Often my best ideas are holding companies run by A+ management teams. $BRK, $IAC, $CNNE, Liberty qualify. With these I can sit back and let these guys compound my capital for decades. I’d like to talk about another such company that I think meets that criteria: $PROSY.
I believe that $PROSY is undervalued and overlooked here in the US. I currently have a 5.9% position and it is currently one of the most attractively priced securities in my portfolio. I see it as a rare, undervalued compounder.
Tencent accounts for ~85% of my NAV. $PROSY owns 31% of Tencent, which is one of the most exciting companies in the world. WeChat is the door to China and gives them an incredible competitive advantage when it comes to investing in businesses. This is their flywheel.
I estimate that Tencent's public portfolio and private portfolio is worth HKD 302, leaving the core business trading at ~25x earnings. I hold their private portfolio at cost and I’m 100% sure I’m missing things – so it is conservative.
25x doesn’t seem egregious for one of the best businesses in the world. I don’t know the exact value (I’m not sure anyone does), but I do think Tencent is somewhere between fairly valued to slightly undervalued.
$PROSY’s investment in Tencent is one of the best of all time (think big tax implications). Their new structure allows for a step up in basis, so we get $130B of distributions tax-free.
Tencent distributes $380M of dividends to $PROSY annually. $PROSY uses this cash flow to invest in their private portfolio in addition to making new venture investments. They also have started paying a small dividend.
To recap $PROSY trades at a $183B market cap while their stake in Tencent is worth $252B. You also get another $9B of public investments for free ($TCOM, $CCX, $DHER, $MAIL-GB) and $29B worth of private investments for free. This private portfolio is extremely compelling.
Management has been compounding the private portfolio at 20% for a few decades. The largest portion is an emerging markets classifieds business. Typically these are tremendous winner take all businesses and $PROSY has done a great job building market share under the OLX brand.
They are particularly strong in Poland, Brazil, Russia, and India. I think this business is worth $16B. Then you have a $5B payments portfolio headlined by PayU. Ultimately, I think these businesses are acquired. $PROSY has a $1.3B etail business called eMAG.
More recently, $PROSY has been focused on winning market share with two tremendous food delivery businesses – Swiggy in India and iFood in Brazil. Together these are worth $5B. Finally, EdTech has been a focus and $PROSY has an early investment in BYJU worth $1.3B.
I estimate NAV to be $296B, or $36.50 per $PROSY share. Current prices represent a 36% discount to NAV. I’m under no illusions that this will trade at a 15-20% discount – giving me a price target of $31 (~33% upside).
This discount is fine by me. $PROSY will use their free cash to buyback shares. If the discount persists then I still think I have an asset that can compound at 10-15% headed by a management team focused on narrowing the discount and gaining scale in their venture book.
I also think I get a free call option on the venture book given that I hold everything at cost. Any narrowing of the discount is another free option and will obviously increase the rate at which I compound my capital.
The biggest risk here is political in regards to Tencent. I happen to think this is all overblown, but I am no expert and would be remiss not to address it.

I'm pretty excited about $PROSY and consider it a core holding in Panda Value for years to come.

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