Morgan Stanley’s Yandex Call Spurs Gain: Russia Overnight

Yandex NV, Russia’s biggest Internet company, climbed to a record after Morgan Stanley said rising sales will help extend the stock’s two-fold gain in 2013.

Shares of Yandex rose 4.7 percent to $44.22 in New York, the highest since its May 2011 U.S. debut. The gain sent valuations to 29.8 times estimated earnings, or 16 percent above its historical average. The Bloomberg Russia-US Equity Index fell 0.4 percent, led by television company CTC Media Inc. and wireless carrier VimpelCom Ltd.

Yandex will report a 30 percent revenue increase for 2013, helping the stock outperform peers over the next two months following a record rally last year, Edward Hill-Wood, an analyst at Morgan Stanley, said in a note yesterday. While Russia is posting its weakest annual expansion since 2009, retail sales beat forecasts and inflation-adjusted wages grew, indicating a robust market for Internet advertising.

“People are pricing in Yandex’s exposure to e-commerce,” Anastasia Obukhova, an analyst at VTB Capital in Moscow, said in a telephone interview. “This is one of the few stories which still provide you with quite high growth.”

Sales for 2013 will increase 39 percent to a record 40 billion rubles ($1.2 billion), according to the average of five analyst estimates compiled by Bloomberg. The company, based in The Hague, is set to report earnings Feb. 19.

Yandex is building online payment tools and a marketplace platform called Yandex Market in a bid to tap into Russian consumers’ migration to online shopping, Obukhova said. Yandex reported third-quarter revenue that exceeded analysts’ estimates, helped by online ads after the company extended its text-based advertising service to Group Ltd.

Wages Grow

Russian retail sales rose 4.5 percent in November, topping the 3.3 percent median forecast of 17 economists in a Bloomberg survey. Real wages advanced 4.8 percent from a year earlier in November following a revised 5.4 percent increase the previous month, and real disposable income rose.

While Russia’s economy probably grew 1.5 percent in 2013, the worst performance since it shrank 7.8 percent in 2009, according to data compiled by Bloomberg, speculation the government may sponsor “some form of fiscal stimulus following the games” is growing, Jefferies LLC analysts including David Reynolds wrote in a note dated Jan. 8.

Russia is hosting the Feb. 7-23 Winter Olympics in Sochi, a resort town along the Black Sea. It’s spending $48 billion on roads, hotels, airports, stadiums and train lines, about seven times more than the amount spent on any previous Winter Games.

ETF Retreats

The Bloomberg Russia-US gauge slipped to 97.91 after Credit Suisse Group AG cut ratings on the country’s top three companies in the telecommunications sector, citing increased price competition in the Russian market and weak economic growth. VimpelCom declined 2.2 percent to $12.07 and OAO Mobile TeleSystems, Russia’s largest wireless carrier, fell 2.9 percent to $20.17. CTC Media sank 5.2 percent, the most in five months, to $12.78.

The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, slipped 0.5 percent to $27.17, the lowest level in four months. Futures on the RTS index slumped 0.7 percent to 137,760 in U.S. hours, and the RTS Volatility Index, which measures expected swings in the index futures, decreased 0.5 percent to 20.62.

United Co. Rusal, a Moscow-based aluminum producer, tumbled 4.1 percent HK$2.34 at 10:39 a.m. in Hong Kong trading, heading for its biggest loss in a month. The stock jumped 7.5 percent yesterday. The MSCI Asia Pacific Index fell 0.2 percent.

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