Facebook Seen Cutting Mail.ru Discount: Russia Overnight

Mail.ru Group Ltd. will boost its dividend after selling its Facebook Inc. shares, leaving the operator of Russia’s largest online social network poised to outperform rival Yandex NV, according to BCS Financial Group.

Global depositary receipts of Mail.ru rallied 4.7 percent in London yesterday to a six-month high of $35.50, valuing the company at 24 times estimated earnings. Its discount to Yandex, narrowed to 25 percent from a record high of 32 percent July 10. The Bloomberg-Russia-US Equity Index of most-traded Russian stocks rallied and futures on the dollar-denominated RTS gauge added 0.3 percent to 134,190 in U.S. hours. Mail.ru traded up 0.5 percent at $35.67 as of 9:40 a.m. in London today.

Mail.ru, controlled by billionaire Alisher Usmanov, said yesterday it sold its remaining 14.2 million Facebook shares for more than $525 million and may sell a 15 percent stake in Qiwi Plc, a Russian electronic payment service. Mail.ru’s board of directors will decide on a “cash return policy,” Chief Financial Officer Matthew Hammond said yesterday. Mail.ru also said it expects revenue to rise between 27 percent and 29 percent in 2013, from a previous range of 25 percent to 28 percent.

“Go long Mail.ru and short Yandex is our pair trade idea, fueled by catalysts that we are seeing for Mail.ru,” Anna Kurbatova, senior analyst at BCS Financial Group in Moscow, said in a phone interview yesterday. “We anticipate a special dividend as the company sold its stake in Facebook and plans to sell Qiwi. Mail.ru has increased its guidance for this year and that is yet another catalyst for the rally.”

Biggest Gainer

Yandex, Russia’s biggest Internet company, rallied 5.1 percent to $34.67 in New York yesterday, the highest level since July 2011, with trading volume more than twice the average daily level for the past three months. The stock has surged 61 percent this year, the most on the Russia-US gauge.

Mail.ru has more than $780 million in cash “as of last night,” CFO Hammond said on a conference call yesterday.

“Cash return policy is a matter for the board and we will make announcements at the appropriate time,” Hammond said on the call. “All I can really say is that our position as concerns excess cash is unchanged.”

Mail.ru approved a special dividend of $899 million in February after reducing its stake in Facebook and exiting investments in Groupon Inc. and Zynga Inc. It had announced a special dividend payment of $795 million on Aug. 6, 2012.

“People expect a special dividend following the sale of Facebook and that supports the stock,” Alexander Vengranovich, an analyst at Otkritie Capital in Moscow, said by phone yesterday. He recommends buying Mail.ru and holding Yandex. “While Yandex has no price catalysts at the moment, Mail.ru enjoys several.”

Online Ads

Mail.ru’s sales jumped 28 percent in January through June from the same period a year ago, driven by growth in online advertising and user spending in social networks and games, the company said in a statement yesterday.

Qiwi, also backed by Usmanov, slipped 0.9 percent to $30.24 in New York yesterday, trimming its surge since its May initial public offering to 78 percent.

State-controlled OAO Gazprom, the world’s biggest producer of natural gas and Russia’s biggest company, jumped the most since December 2011 in New York yesterday, with volumes almost three times the 90-day average. American depositary receipts of the company rose 5.8 percent to a four-month high of $8.36.

The Bloomberg Russia-US gauge climbed 2.9 percent, the most in eight weeks, to 92.61 yesterday. The Market Vectors Russia ETF also gained 2.9 percent to a six-week high of $27.04. The RTS Volatility Index, which measures expected swings in futures, increased 2.1 percent to 20.20.

The benchmark Micex Index gained 0.3 percent today after a 3.4 percent surge yesterday, while the dollar-denominated RTS Index added 0.4 percent.

Before it's here, it's on the Bloomberg Terminal.