Yandex - Crystalizing Value of Mobility Business

Yandex has announced a long-awaited restructuring of its mobility verticals. It plans to spin off the self-driving cars business (SDC) from the Yandex.Taxi JV and increase its direct stake in it and also to merge the car-sharing business with the Yandex.Taxi JV. We are positive on the news, as these steps should help to crystalize the value of the mobility business, including the SDC division (based on recent deals, Yandex's SDC could be valued above $6 bln, whereas we currently do not give it a valuation in our SOPT model). Yandex's stake in SDC will increase to 73%, from the previous pro-rata 58.2%. It will increase its stake in the taxi JV to 61.7% from 58.2% and put car-sharing under the roof of the taxi JV, which is a logical step that should allow additional synergies to be extracted (e.g. taxi drivers can rent car-sharing cars to use as taxis; economy of scale for car-leasing, etc.). Sadly, no valuation terms were disclosed. The deal is complex and does not allow for the underlying valuation to be calculated in a straightforward fashion. We reiterate our BUY rating on Yandex and target price of R4,896 per share ($68.00 per US-listed share).> SDC restructuring. Yandex and Uber entered into agreements to spin off the self-driving vehicles business from the Yandex.Taxi JV. Following these transactions, Yandex's SDC division will be directly owned by Yandex and Uber. With the spin-off transaction, Yandex will invest $150 mln in Yandex SDC. Yandex will also purchase a portion of Uber's stake in Yandex SDC and will ultimately own 73% of Yandex SDC. Its cumulative investment in SDG to date has been approximately $65 mln (including circa $20 mln in 1H20), which is way smaller than for global players. > SDC could be worth above $6 bln. As of today, Yandex's autonomous vehicle fleet has 130 cars, which have driven over 4 mln autonomous miles on public roads in various weather and road conditions in three countries: Russia, Israel and the US. This puts Yandex SDC in the top three globally in terms of autonomous miles driven. According to the FT, Waymo was valued at $30 bln for its recent deal, which equals $1,500 per mile driven and would put Yandex SDC's implied valuation at $6 bln. We note (see the chart on the next page) that a valuation of $1,500 per autonomous mile driven is at the bottom of the range, while the recent acquisition of Zoox by Amazon implies $13,300 per mile.> Car sharing restructuring. Yandex agreed with Uber to contribute the Yandex.Drive car-sharing business from Yandex to Yandex.Taxi JV. Following the addition of Yandex.Drive to Yandex.Taxi JV, Yandex will own 61.7% in Yandex.Taxi JV (it now holds 58.2%), Uber 33.5%, and the remaining 4.8% will be reserved for the management and employees. Both deals are subject to customary closing conditions and are expected to close in 3Q20.