A £55bn valuation anomaly really should not exist in the modern financial markets. But exist it does – and better still Questor readers can use it to buy a stake in one of the world’s most impressive internet companies at a 36pc discount.
That company is Tencent, which is based in China and listed in Hong Kong and is most famous for WeChat, its messaging, entertainment and payments app, and its Fortnite game. WeChat is a little like WhatsApp but does far more; it has become ubiquitous in China, where it has more than 1bn users, as a result.
“WeChat is a fantastic play on Chinese consumer behaviour. It is the gateway into so much spending activity, such as payments, entertainment and gaming,” said Joe Bauernfreund of Asset Value Investors, which owns – indirectly, as we will explain – a stake in the company.
“Although Tencent is a play on the Chinese consumer, it also has a great portfolio of businesses around the world. It’s best to see it as a conglomerate. Alongside Alibaba, it is one of China’s two pre-eminent internet companies.”
Mr Bauernfreund owns Tencent indirectly in order to benefit from the huge discount we mentioned in the introduction. To explain how it has arisen we need to leave China and Hong Kong for a moment and travel to Holland – via South Africa.
A very substantial stake in Tencent was until last year held by a South African company called Naspers, itself a hugely successful investor in technology businesses. Naspers had in effect outgrown the relatively small Johannesburg stock market on which it is listed. So last year it made itself smaller by listing a separate company, Prosus, on the Euronext exchange in Amsterdam.