Naspers/Prosus: ‘Steal of the century’

0:00You're listening to the Money Web Now podcast series with Simon Brown. Live streamed every weekday at 6.30 a.m. It's Friday, 9 October. We had Japanese household spending daughter earlier this morning, year on year, down 3.1%. I'm Simon Brown coming at you live and loud from the Money Web Studios and Hortons Johannesburg on the show today, getting you on a prime expt process through delivery update, moving parts, some doing better than others perhaps, but it's a sector you genuinely like. But maybe the biggest story is process and as pers, they're kind of almost 50% 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. But don't for me, the Premier Group RFG Competition Commission issue, lots of movie parts

1:01and I think management is responding poorly. This podcast is brought to you by Stand Lab Asset Management, invest in more global opportunities through their partnership with JP Morgan Asset Management. Morning headlines, Money Web, San Rail, irregular expenditure jumps 100% to 1 billion round 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. Money markets, US was rate S&P half a percent down Nasdaq 1.4% lower. East is mostly green, Sydney's a quarter percent up, Turkey is the exception, offer percent, Hong Kong is upper percent, 10 centers up, 2%. The commodities mostly green, gold futures 4200, 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

2:08quarter of a percent higher. Money Web now, on the money. I think food delivery is one of the games that I think you need scale. You look at the difference between the European business versus the Latin American business where I food actually is the dominant player in that market. Yes, they are complaining of the Chinese competition in Latin that is coming to E.D.

3:08Lounge, 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 their food delivery business and hence why they have a dominant market position in Europe and in the US. 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 process has changed both in the European operation they just eat takeaway and perhaps even the I food in Latin to actually become that

4:09scale and to go toe to turn to be I don't know maybe we end up with two maybe three dominant plays and process could be part of that. I think process has the first of all to have the balance sheet to do that. But what I 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 to consume your preference ratio 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 and I think that's how you really need to look at all bit this business a very low margin business but I'm guessing governance matters. Yeah low margin so you need you need have volume. So then it brings me to process and let's bring NASPASS in. It was a year ago NASPASS did that shares but it's five for one and it's been pretty much one

5:10way traffic process almost 50% off those October highs of last year. NASPASS not quite but having a horror time of it. Tencent has been under some pressure which is obviously the big story there. Is there opportunity and either or both of those stocks I've always liked the Tencent business and you're getting cheaper now? To be perfectly honest I think this is the steal of the century and it comes back down to the it comes back down to the fact that this stock really is a proxy for Tencent. Yeah. I remember you saying in the beginning on your opening cost that a Tencent is up 2% and well that's why they indicate of margin for the top 40 indexes up as well. And for as long as Tencent continues to do well and you look at the advertising business. It's up almost 20% on the back of the fact that they're using the AI models in order to get more targeted marketing to the right people and you look at gaming up 17% even though

6:12we have seen regulation come down and tab down on that business. But I think the monetization of AI is going to be really the corner post that this stock is going to be built on and I think Tencent has the unique ability to be operating with less competitors in China for the ability to monetize their product better than the US counterparts. Yeah, I agree. Tencent is the food delivery everything is nice but processed, NASPASS is still all about Tencent and Tencent is an absolute beast and you're getting it at a head of chunky discount and then everything else for free. Steel of the century, I'll quote you on that here. Kenyanya, Rick, Prime XBT, always appreciate the early morning time and that's our poll today on LinkedIn. Time to buy some. Here says absolutely it is. Have your vote. Have your say, LinkedIn. Is your career ready for its next big move?

7:15Join Money, Whip, Simon Brown and Leading Gibbs academics for practical webinar on Wednesday, 14 October at 11 a.m. as they explore which postgraduate business qualification best matches your experience ambitions and leadership journey. Whether you're considering an MBA, PG, Diploma or part-time PDBA, discover how each program can sharpen your strategic thinking, strengthen your leadership and prepare you for greater responsibility. Register now at moneywip.se. And take the next step towards making a great impact. Gibbs, shaping leaders, advancing African business and driving performance. I'm sitting with Erden Akachi, he's a climate risk analyst at just share. How cool is your bank report just came out?

8:17Third edition. It's looking at sort of how South Africa's big five banks understand and manage climate risk. It looks at fossil fuel exposure, emissions disclosure and targets, governance and strategy, sustainability and transition finance and of course nature and biodiversity. As I said, this is the third net bank comes top again, but only with 59%. Invest ticket 49%, first-randed 46%, absolute 32%, and standard bank down at 31%. Erden Akachi appreciate the time today. Three of the five actually scored lower than in the previous report after three editions. Are we seeing a sector that's moving backwards or have you perhaps raised the bar in the methodology of the report? Thank you. Thank you, Simon, for having me. I think you've listed out the numbering or other the scoring that we've got here, but I think first of all, I would resist in the sense the idea that the sector is in a sense moving backwards. So I think we do see real progress in some areas.

