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bne TMT weekly ListExecutive Summary:
This is bne's Technology, Media, Telecoms newsletter, a list of the top stories in Emerging Europe this week. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options: click here: | ||
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Stories in this Dispatch:
NEWS TMT
COMPANY RESULTS TMT
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| 1. Mail.ru Group: To Sell Part of FBs Shares at IPO |
| VTB Capital |
| 13 May 2012 Facebook files IPO papers. The valuation of the company could be as high as USD 77-96bn, implying USD 28-35 per share. Facebook aims to sell 337mn shares, nearly half of which are primary ones, on 18 May. Facebooks high-end IPO valuation range creates upside risks to our SOTP valuation for Mail.ru Group (Buy, TP of USD 55). The company acquired 2.38% in Facebook in 2009-10. In our sum-of-the-parts valuation for Mail.ru (the owner of Russias #2 and #3 social networks OK and MyWorld, and 40%-owner in Russias largest SNS VK), we use a value of USD 87.7bn (2011-1Q12 OTC market transaction average) to estimate Facebooks impact, which accounts for 20% of our SOTP valuation. This equates to the mid-point of Facebooks pre-IPO valuation range of USD 77-96bn. The valuation implies 2011 EV/EBITDA of 32-41x and 2012F EV/EBITDA of 27- 34x (assuming 20% YoY growth in FY12 EBITDA) for Facebook. By way of comparison, we note Mail.ru Groups 2012F EV/EBITDA of 14.3x. Mail.ru may sell 11.27mn shares (22% of its shares in Facebook) ending up with a 1.5% stake in the global SNS; might raise USD 316-394mn at IPO. We also believe the IPO could: i) be a trigger for Mail.rus stock performance; ii) as Mail.rus 26% free-float is partly spread out among non-Russia dedicated funds, the latter may start exiting the stock to gain direct exposure to the largest global SNS story; iii) Mail.ru Groups still attractive valuation might attract new investors. The company might spend the cash on M&A, and increasing the 40% stake it already holds in Vkontakte (VK), Russias #1 social network, to a controlling one might be a key target, in our view. This would allow Mail.ru Group, which already is uniquely positioned on the Russian market via the two largest local SNSs, to benefit from consolidation and broadening in this segment. In 1Q12, FBs revenues rose 45% YoY, EBITDA was up 12%YoY while 1Q12 earnings fell 12% YoY (vs. +88% to USD 3.7bn, +78% to USD 2.079bn and 65% YoY to USD 1bn, respectively, in 2011). While Facebook still derives the lions share of its top line from online ads (89%), IVAS revenues (virtual gifts, revenue stream from SNS applications and social games) are catching up, and accounted for about 11% of the 2011 top line (up from 7% in 2010). As of March 2012, Facebook had 901mn monthly active users or 526mn daily ones, up 44% and 41% YoY, respectively, while in October it had some 13.4mn monthly users in Russia (the Russian interface was launched in June 2008). The key stakeholders in the company are Mark Zuckerberg, the co-founder and CEO (28%); Facebook employees and management (about one third). |
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| 2. Hackers bring down the Kremlins site |
| bne |
| 13 May 2012 A group of hackers attacked and brought down the Kremlins website, just days after Vladimir Putin was being re-inaugurated as president. Russian Anonymous claimed responsibility for an attack, which disabled the site for one hour starting at 11am, and said it was acting in solidarity with Russias nascent opposition movement, Interfax reported. "We are very serious about these threats and are fully prepared," a Kremlin spokesman told Interfax. "They are serious attacks, but the expertise of our professionals is not a joke." On the eve of Putins inauguration the Russian branch of well known internet vigilantes Anonymous posted a video message threatening to hack government sites, expressing support for the political opposition and stating that they would help protesters break "false government sites," reports the Moscow Times. Russias hackers seem to have it in for the government, and Putin personally. In December hackers crashed the site, webvybory2012.ru, promoting Putin's election web cameras. Putin ordered the government to install cameras in all polling stations to prevent fraud a piece of political theatre but the state actually went ahead with the plan at the cost of hundreds of millions of dollars. However, the website that was supposed to promote the move was brought down by hackers underlying the futility of the measure. |
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| 3. Russian ministry decreases fee for Wi-Fi frequency band usage |
| bne |
| 4 May, 2012 Russia's Communications and Mass Media Ministry has decreased the annual and one-off usage fees for radio frequency bands used for the development of Wi-Fi services, according to an order on the ministry's official Web site. The ministry's order refers to all the operators that currently use the radio frequency band. The initiative is aimed at cutting fees for frequencies, including those that are used for Wi-Fi services, in Moscow and the Moscow Region, Anna Aibasheva, spokeswoman VimpelCom, said, cited by Prime. VimpelCom now has one of the largest Wi-Fi networks in the world comprising 12,000 access points. Meanwhile, in late 2011, sources in VimpelCom said the operator might close down its Wi-Fi network in Moscow due to the increased payments for Wi-Fi frequencies. |
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| 4. Russian government orders mobile coverage for all roads |
| bne |
