Page 9 - bne_Tech_11_2018

Leaders
November 2018 www.intellinews.com I Page 9
Russia's Mail.ru keeps growing in 3Q18, pressures on margins remain, Usmanov gives up control
Russia's internet major Mail.ru posted 32% year- on-year revenue growth in the third quarter of 2018 to RUB17.7bn ($269mn), with Ebitda up
by 6% y/y to RUB4.3bn. The management has improved its own guidance for 2019 to 28-30% top line growth to RUB72.7bn-73.8bn ($1.1bn) in 2019 from previous 26%-30%.
Mail.ru has been expanding rapidly in multiple segments, from food delivery, to taxi aggregators, to cyber sports, keeping margins under pressure. The company is set to remain one of the major players in Russian digital economy and e-com- merce with the recently announced partnership with Chinese AliBaba.
In the third quarter advertising revenue increased by 38% to RUB7.7bn, while revenues of Vkontakte social network expanded by 45% to RUB4.4bn. MMO games brought 31% more with RUB5.7bn, with 64% coming from foreign users. Revenues
of Delivery Club food delivery division increased by 37%.
Margins remained subdued in the reporting quar- ter, however, with 24.6% Ebitda margin and overall Ebitda missing the consensus forecast by 12%.
"Mail.ru’s 3Q18 results came in significantly below consensus on the Ebitda line," VTB Capital commented on October 25, while noting that
the company has nevertheless raised its Ebitda
guidance for 2018 from RUB21bn-22bn to RUB 22bn-22.5bn.
This is largely attributed to the exclusion of Pandao, its loss-making e-commerce business, which will serve as the basis for joint venture with AliBaba. "Mail.ru also announced its plans to create a new e-commerce platform around its classifieds and food delivery business, which might lead to these loss-making businesses being deconsolidated," VTB believes.
This restructuring could be supportive for Mail. ru’s valuation metrics, VTB argues, maintaining the Hold recommendation for Mail.ru shares with 12-month target price of $30 implying an estimat- ed total return of 14%.
In the meantime shareholder structure of Mail. ru is also being reshuffled, with one of Russia's richest men Alisher Usmanov no longer having
a majority voting stake through his USM holding, transferring the control to Mai.ru management to shield the company from potential sanctions.
USM controlled Mail.ru through a joint venture MF Technologies with mobile operator MegaFon and Russia's third largest bank Gazprombank. Mega- Fon recently said it will buyout shares and go private, as it prepares to complete its transforma- tion "into a digital business in the heart of the new digital ecosystem in Russia."