Luxoft Holding Inc. (LXFT), the software development unit of Moscow-based IBS Group Holding Ltd., rallied to the highest level in five months in New York on prospects the company will benefit from revenue outside of Russia.
The company, whose clients include Boeing Co. and UBS AG, has more than doubled since its June debut, climbing 12 percent to $37.70 last week. The advance sent valuations to 20 times estimated earnings, surpassing the average multiple of 6.7 for the average company on the Bloomberg-Russia-US Equity Index. The gauge of the most-traded Russian stocks in the U.S. posted a fifth weekly decline. RTS index futures rose 0.3 percent to 145,090 in U.S. hours.
While most of Luxoft’s programmers are based in Russia and Ukraine, the Zug, Switzerland-based company generates the majority of its revenue from Europe and the U.S. Companies in Russia, which is expanding at the slowest pace since the recession in 2009, are trading at 4.3 times estimated earnings on average, the cheapest valuation among 21 emerging markets tracked by Bloomberg.
“Luxoft is a global play, rather than a Russia play,” Mansur Mammadov, a money manager at Kazimir Partners, which oversees $300 million in assets, said by phone from Moscow Nov. 22. The firm owns about $500,000 worth of Luxoft stock, he said. “They aren’t exposed to so many of the potential Russian risks. Even though they have their programmers in Russia and enjoy low cost and great education of Russian labor, they don’t depend on contracts from the government or state companies.”
A software engineer makes $20,000 in Russia outside the biggest cities, compared with $95,000 in the U.S., Otkritie Capital said in a Nov. 13 note.
Russia’s benchmark index’s valuation compares with ratios of 13.2 for India’s S&P BSE Sensex Index (SENSEX), 11 for Brazil’s Ibovespa (IBOV) and 8.6 for China’s Shanghai Composite Index (SHCOMP), according to data compiled by Bloomberg. Russia was ranked the most corrupt among the Group of 20 nations in Transparency International’s 2012 corruption perceptions index.
Russia’s jobless rate increased to a six-month high of 5.5 percent in September, the Federal Statistics Service in Moscow said a Nov. 20 statement. Growth this year may miss the government’s 1.8 percent forecast by as much as 0.3 percentage point, Economy Minister Alexei Ulyukayev said Nov. 13.
Rus Lux Limited, a subsidiary of Russia’s VTB Group, is selling 2.8 million of Luxoft shares for $34 each and the offer is oversubscribed by more than three times, according to Alina Plaia, head of external communications at Luxoft. The company won’t receive any proceeds from the sale, it said in a Nov. 21 statement. Luxoft had raised $69.6 million in its IPO in June as the company sold 4.1 million shares for $17 each.
Luxoft raised its revenue forecast for the fiscal year ending March 2014 to at least $384 million, a 22 percent increase from a year earlier, Dmitry Loschinin, chief executive officer at Luxoft, said on a Nov. 13 conference call.
“Liquidity helps and fundamentals are good,” Moshe Katri, an analyst at New York-based Cowen & Co. said by phone Nov. 22. He rates the stock the equivalent of buy. “Luxoft has a very unique business model, which helps them do work in more effective way.”
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, rose 0.2 percent to $28.73, gaining for the first time in five weeks. RTS Volatility Index, which measures expected swings in the stock futures, decreased 2.6 percent to 20.02.
Polyus Gold International Ltd. (PGIL), Russia’s biggest gold producer, fell 3.9 percent last week to $3.02 in New York to trade at a 2.8 percent discount to its London shares. German Pikhoya, 43, will resign as chief executive officer at Polyus Gold, the company said in a Nov. 22 statement.
United Co. Rusal (486), a Moscow-based aluminum producer, dropped 0.9 percent to HK$2.17 in Hong Kong trading as of 11:17 a.m. local time. The MSCI Asia Pacific Index gained 0.5 percent.
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