Yandex a Buy to Barclays After Decline: Russia Overnight

Prospects that Yandex NV will use part of its almost $1 billion in cash for dividends outweigh a share sale that sent the Russian company’s stock down the most in three weeks, Barclays Plc and JPMorgan Chase & Co say.

The nation’s most-used search engine tumbled 8 percent to $23.03 yesterday after some of its largest shareholders said they would sell twice as much stock as the company had planned to acquire in a buyback announced March 11. Yandex raised $552 million in the offering, pricing shares at $22.75 apiece, according to a statement released after trading closed in New York. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. and RTS Index futures retreated.

At least seven of the 16 analysts that have buy recommendations on Yandex reiterated their ratings on the Nasdaq-listed company yesterday. Boris Vilidnitsky, an analyst at Barclays in London who sees Yandex gaining 54 percent in the next 12 months, said yesterday’s slide was “overdone” as the company, which had $895 million in cash and cash equivalents as of Dec. 31, may use part of these funds to reward shareholders.

“This is just the beginning,” Vilidnitsky said by phone yesterday. “The company has a lot of cash and has been discussing using some of it as a dividend payment, which I think may happen already this year. I would be a buyer here.”

The Bloomberg Russia-US gauge lost 1.3 percent to 100.69 as RTS stock futures slipped 0.5 percent to 153,220 in U.S. hours.

Cash Pile

Besides Vilidnitsky, analysts at JPMorgan, Credit Suisse Group AG, UralSib Financial Corp., Otkritie Capital and Sberbank Investment Research reiterated their buy ratings on Yandex yesterday. Of the 21 analysts covering the stock, 76 percent have a buy recommendation, according to data compiled by Bloomberg.

Goldman Sachs Group Inc. reiterated its 12-month target price on Yandex at $31.50 yesterday, implying a 37 percent gain from current levels.

Yandex, which has never paid dividends, had $900 million in cash as of last month and expected to have “about $1 billion in the near future,” Chief Financial Officer Alexander Shulgin said on a Feb. 19 conference call.

The company’s founders -- Chief Executive Officer Arkady Volozh and Chief Technology Officer Ilya Segalovich -- along with shareholders including Baring Vostok Capital Partners sold 24.3 million shares. Volozh is expected to reduce his stake to 10.5 percent from the current 12.2 percent, Segalovich's will drop to 2.5 percent from 2.6 percent, while Baring Vostok will cut to 11 percent from the current 16 percent, according to Barclays’ Vilidnitsky.

‘Shareholder Remuneration’

“We remain positive on Yandex long-term fundamentals and would view any weakness in the shares as a buying opportunity,” JPMorgan analysts wrote in a report yesterday. “The decision to use Yandex’s existing cash cushion suggests that more shareholder remuneration may follow, possibly in the form of dividends.”

Yandex reported last month fourth-quarter earnings that missed analysts' estimates, and said domestic sales growth will slow.

The Market Vectors Russia ETF, the largest Russian exchange-traded fund in the U.S., fell 1.2 percent to $28.92 in New York yesterday. The RTS Volatility Index, which measures expected swings in the stock futures, slipped 0.5 percent to 20.78 points.

The ruble erased its advance versus the dollar and pared gains against the central bank’s currency basket after President Vladimir Putin nominated Elvira Nabiullina, an adviser to the president and Russia’s economy minister from 2007 to 2012, to lead Bank Rossii.

Oil Rises

Futures expiring in March on Russia’s ruble showed the currency falling 0.2 percent to 30.744 per dollar, after strengthening as much as 0.3 percent to 30.6330 in Moscow yesterday. The ruble gained less than 0.1 percent versus the dollar to 30.7010 by the close in Moscow. The currency was little changed at 34.8955 against the dollar-euro basket used by the central bank to minimize swings that hurt exporters.

Crude for April delivery gained 0.5 percent to $92.54 a barrel on the New York Mercantile Exchange yesterday, narrowing its discount to Brent crude to the least in more than five weeks. Brent for April settlement dropped 0.6 percent to $109.65 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s major export blend, was little changed at $106.79.

United Co. Rusal, the world’s largest aluminum producer, dropped 1.4 percent to HK$4.15 in Hong Kong trading as of 10:20 a.m. local time. The MSCI Asia Pacific Index fell 0.3 percent.

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