Yandex NV (YNDX:US), Russia’s biggest Internet company, advanced to a record in New York, widening its premium over China’s Baidu Inc. (BIDU:US) on prospects the purchase of a movie-rating site will cement its lead in the search market.
Shares of Yandex climbed 1.9 percent yesterday to $39.31, the highest since its 2011 debut. The company is trading at 34.7 times earnings, 18 percent above Baidu’s multiple, the biggest gap in a month. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. rallied to an eight-month high in New York, led by VimpelCom Ltd (VIP:US) and OAO Gazprom. (OGZPY:US) RTS stock-index futures (VEA) gained in U.S. hours.
Yandex, which gets most of its revenue from online advertising, bought the KinoPoisk movie-rating site on Oct. 15. The Russian company increased its share of the online search market to 62.2 percent last month, the highest since August 2011, while Google Inc.’s portion was unchanged at 26 percent, according to LiveInternet.ru. Baidu has made five acquisitions over the past year to maintain its lead among China’s Internet companies as Qihoo 360 Technology Co. gains ground.
“Yandex deserves a premium rating in my book because it has better earnings growth,” Julian Rimmer, a trader with CF Global Trading UK Ltd. in London, said by e-mail yesterday. “They are successfully monetizing different business lines.”
Baidu, China’s second-largest Internet company by market value after Hong Kong-listed Tencent Holdings Ltd., paid $1.85 billion for app store 91 wireless in July and bought a stake in group-deal site Nuomi.com for $160 million in August. The Beijing-based company also acquired video business PPStream Inc. for $370 million in June to merge it with its video unit iQiyi.com, which it purchased in November.
Yandex could have paid as much as $95 million for KinoPoisk, the nation’s biggest Russian-language website on movies with 18.6 million users, the Wall Street Journal reported, citing unnamed industry experts and analysts.
“The acquisition of KinoPoisk, which is the Russian version on IMDb.com and one of the most popular websites on the Russian Internet, is probably just a first step as Yandex may be expanding into the video segment of the market,” Anna Lepetukhina, an analyst at OAO Sberbank, Russia’s largest lender, said by phone from Moscow yesterday. “It will probably seek to offer video content, which would allow it to sell video-based ads, which have higher price tags than text-based ads.”
Internet advertising in Russia will grow an average 26 percent annually from 2013 to 2015, Yandex said in a June presentation citing ZenithOptimedia data. Online ad revenue will rise to account for 30 percent of total ad sales by 2015 in Russia, the data showed, compared with an estimated 27 percent for China.
Yandex’s valuation premium over Baidu will increase, Rimmer said. The gap reached 52 percent in July, before plunging to 6 percent earlier this month, the narrowest premium since August 2012, data compiled by Bloomberg show. Yandex will say third-quarter adjusted net income rose 42 percent when it reports (YNDX:US) earnings Oct. 24, according to the average estimate of three analysts collated by Bloomberg.
“Yandex succeeded in becoming the market leader in Russia, beating Google,” Mattias Westman, chief executive officer of Prosperity Capital Management, said by e-mail from London. His firm manages about $4 billion and is the world’s largest Russia-focused money manager. “Hardly anyone has done this.”
The Market Vectors Russia ETF (RSX:US), the largest dedicated Russian exchange-traded fund, climbed 1.1 percent to a four-week high of $29.67 in New York yesterday. Futures expiring in June on the RTS gained 0.2 percent to 150,530. The RTS Volatility Index, which measures expected swings in the stock futures, slipped 1.4 percent to 23.68.
VimpelCom rallied 4 percent to $12.87 yesterday, the highest level since July 2011, with trading volume 2.5 times the average daily level for the past three months, data compiled by Bloomberg show.
Gazprom added 2.2 percent to $9.82, the highest level since Jan. 14, on its third day of advances.
United Co. Rusal (486), a Moscow-based aluminum producer, was unchanged at HK$2.30 at 1:23 p.m. local time in Hong Kong trading after gaining as much as 1.3 percent. The MSCI Asia Pacific Index climbed 0.7 percent.
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