9:17I think particularly when we look at renewable energy financing and also look at the development of transition and sustainable finance products, but I think in another way we also raise the bar in this situation that is. So the first edition had asked some fairly basic questions about whether the banks had policies and commitments in place, but then after three editions, I think we can ask more demanding questions in the sense that are those commitments changing what banks actually finance? Questions like are they reducing exposures with pie-ammitting activities or are they targets actually backed in the sense by credible plans? So a lower score does not, in a sense, necessarily mean that the bank has done less. It can also mean that the bank has not kept the pace with what we now think would practice requires, and that is really the point of this benchmark. If you don't want banks to be able to take the same boxes year after year, I think the standard in a sense has to move as the transition becomes in this way a bit more urgent. And that's a great point. This cannot be a box ticking exercise, and I like your point there.

10:21It needs to evolve and the way that the banks are measured needs to be part of that evolving. And there is some good parts happening here. When your lending is up, first round growth are 175%. They're a bigger share of energy lending at four of the five banks. So really good news in that regard, but finance emissions are still rising across all banks. It does feel to your point around sort of a almost a looming crisis. We move in forward two steps, and then we go two or three backwards. It's not a linear relationship at all. There's a lot of backwards and forwards happening. And to be honest, you're spot on in that observation. I think that's where the tension actually sits. But I would not describe it as two steps forward and actually then three steps backwards. I think in a sense, the growth and the level of financing is quite encouraging. It shows in the sense that banks can mobilize significant capital towards the technology itself it needs. But then financing needs, especially if these financing of renewable products or renewables, in a sense, it does not automatically decarbonize the banks portfolio. If it continues,

11:24you know, if finance fossil fuels at scale, I think that is the critical discussion of distinction we've got to sit with here. The transition is not simply about adding green finance. I think it's also about changing. That is pure definition of what a transition means, changing what happens to the brown, in this case, the brown parts of the portfolio. So I'll give you an example. If a bank finances take, for example, 10 billion around for renewables, but continues to finance a large and growing fossil fuel portfolio, it's overall finance emissions. I mean here by finance emissions basically is that the emissions you attribute to a company due to its investment decisions. And this is following from that, the amount of greenhouse gases entering the atmosphere in this case can still rise. So we need both sides of the equation. So rapidly scaling up our financing for the transition and also in a sense managing down the exposure to high missing activities. In this case, you cannot, you have to get to go to say you cannot simply add green finance on top of unchanged fossil fuel business and then turn around and call that decarbonization.

12:29Got you. Integrated, invest in a net bank, they cut absolute fossil fuel exposure and absolute wind there. Do our banks, I mean, do they and should they, I mean, I think they should, they should have a dedicated board climate committees, much like they have a Remcom and audit committees, do our banks have climate committees? Because it is, I mean, to the point, it's at that level where it needs to be a critical and constant focus of a board. I agree with you. I agree with you. And I think it's also not necessarily that every back needs a standalone climate committee. I think the more important question is whether climate risk and transition in this case are receiving genuine board level oversight as well as accountability. So climate of fixed credit risk, market risk, strategy, capital location and in this sense, ultimately, shareholder value. So I don't think it can sit in a sustainability silo, as we tend to say. So a dedicated committee can be useful in some circumstances, but particularly where the scale and complexity of those risks justified. So in this case, a bank could have a climate committee and still have four climate governance.

13:34What we want to see is clear accountability. And so I'm saying, we want to see clear commenter accountability. Like who on the board is responsible for climate related risks and as well as the opportunities. And how often does the board consider them? And how does this oversight influence the lending as well as the investment decisions? Yeah, that's a good point. Having the committee, I mean, we've got Remcoms that are, you know, deceivingly beholden to the CEO sometimes, the committee doesn't solve the problem unnecessarily at all. Instead of coming in last again in their defense, they're also the only bank to improve in every one of the three editions. Fossil fuels 61% of its energy book, 68% once off balance sheet is included. I mean, are they the worst bank or is there perhaps that it's different levels of disclosure and that high disclosure might sort of drag you down against your competitors? I think they have to be very careful about, you know, the score with a judgment about which bank is worst standard bank deserves credit for improving in every edition. And also, better disclosure can sometimes make the bank

