The strategy to differentiate Naspers/Prosus* from its Tencent underpinnings couldn’t be more blatant, with Prosus management referring to a “Prosus-plus” strategy vs the historical “Tencent-minus” issue that has plagued the valuation.
Put simply: the market has been placing a negative value on the ex-Tencent portion of the group for longer than anyone can remember. Prosus management would like to change that.
But is any decoupling actually taking place?
We can compare the American depository receipt programmes of Tencent and Prosus, giving us dollar-based pricing that needs no further adjustment. Tencent is down 27% year to date and Prosus is down 28%. These prices are clearly joined at the hip while tumbling down the stairs together!
A meaningful decoupling in performance is going to take time.
CEO Fabricio Bloisi has been in the top job at Prosus since mid-2024. His focus has been on tightening up the capital allocation strategy. To his credit, in the year ended March 2025 the Prosus ecosystem assets (everything excluding Tencent) generated free cash flow of $275m.
Sure, that’s a lot less than the $1.24bn dividend received from Tencent, but it’s also a huge positive swing from the negative free cash flow of $1.16bn just in financial 2023, when the previous management team was using a shotgun rather than a rifle to allocate capital.
This more disciplined approach is laid out in detail in the Naspers/Prosus financial reports, with almost all of the focus placed on the “ecosystems” — the tech assets being built in Latin America, Europe and India. This makes for great reading, but it doesn’t give a fair reflection of how the market actually values this company. It merely explains how management would like it to be valued.
So, investors must consider Tencent’s recent performance in any assessment of the Naspers/Prosus investment case.
Tencent released its first-quarter results in May. Revenue was up 9% and non-IFRS attributable profit increased by 11%. Double-digit growth from this platform is hardly pedestrian, but is it exciting enough to reward investors for taking risks on Chinese exposure?
One of the challenges in China is that regional tech champions find it difficult to expand into the West, putting a natural ceiling on growth. There’s also the hangover from regulatory interference by the government, which drove a structural decline in valuations. Tencent trades at a revenue multiple of 4.7, far below Meta at 7.5.
A recent issue is the risk of AI disruption and “forced” related spend, driving investors away from the application layer and towards the hardware layer (to the detriment of companies like Tencent). This particular issue isn’t doing the broader Prosus ecosystems any favours either.
Of course, all this pressure in China is also a source of opportunity. If sentiment towards the region improves from these depressed levels, then Tencent’s share price could grow at a rate well in excess of earnings growth (thanks to an expanding multiple). This is a key element of the Naspers/Prosus bull case.
In the rest of Naspers/Prosus, we find Latin America as the template for the broader ecosystems business. In that region, food delivery is the critical underpin (now 45% of revenue), with bolt-on acquisitions (like Despegar) used to create a lifestyle platform that benefits from cross-selling opportunities. It’s not quite the “super-app” mindset of Tencent, but it’s not far off.
The problem is that this region is seen as lucrative, so it attracts competition that forces the existing players to spend heavily on marketing. Bloisi has flagged the near-term risk to margins.
In Europe, OLX is the key underpin with a 48% adjusted ebitda margin. That stability is needed, because the Just Eat Takeaway.com (JET) acquisition will be a major challenge to bed down successfully. Europe is a tough place to grow, with Prosus pinning its hopes on AI-driven enhancements to that business.
Prosus is a complex global story, with the share price back to 2020 levels. Much has happened since then, both on a macro level and in terms of the group strategy. But the true test for Bloisi will be how Prosus handles Latin American competition and the JET implementation in Europe.
Rather than selling my current position, my inclination is to add during a period of share price weakness. That’s because Prosus plugs an important “ex-US tech” gap in my portfolio. Patience may be well rewarded here, as any further jitters in global tech will almost certainly flow down into Prosus as well.
The writer holds shares in Prosus