Shareholders including Russian billionaire Alisher Usmanov, China’s Tencent Holdings Ltd. (700) and South Africa’s Naspers Ltd. (NPN) support the plan and are eager to offer stock, Chief Financial Officer Matthew Hammond said on a conference call today. The size of the offering will be in the “low tens of millions” in U.S. dollars, and will occur in the “near future,” he said.
The Russian listing proposal came as the $8 billion company, part owner of the country’s largest social network VKontakte, predicted slowing revenue growth this year as the pool of people not already online shrinks. Moscow-based Mail.ru wants a local stock listing for investor convenience and to encourage inclusion on Russian equity indexes, Hammond said.
Mail.ru is introducing new games and online services to attract Web advertising as the growth in Russian Internet users threatens to slow after topping 60 million. Mail.ru said 94 percent of Russian Web users access its sites each month. Revenue will probably rise 22 percent to 24 percent this year after advancing 30 percent to 27.4 billion rubles ($766 million) in 2013, the company said today in a statement.
“Mail.ru’s offering size will be small, so it shouldn’t create an overhang which is sometimes the case with secondary share sales,” said Alexander Vengranovich, an analyst at Otkritie Capital in Moscow. “The Moscow listing will benefit Mail.ru as the company may become eligible for inclusion into the MSCI Russia index tracked by many investors.”
Yandex NV (YNDX), Russia’s largest search-engine company, is also weighing a Moscow listing, Vice President Greg Abovsky said on a conference call today. Like Mail.ru, Yandex favors inclusion in Russian indexes. Local trading would also be more convenient for employees with stock options, Abovsky said.
The shares of Yandex and Mail.ru fell after both said sales growth will be slower this year, and Mail.ru forecast a narrowing profit margin. Yandex declined as much as 9.2 percent and was down 9.1 percent at $36.21 as of 10:59 a.m. in New York. Mail.ru fell 1.9 percent to $39 at the close of trading today in London.
Earnings before interest, taxes, depreciation and amortization at games provider Mail.ru will probably be 53 percent to 54 percent of sales this year, the company predicted. Ebitda was 15.1 billion rubles, or 55.1 percent of sales, last year. Net income increased 36 percent to 11.4 billion rubles, driven by online advertising and virtual purchases.
“Results for 2013 and forecasts for this year were fine,” Otkritie’s Vengranovich said. “What disappointed investors was the lack of clarity regarding the VKontakte social network and cash distribution.”
Mail.ru hasn’t decided on distribution of the 31.3 billion-ruble cash pile it amassed by selling minority stakes in Facebook Inc. (FB) and Russian instant-payments operator Qiwi Plc (QIWI) last year, Hammond said.
Mail.ru may pursue small acquisitions, said the CFO, who declined to comment on whether it wants to boost its stake in VKontakte. Mail.ru holds 40 percent of VKontakte, while Usmanov’s ally Ivan Tavrin acquired a 12 percent stake last month.
Mail.ru started the My.Com portal for games, messaging and and other applications in November to target the U.S. and expand beyond Russia and ex-Soviet republics. The initial signs for My.com games, which include Jungle Heat and Evolution, are “promising,” Mail.ru said.
To contact the reporter on this story: Ilya Khrennikov in Moscow at email@example.com