Yandex: The true value of the ecosystem (stays BUY)
In this report, we take a deep dive into the value drivers of Yandex’s emerging new businesses – ride-hailing and e-commerce – and we re-assess their valuations, at USD 23/GDR and USD 18/GDR, respectively, using our more detailed analysis. We have raised our price target (PT) by 26%, to USD 88 (from USD 70), maintaining our BUY rating. Besides a more positive outlook for the new businesses, the other major difference between us and the market lies in our valuation approach. We see value in operating key services within a single ecosystem, which generates additional synergies and makes their competitive advantage stronger. Besides this, we treat investments into new ventures separately and assign zero or a small conservative value to them, while a traditional approach of applying a P/E multiple to the consolidated earnings may lead to a negative value assigned to new businesses.Yandex is an internet and technology company that operates an internet search engine in Russia. Co. builds intelligent products and services powered by machine learning. Co.'s products and services are based on complex, unique technologies that are not easily replicated. Co. generates substantially all of its revenues from online advertising. Co. also generates revenues from its e-commerce offerings, classifieds and e-hailing service. Co.'s businesses are organized in the following operating segments: Search and Portal; E-commerce; Taxi; Classifieds and Experimental businesses.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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