Naspers and Prosus suffer from jitters around Tencent (JSE: NPN | JSE: PRX)

Although there’s no related SENS announcement, this is very important news

Despite all the capital that has been plowed into investments beyond Tencent, the reality is that the Naspers and Prosus valuation is still largely tied to the fortunes of the Chinese giant that made those groups so wealthy in the first place. This means that geopolitical risks are never far away, particularly as US – China relations can be dicey at the best of times. Under Trump, this is likely to worsen.

The latest news is that the US Department of Defense has designated Tencent as a “military company operating in the US” – and that’s not good. In theory, this could lead to Tencent not being able to have its securities traded in the US, where they currently trade on an over-the-counter basis. The bigger issue for South African investors is the extent to which this might lead to international investors trying to get out of Prosus and Naspers, as a sudden sell-off of shares always leads to a sharp drop in price.

Naspers closed over 10% lower for the day, while Prosus fell down 8.4%. Some may see this as an opportunity, as the designation of Tencent as a military company seems very odd. Also, there are examples of companies that have been removed from this list, so we’ve seen this movie before with other Chinese companies. This would then support a rebound in the valuation.

Given all the good work that I’ve seen from new Naspers/Prosus CEO Fabricio Bloisi, I was very tempted by this and I pulled the trigger in the late afternoon. Beyond the capital flows and potential shock reactions, it’s not obvious how this designation impacts Tencent’s business which is focused on China. I’m therefore hoping that the market has dished out a little gift here, although my position sizing was such that I can put in more if it suffers another major sell-off. This is an important technique when buying into an uncertain dip.

Schroder European Real Estate sells an asset in Germany (JSE: SCD)

This is a mature asset with limited scope for further improvement

When it comes to property, some funds talk about “asset management opportunities” as an umbrella term for the initiatives that increase the value of a property. The sky is the limit here obviously, with all kinds of potential projects ranging from improving the parking through to creating better flow of people through the mall.

The end goal is always the same: improve the rental and tenant profile and get a better valuation yield on the property, which equates to a higher value. When this is achieved, it’s usually time to sell the property to someone looking for a more passive investment. The proceeds can then be recycled into new asset management opportunities.

Schroder European Real Estate is the latest example of this, selling a grocery-anchored mall in Frankfurt, Germany for €11.8 million. This is in line with the September 2024 valuation, so that is encouraging for shareholders who need to believe in the company’s disclosed net asset value.

Don’t get too excited about the returns that were achieved here: Schroder bought the property in April 2016 for €11 million. That’s a total capital return of a rather paltry 7.3% over nearly 9 years – in addition to the rentals earned, of course!

Germany simply hasn’t been a great story in recent years.

Nibbles:

• Director dealings:
  • Acting through Titan Fincap Solutions, Dr Christo Wiese has bought a substantial R54 million worth of Brait exchangeable bonds. The bonds specifically trade under the ticker JSE: BIHLEB and should not be confused with the ordinary shares (JSE: BAT).
  • The company secretary of Datatec (JSE: DTC) sold shares worth R14.7 million.
  • The company secretary of Redefine Properties (JSE: RDF) sold shares worth R308k. Although this was related to a share award, the announcement isn’t explicit on whether this was purely to cover taxes.
  • A director of a subsidiary of Capital Appreciation (JSE: CTA) sold share awards worth R32k. There’s no indication of whether this is only the taxable portion, so I must assume that it isn’t.
  • A director of Visual International (JSE: VIS) bought shares worth R12k.

• At Trustco’s (JSE: TTO) general meeting, shareholders approved the resolutions for the Legal Shield Holdings transaction.

• Vunani (JSE: VUN) has renewed the cautionary announcement related to the potential disposal of a minority interest in a subsidiary. Negotiations are still underway, so the cautionary has been renewed.

• A director and member of the audit and risk committee of Labat Africa (JSE: LAB) has decided not to stand for re-election at the next AGM. It seems to be quite a sudden decision and no reason has been given.

• Acsion Limited (JSE: ACS) is moving its listing to the general segment of the main board of the JSE, following in the footsteps of a bunch of small- and mid-caps that did the same thing last year in search of a less onerous regulatory framework.