Investment bank opinion divided on Prosus listing

By Kit Rees

(Bloomberg) – Prosus NV, which listed in Amsterdam just last week, is splitting opinion among the first investment banks to cover the stock. While Jefferies rates the Naspers Ltd. tech-investments unit underperform, Bank of America Merrill Lynch recommends that investors buy the stock.

Jefferies began coverage of Prosus, which owns a 31% stake in Chinese tech giant Tencent Holdings Ltd., with a price target of €61, implying a downside of around 16% from current levels.

Analyst Ken Rumph wrote in a note that there is “frustration” that while Naspers and Prosus have been good investors, there has been no return of any gains. While unattractive operations were spun off and the Dutch listing accessed more passive capital, the e-commerce disclosure remains “thin” for a public company, Rumph also said. He expects Prosus’s net asset value to be largely driven by Tencent.

“After current index flows, we expect Prosus to trade back toward a wider discount as active investors realise they have an ambitious patient capital investor, not a value-maximising wind-up on their hands,” he wrote in a note.

Bank of America Merrill Lynch analyst Cesar Tiron is more optimistic, with his €97 price objective implying potential upside of 33%. Prosus offers exposure to “best-in-class” emerging-market internet assets, he wrote in a note.

Cape Town-based Naspers carved out Prosus for a separate listing to attract a more global investor base and realise more value, while weakening the group’s dominance over the Johannesburg stock exchange.

Prosus shares fell as much as 2.1% Monday and traded at €72.97 as of 12:47pm Amsterdam time, with the retreat taking them 4% below their €76 debut level last Wednesday.

Last week, Spin-Off Research began its coverage of Prosus with a buy rating and €99 price target.

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