Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more...
-
Upload
aubrey-davis -
Category
Documents
-
view
216 -
download
0
Transcript of Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more...
![Page 1: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/1.jpg)
YANDEX N.V.
Nathaniel Rabin
![Page 2: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/2.jpg)
Value Catalysts Extremely rapid growth of internet use in Russia
will lead to more online advertising Deeply discounted when compared to competitors
at similar development stages Major competitive advantages will keep Google
from penetrating Yandex’s 60% market share, downside already priced in
![Page 3: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/3.jpg)
Company Overview
Largest Russian search engine Generates revenue from text-based and
display advertising on own content, as well as revenue from partner websites
Includes search, news, shopping, maps, video, and email functions for users
~97% of revenue comes from Russia, with additional operations in Belarus, Ukraine, Kazakhstan and Turkey
![Page 4: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/4.jpg)
FeaturesFor Users For Advertisers/businesses
Yandex.Search Yandex.Direct
Yandex Homepage Yandex.Spravochnik
Yandex.News Yandex.Webmaster
Yandex.Market Yandex.Metrica
Yandex.Mail
Yandex.Traffic
Yandex.Browser
Yandex.Drive
Yandex.Music
Source: 10k
![Page 5: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/5.jpg)
Internet Use in Russia 44.3 million daily internet users in 2011 (increase of 22% from
2010) ~60 million monthly internet users (51%) of adult population Monthly internet users projected to rise to 71% by end of 2014 Internet use concentrated in “European” Russia, municipal areas,
but spreading outward Online shopping volume increased 30% from 2010-11
Sources: Moscow News article,Public Opinion Foundation report
![Page 6: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/6.jpg)
Recent Developments
Yandex.browser Mobile app store for Android devices Partnership with AAPL Acquisition of SPB Software
![Page 7: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/7.jpg)
Market share strength Decline in share price mostly as a result of market share decrease
from 65%(IPO) to 60.4% (current) Higher share of Chrome searches than Google Yandex has been able to retain large market share because of
understanding of the nuances of Russian language and alphabet Yandex code tracks IP address, uses local dialect to help with
search Yandex’s advantage over Google will only increase as internet use
spreads to more remote parts of Russia Internet use growing at such a fast rate that a decline in market
share to 50-55% would not hurt Yandex too much
![Page 8: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/8.jpg)
Quick Stats- Share Price: $24.60- Market Cap:$8,030.2mm- Total Enterprise Value: $7,661.6mm- LTM P/E: 37.8x- Forward P/E: 30.4x- EV/EBITDA: 23.4x
![Page 9: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/9.jpg)
Historical Stock Price5/
24/1
1
6/7/
11
6/21
/11
7/5/
11
7/19
/11
8/2/
11
8/16
/11
8/30
/11
9/13
/11
9/27
/11
10/1
1/11
10/2
5/11
11/8
/11
11/2
2/11
12/6
/11
12/2
0/11
1/3/
12
1/17
/12
1/31
/12
2/14
/12
2/28
/12
3/13
/12
3/27
/12
4/10
/12
4/24
/12
5/8/
12
5/22
/12
6/5/
12
6/19
/12
7/3/
12
7/17
/12
7/31
/12
8/14
/12
8/28
/12
9/11
/12
9/25
/12
10
15
20
25
30
35
40
45
NasdaqGS:YNDX - Share Pricing
NasdaqGS:YNDX - Share Pricing
Source: Capital IQ
![Page 10: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/10.jpg)
Q2 Results Revenues of $207.2mm (+50% Y/Y) EBIT of $68.4mm (+63% Y/Y) Net Income of $60.4mm (+76% Y/Y) 60.4% share of Russian search market 46% of Chrome searches (more than Google) Total search queries up 30% Y/Y Number of advertisers: >193,00 (+8% from Q1) Q2 revenue breakdown:
72% text-based advertisements, Yandex content 17% text-based advertisements, partner websites 9% display advertisements 2% online payment commissions
Source: 8k
![Page 11: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/11.jpg)
Financials LTM revenue: $748.3mm
Y/Y rev. growth: 32.9%
LTM EBITDA: $327.2mm Y/Y EBITDA growth: 28.7% EBITDA margin: 43.7%
LTM Net Income: $217.9mm Y/Y income growth: 43.3% Net margin: 29.1%
- Total Cash and ST investments: $367.8mm- Total debt: $0.0
Source: Capital IQ
![Page 12: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/12.jpg)
Margin ComparisonGross Margin
EBITDA Margin
EBIT Margin
Net Margin
FB 74.0% 24.2% 13.8% 13.3%
BIDU 79.5% 57.3% 51.3% 46.8%
GOOG 63.2% 35.8% 30.8% 25.7%
LNKD 85.9% 12.6% 5.4% 1.8%
MAIL 75.5% 44.7% 29.4% 128.0%
EBAY 69.9% 28.9% 20.3% 28.7%
YNDX 75.1% 43.7% 33.7% 29.1%
Source: Capital IQ
![Page 13: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/13.jpg)
YNDX vs. GOOG vs. BIDU historical trading multiples Ignore current multiple comparisons; YNDX is a growth play and
trades at such. However, YNDX is still fundamentally undervalued when compared to its two closest peers at stages of development similar to where YNDX is now.
YNDX (Current)
BIDU (2009) GOOG (2004)
EV/Rev 10.24 18.02x 16.05x
EV/EBITDA 23.42x 41.92x 59.99x
P/E 37.85x 58.51x 186.64x
Source: Capital IQ
![Page 14: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/14.jpg)
Bonus Catalysts – Huge Upside
Proprietary browser Safari mobile default browser? Expansion into other markets (Turkey) Growing use of smartphones in Russia
![Page 15: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/15.jpg)
Risk Factors Significant loss of market share to Google European economic downturn could lead to
decrease in consumption, advertising spending Political/legal risk
“Businesses in Russia, especially high-profile companies, may be subject to aggressive application of contradictory or ambiguous laws or regulations, or to politically motivated actions, which could materially adversely affect our business, financial condition, and results of operations.”
![Page 16: Nathaniel Rabin. Value Catalysts Extremely rapid growth of internet use in Russia will lead to more online advertising Deeply discounted when compared.](https://reader036.fdocuments.in/reader036/viewer/2022082516/56649d0e5503460f949e35fb/html5/thumbnails/16.jpg)
Conclusion
Long YNDX because:Market share will not shrink much further, due to
Yandex’s superior code and understanding of Russian, downside already priced in
“Next Google” unlikely, “next Baidu” far more realistic, still represents huge upside – trading at a lower multiple than Baidu was at similar stage
Online advertising spending in Russia will catch up to exploding internet use
Huge potential upside with recently released products/services