Prosus: Hold Rating Amid Uncertainty on Tencent Dividend and Strategic Clarity

Morgan Stanley analyst Laura Metayer maintained a Hold rating on Prosus (PROSF – Research Report) yesterday and set a price target of €46.00.

Laura Metayer has given her Hold rating due to a combination of factors influencing Prosus’s current and future performance. The company is expected to announce strong mid-term profitability targets for its e-commerce portfolio, which could be a positive catalyst. However, there is uncertainty regarding whether Prosus will pass the Tencent dividend on to shareholders, as the company has just started generating positive free cash flow excluding this dividend.
Prosus’s focus on narrowing its discount to net asset value (NAV) is another consideration, but no specific plan has been set to pass the Tencent dividend to shareholders. Additionally, while Prosus has a robust cash balance for potential mergers and acquisitions, the market is awaiting more detailed information on margin expansion strategies, particularly in the Food Delivery and Classifieds sectors. These factors contribute to a cautious outlook, justifying the Hold rating.