Naspers/Prosus: ‘Steal of the century’

SPEAKER_1 (0:02)

You're listening to the MoneywebNOW podcast series with Simon Brown. Live streamed every weekday at 6:30 a.m. It's Friday, 9 October.

Simon Brown (0:16)

We had Japanese household spending data earlier this morning, year on year, down 3.1%.

I'm Simon Brown, coming at you live and loud from the Moneyweb Studios in Khartoum, Johannesburg. This is the show today Kea Nonyana from PrimeXBT. Prosus food delivery update, moving parts. Some doing better than others perhaps, but this is the sector he generally likes. But maybe the biggest story is Prosus and Naspers. They're almost 50 percent down from last October's highs. Is there opportunity here or do we wait and watch rather? We're going to be chatting with Just Share on their climate risk analysis. This takes the five banks and looks at how they are doing. How cool is your bank? And thoughts from me, the Premier Group RFG Competition Commission issue, lots of movie parts and I think management is responding poorly. This podcast is brought to you by Standlip Asset Management. Invest in more global opportunities through their partnership with JP Morgan Asset Management. Morning headlines, Moneyweb, Sanreal, irregular expenditure jumps 100% to 1 billion rand plus in a year. It also only awarded 39 tenders against a target of 250 Business day, factory output slumps 4.3% as fuel prices surge. Morning markets, US is red, S&P half a percent down, NASDAQ 1.4% lower. East is mostly green, Sydney is a quarter of a percent up, Tokyo is the exception, off a percent, Hong Kong is up a percent, 10 cent is up, 2%.

Commodities, mostly green, gold futures 4,200, Brent $103.36, platinum is the red $1,769, and palladium $1,157.

Rand $16.53, bitcoin $82,200, and top 40 opening call, expected a green open, 250 points, quarter of a percent higher.

SPEAKER_1 (2:12)

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Simon Brown (2:17)

Cheney and I are with Kea Nonyana from PrimeXBT. Kea always appreciates the early morning process, giving us an update mostly on their food delivery. I mean, they're touching the likes of OLX, they say, and I quote, doing quite well. But on the food side, iFood in Brazil, in a fight with Chinese competition, they claim their competitors are spending irrationally, just eat in Europe, doing all right, growing, not profitable. Your thoughts on the update and the food delivery generally.

Kea Nonyana (2:46)

I think food delivery is one of the games that I think you need scale.

And you look at the difference between the European business versus the Latin American business, where iFood actually is the dominant player in that market. And yes, they are complaining of the Chinese competition in Latin, that is coming to eat their lunch, but they own 80% of that market. And it continuously comes to show in the sort of margins that they earn in Latin versus in Europe. But I think truly, as I said from the beginning, the food delivery business just comes back down to scale. And anyone who has scale is able to dominate. Just look at one of the competitors, Uber Eats. They have a database from Uber that essentially translates into the food delivery business. And hence why they have a dominant market position in Europe and in the US.

Simon Brown (3:47)

I like that. It is about scale. And in many cases, it is Uber. But sometimes, I mean, it's not. And I'm thinking Nigeria is an example. Uber just up and left last month. They were like, man, we don't have the scale. The local operations are beating us. And my sense is that Prosus has a chance, both in the European operation, to just eat takeaway and perhaps even the iFood in Latam, to actually become that scale and to go to turn to be, I don't know, maybe we end up with two, maybe three dominant players and that in Prosus could be part of that.

Kea Nonyana (4:18)

I think Prosus has, first of all, they have the balance sheet to do that. But what I'll also say is that I think you have more time in third world countries in order to find ways to dominate the market. I think the problem with Europe is just too much competition as well as the consumer preference really shifts depending on where service is. Whereas in Latin, because of the fact that there are a lot more fewer players, there's a lot less competition. I think that's how you'd really need to look at it. Orbit, this business is a very low-margin business, but I'm guessing dominance matters.

Simon Brown (5:00)

Yeah, low margin, so you need high volume. So then it brings me to Prosus, and let's bring Naspers in. It was a year ago Naspers did that share split five for one, and it's been pretty much one-way traffic. Prosus almost 50% off those October highs of last year. Naspers not quite but having a horror time of it.