It seems everyone on Wall Street is missing the forest for the trees when it comes to Prosus. The global tech conglomerate, a spin-off of South African media giant Naspers, often gets pigeonholed as merely a Tencent proxy. While its significant stake in the Chinese behemoth is undeniably a defining characteristic, a deeper dive into Prosus's recent financial data reveals a story far more compelling – one of strategic divestment, aggressive share buybacks, and a potentially undervalued core business.

The narrative surrounding Prosus has been dominated by its Tencent holdings. The company initially acquired a 46.5% stake in Tencent back in 2001 for a mere $32 million – an investment that has ballooned into a present-day value exceeding $100 billion. This single investment has undeniably shaped Prosus's fortunes, but it has also cast a long shadow, obscuring the company's own operational performance.

However, a closer look at the data paints a different picture. Prosus has been strategically divesting its Tencent shares, using the proceeds for a massive share buyback program. This move, while initially perceived as a value unlock for shareholders, could signify a much bolder play.

The data reveals a fascinating trend. While Prosus's market capitalization hovers around $88 billion, its stake in Tencent alone is worth significantly more. This implies that the market is essentially assigning a negative value to Prosus's core operations – a curious anomaly considering the company's strong performance in segments like classifieds, payments and fintech, and food delivery.

Valuation Metrics

Could this be a classic case of a "sum of parts" discount? The market may be fixated on the Tencent narrative, failing to appreciate the intrinsic value of Prosus's diversified portfolio of high-growth businesses.

Prosus's management seems to be capitalizing on this discrepancy. The massive share buyback program, funded by Tencent divestment, is a clear signal that they believe the company's shares are undervalued. By reducing the number of outstanding shares, Prosus is effectively increasing the ownership stake of existing shareholders, amplifying potential future returns.

Here's the kicker: Prosus is not just a passive investor anymore. It's actively building and scaling its own businesses across various sectors. Its food delivery platform, iFood, is a dominant player in Latin America, competing head-on with global giants like Uber Eats and DoorDash. Similarly, Prosus is making significant strides in classifieds, payments, and education technology.

Hypothesis:

The market's current valuation of Prosus fails to capture the true potential of its core business. As the company continues its share buyback program and its operational performance gains more visibility, a significant re-rating is likely.

Supporting Data:

Market Cap vs. Tencent Stake: The discrepancy in valuation points to a potential undervaluation. Low P/E and P/B Ratios: These metrics, particularly in comparison to industry peers, suggest the stock is cheap. Strategic Divestment and Buybacks: Management's actions signal a strong belief in the undervalued nature of the stock. Growing Core Business: Prosus is actively building and scaling its own businesses, not just relying on Tencent.

While uncertainties remain, particularly regarding the future of its Tencent stake and the regulatory landscape in key markets, the evidence suggests that Prosus may be on the cusp of a significant breakout. The sleeping giant is stirring, and those who fail to notice might miss out on a remarkable opportunity.

Hypothetical Growth of Prosus' Core Businesses

This chart illustrates the potential growth trajectory of Prosus' core segments, assuming the market recognizes their value independently of the Tencent stake.

"Fun Fact: Prosus's parent company, Naspers, initially invested in Tencent as part of its venture capital arm. This single, relatively small investment ended up becoming one of the most successful venture capital investments of all time."