14:38look worse because we can actually see what's going on. You know, but disclosure and performance to be honest are two different things. Being transparent on one hand about a large fossil fuel exposure is better than concealing it, but transparency does not necessarily make the exposure in this case less material. So the fact that fossil fuels accounts for 61% of its energy lending as well as 68% will mean, include off balance sheets business. It also tells us something important about the bank's current business model. So I wouldn't necessarily give a centipent credit for the direction of travel in this case in this disclosure. But while we still need to ask the pace of the change you're observing is in a sense sufficient. Yeah, yeah, 100%. I lost question. All the banks talk around a gas as a transition fuel. The first round in Investek have got a set date when it stops qualifying. We've got a gas supply cliff looming locally. Is gas finance what South African needs? All's it more about perhaps setting conditions in the other bank saying, you know what, it's a transition, but we can't sort of have a transitioning forever. I think the answer is very much about,

15:44conditions, timing in this case and what problem the gas is actually solving. So Africa does need, in this case, a reliable electricity system. True, but calling gas a transition fuel does not make every gas project in this case, compatible, critical transition. Gas infrastructure in this case can lock in emissions as well as capital for decades. So I think the question rather in this case does this investment provide a sort of genuine necessary system service? Well, in this case, electricity system transitions or does it create another long live fossil fuel dependency as we tend to see? So if the banks are going to finance gas as a transition activity, they should also be able to explain in the same vein or in the same breath even the conditions under which it qualifies. How those projects fit into South Africa's decarbonisation pathway and lastly, most importantly, and when that transitional role ends because it is gas as a transition fuel. So the fact that only two

16:47banks in our report are actually put a date when gas stops qualifying as a transition to finance is what is actually very, very telling. So a transition fuel does need an end point, otherwise transition becomes a very permanent category in this case. So it's something we need to really look at and look at very closely. Yeah, if you're transitioning with no date, you're not transitioning. You're not transitioning. You're just carrying on as for normal. We'll leave a day. And in the catchy, he's a climate risk analyst. Just share, appreciate the time. Give your money the return at once without taking a flight with the Stand Lab Global Select Fund, an offshore equity fund, sub-managed by JP Morgan Asset Management. Money Web Now on the Money. Thoughts on the, from me, on the premier group, RFG Competition Commission issue. Lots of moving parts, but my first concern. Competition Commission issued a press release Wednesday late morning. Premier issued a sense on Thursday

17:47morning, a 20-hour delay for what is material information? Why? The purpose of sense is exactly to get this sort of information out into the market as soon as possible. Even just a single one line is saying, I don't know, oh, look what we got. And a link to the press release. Something, a 20-hour delay is just not on. But okay, moving on. Premier, I have a problem. And to be clear, I am not accusing them of lying to the Commission. I am not saying that they knew they would be closing the plant. There is no evidence to suggest that whatsoever. But here's the thing. They, premier group, made a deal with the Competition Commission. They said the merger would have no job losses. That was part of the broader agreement that enabled them to take over RFG road's food group. Now they're looking to basically break that agreement by closing the RFG's tourbath fruit-caning facility in the western cap. This will result in job losses. Simple. That breaches the agreement. You can't simply break an agreement and walk away with no worries. That's

18:50not how agreements work. So Premier Group is going to have to come up with a plan. As Lissifrion yesterday said, she from merchant-west investments, you can't unscramble this egg. I agree with that. I don't think we should undo the merger or the acquisition, but they does need to be a plan. And Premier management seems to have not gone through and thought around this. They did notify the Commission. They said to the Commission, hey, look, back in July, four months off to the merger was implemented. They said to the Commission, they intend to close the facility. They know they're breaching it. Why? No plan. That's it for today. We're chatting with Carl Wales yesterday from Prosper Invest, talking around their self-invested personal pension. Basically managing your own RA. We asked you, if you would like to manage your own RA. Just over 40% each said, yes, great idea. The other just over 40 saying no, let a pro do it. The rest said you need more information. Have your vote. Have your say, LinkedIn. This podcast is brought to you by Stanlib

19:52Essad Management, invest in more certainty to navigate volatile market conditions. We live every week, their morning, the money we have websiteed to the app 630am podcast just after seven. Thanks to my team, Edith Norbrookling the Colt, Sabut, to you for listening. My guests for their time. My name is Simon Brown. This is my new webinar, which had again Monday, half of South Africans, overspend on celebrations. You've been listening to another Money Web Now podcast posted every week day at 7am on moneyweb.co.z. Money Web Now on the money.