Another Naspers / Prosus shuffle (#446)

Simon Shares

• Raubex (JSE code: RBX) results saw the second half record HEPS of some 110c after a loss in the first half. The previous full-year, 2020, HEPS was only 161.7c, so the business is looking good. That said, lots of debt and the expanding order book needs to be converted into profit.
• Transaction Capital (JSE code: TCP) results see the dividend returning.
• A super-strong trading update from Lewis (JSE code: LEW) with HEPS more than doubling. At the time of their interim results, they paid a dividend of 133c when the stock was around 2400c. If they can do a 250c dividend (should be easy?) the forward dividend yield sits at around 8%.
• US inflation data spooked higher than expected, even considering the April base effect. April Consumer Prices +4.2% and Core CPI +3%, highest since 2009. Used cars (stimulus cheques?) were +10% and made up a third of the core CPI increase. Fed will do nothing.
• Ascendis (JSE code: ASC) has announced they've reached a deal with debt holders. Basically, they're swapping the crown jewels (Remedica) for their large debt pile. The debt cost was R280million for the last six month period ending December and this will improve solvency and keep Ascendis alive. But are the remaining assets attractive enough for investors?

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More Naspers shuffles

Naspers (JSE code: NPN) and Prosus (JSE code: PRX) have announced another deal to try and close the discount between themselves and their holding in Tencent (Hong Kong code: 700).

Prosus will acquire up to 45.4% of Naspers shares via a share swap whereby holders of Naspers can get 2.27 new Prosus shares for every one Naspers share.

This will increase Prosus liquidity (in theory) and markedly reduce Naspers weighting in the Top40 and Swix indices. The latter argument makes sense and is likely a part of the reason for the discount that Naspers experiences. The problem is that with the weighting above 20% most funds are not allowed to hold over a certain percentage (lower than the Naspers weighting), so they can not go overweight, or even match index weight, for Naspers and this reduces potential buyers of the stock.

Will it work? Maybe.

They have tried many other tricks, unbundling Prosus and earlier MultiChoice (JSE code: MCG) and that hasn't worked. But the weighing in the indices is a real problem.

Of course, the very easy fix here is to simple unbundle the Tencent holding - but that's not going to happen any time (aside from some sales every three years as we saw recently).

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