| 13 May 2012 The Russian government has ordered that the entire national road network must be cover by mobile phone networks by 2013. The government placed the Communications and Mass Media Ministry in charge of the project and RUB2bn has been allocated from the state budget to cover the costs. The Transportation Ministry will assist with the construction of roads leading to the communications facilities, as well as with the delivery of equipment, the government said. In late 2011, the federal service for communications oversight said that 96.6% of the country's federal highways - with a total length of 27,440 kilometers - were covered by mobile networks. |
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| 5. CTC Media volumes take on greater importance |
| Troika Dialog |
| 13 May 2012 We have revised our forecasts for CTC Media and cut our target price from $22.80 to $15.10 per share, but retain a BUY recommendation on the stock. Maintenance of 1Q12 audience share dynamics combined with an increase in TV viewership would enable the company to deliver revenue and EBITDA growth sufficient to justify the multiples implied by our DCF valuation. ? Pricing was previously driving revenue growth across CTC Medias channels, but volumes are now becoming a more significant catalyst, and inventory growth should not be overlooked. In 1Q12, the broadcasters niche channels, Domashny and Peretz, posted audience share gains that translated into an estimated average increase of 20_30% in advertising inventory on these channels. Should this trend be sustained (or slow slightly) and price inflation come in at the mid_single digits in 2012, CTC Media could post advertising revenue growth of 11.5% this year. Building a library of in_house developed and produced content should also drive revenues from sublicensing. Beyond 2012, top_line growth will depend on the macroeconomic situation, though we still see scope for double_digit growth and forecast ad revenues expanding at a 12.4% CAGR in 2012_16. ? We expect the company to increase cash spending on programming in 2012. It started increasing investment in programming rights in 2011 and will continue to do so this year, as it needs to raise the average broadcast time for premieres, which dropped to just 1.3 hours per day in 2011 from more than 2.0 hours per day in previous periods. CTC Media will also address the issue of in_house content, which accounted for less than 10% of programming last year despite the company having its own production capacity. All of these initiatives will eat into cash flow this year, but we think they will ultimately benefit the broadcaster, enabling it to deliver revenue growth and maintain or even improve profitability if the share of in_house content is increased. ? We expect the EBITDA margin (adjusted for stock_based compensation) to decline to 31.6% in 2012 and remain flat in 2013_14, after which it should recover to 32.3% in 2016. This year, we see margin pressure coming from costs related to acquired regional stations, higher marketing costs and amortization of programming rights. The latter should climb 16% in ruble terms this year as the broadcaster increases the number of premieres and the quality of the series that it launches. On the flip side, there will be a positive impact from lower impairment charges, which were abnormally high in 2010_11 and are expected to fall to a more normal level, as the company has had no major content failures so far. ? Our revised estimates and valuation for CTC Media imply a 2012E EV/EBITDA of 8.2, which is justifiable, as this is the level at which its closest peers trade. Meanwhile, the stock is trading at a 2012E EV/EBITDA 6.0. We thus reiterate our BUY recommendation. For more details see our upcoming desknote. Anna_Lepetukhina |
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| 6. Yandex Weekly search share data |
| Renaissance Capital |
| 13 May 2012 Weekly share of Russian internet data released: On Monday (7 May) LiveInternet released its Russian internet search engine market share statistics for 30 April6 May. During the week under review, the search shares of Yandex, Google and Mail.ru were 60.2%, 26.2% and 8.5%, respectively. ? Yandexs share is stable: Yandexs share is currently slightly below its fourweek average of 60.3% but above its three-month average of 59.6%. Googles share of search is above its four-week average of 25.9% and its three-month average of 25.7%. Mail.rus current share is below its four-week average of 8.7% and its three-month average of 9.1%. ? Yandexs share on Google Chrome is stable: Yandexs search share on the Google Chrome browser currently stands at 44.6%, below its four-week average of 44.9% but above its three-month average of 43.5%. Googles share of search among Chrome users amounted to 39.2%, above both its four-week average of 39.1% but slightly below its three-month average of 39.4%. Currently Mail.rus share on the Chrome browser stands at 11.6%, slightly above its four-week average of 11.4%, but below its three-month average of 12.0%. Chromes share of the browser market is showing tentative signs of stabilisation following rapid market share gains; Operas share appears to be stabilising as well, but at a lower level. ? Yandex now trades at a discount to Mail.Ru Group (BUY, TP: $48/share, current price: $42.2): Although Yandexs 1Q12 results were above our forecast, its shares have lost 11% since their publication (26 April) and now trade on a 13% and 9% EV/EBITDA discount to Mail in 2012 and 2013 respectively. Relative to Baidu (Not rated), Yandex trades on a 17% and 15% EV/EBITDA discount over the same period, and in the short term we see scope for shares in Yandex to rebound. In the mid-term, however, we believe uncertainty remains as to whether Yandex can deliver on FY12 Bloomberg consensus EBITDA margin forecasts and this could prevent a sustained upward rerating. Given the premium upon which shares in Mail trade, some short-term profit-taking is also possible, though our view remains that Mail deserves a premium given a superior earnings upgrade potential, the possibility of cash being returned to shareholders post the sale of its international assets and its more diversified business model. |
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