Page 10 - bne_Tech_12_2020

Investment
December 2020 www.intellinews.com I Page 10
Russia's Mail.ru buys into e-learning with Uchi Group
Russian internet major Mail.ru Group will acquire 25% stake in Uchi Group, a Russian e-learning platform for school students, for RUB3.75bn ($51mn) in cash.
"We welcome the deal and believe that Uchi.ru will be complementary to Mail.ru's e-learning vertical and ecosystem centred around VKontakte social network," Sberbank CIB commented on December 9.
"The Russian education market stands at around RUB1.8 trillion ($24.5bn)," Sova Capital wrote on December 9, with the Russian online education market having the potential to triple by 2023 (from RUB45bn in 2019 to RUB140bn in 2023).
Sberbank CIB reminds that Mail.ru also owns a controlling stake in the online educational services GeekBrains and Skillbox (51% and 70% stakes), which together are expected to deliver over RUB5bn in revenues in 2020, as well as minority stakes in Tetrica, Algorithmika (an online programming school for children) and SkillFactory (18.31%).
Sova Capital also believes that the deal should further strengthen Mail.ru’s exposure to the growing e-learning market and its promising school learning and exam preparation segment. Mail.ru will have the chance to increase its stake
in Uchi to a controlling one in 2022-2023 via put/ call options, and also could exercise its initial put/ call option to increase its stake in Uchi to 49.5% in late 2021.
Uchi Group’s main product is the free or subscription-based self-learning platform Uchi.ru for school students, covering all major disciplines and offering exam preparation (about 90% of revenue in 2019).
According to Mail.ru, 8mn school students (about 50% of Russian school students) and 350,000 teachers are registered on the platform. Uchi Group is also developing a one-on-one online tutoring service, as well as educational products for international markets.
Uchi Group’s revenue is anticipated to reach RUB3bn in 2020 (up 200% year on year) and deliver a sales growth annually of at least 30% in 2020-2023 with a margin of over 30%.
The deal implies a valuation of RUB15bn for the whole group (assuming no net debt/cash). This translates to a 2020 Enterprise Value/Sales of 5.0x and 2020 Enterprise Value/Ebitda of 16.7x (assuming a 30% Ebitda margin), on Sova's estimates. The analysts see the valuation as demanding, but justified, and reiterated a Buy call on Mail.ru's shares.