Protest-Daring Kiev Engineers Spur a Tech Stock’s Rebound

Luxoft Holding Inc. Vice President Alina Plaia gets a bit emotional talking about the dedication that her company’s Ukrainian employees have shown during the country’s four-month crisis.

On days when deadly protests shut down the Kiev subway, engineers with the Russian software developer lined up car pools and rode the company’s shuttle to offices in the city outskirts, said Plaia, Luxoft’s New York-based vice president. Eighty percent of them made it to work on those days, she said.

“Their dedication brought us to tears,” Plaia said in a phone interview yesterday. “We offered them to work from home and they still came in. Even on the bloodiest day of the protests when the subway didn’t work, they managed.”

Luxoft executives are seeking to allay concern that the upheaval in Ukraine, where 48 percent of the company’s engineers are based, is impairing its operations. Company officials told investors on a conference call yesterday that their three Ukrainian locations are functioning normally, even after Russian President Vladimir Putin deployed military forces into parts of the country.

Luxoft soared 18 percent to $34.10, rebounding from a 2 1/2-week plunge that had driven it down 33 percent to the lowest price since October. Luxoft, which was founded by Russian entrepreneurs and is based in Zug, Switzerland, raised $69.6 million in the June initial public offering. The stock has doubled from the IPO price of $17.

Gazprom Neft

The Bloomberg-Russia-US Equity Index of the most-traded Russian stocks in the U.S. climbed 4.4 percent to 85.16 yesterday, the most since December 2011. OAO Gazprom Neft, the oil arm of Russia’s natural gas exporter, and Yandex NV, the nation’s largest Internet company, jumped more than 6.4 percent in New York. The Micex Index gained 5.3 percent to 1,356.54 in Moscow, the biggest advance since May 2010. RTS index futures fell 0.1 percent to 117,590 in U.S. hours. The Micex slid 0.8 percent as of 07:09 a.m. in New York today.

In his first public remarks since Ukraine said its Crimean peninsula had been taken over by Russian forces, President Putin said he reserved the right to use force to defend ethnic Russians while there’s “no such necessity” at present.

Putin is seeking to regain influence over Ukraine as the overthrow of Kremlin-backed President Viktor Yanukovych, who was deposed by lawmakers on Feb. 22 after clashes with protesters in Kiev left more than 80 people dead. Ignoring warnings from the U.S. and the European Union, Putin has since sent thousands of troops to augment the 15,000 already in Crimea, where Russia has stationed the Black Sea Fleet since its founding by Catherine the Great in 1783.

Trade Pact

Demonstrations erupted in November after Yanukovych spurned a trade pact with the European Union in favor of closer ties with Russia. The U.S. and Europe are racing to seal billions of dollars of aid to help the new administration in Kiev avoid bankruptcy.

The hryvnia has lost 9.5 percent against the dollar since the beginning of the year, more than any currency except the Argentine peso and the Kazakh tenge, according to data compiled by Bloomberg. Luxoft is not exposed to foreign-exchange risks because most of its revenue and spending are in dollars and euros, Plaia said.

The rally in Luxoft since its IPO sent valuations to 16.4 times estimated earnings, surpassing a multiple of 5.8 for the average company on the Bloomberg-Russia-US gauge. The company, whose clients include Boeing Co. and UBS AG, confirmed its revenue forecast for the fiscal year ending March 2014 of at least $396 million, a 26 percent increase from a year earlier, Dmitry Loschinin, chief executive officer at Luxoft, said on the conference call yesterday.

‘Fair Amount’

“The shares are still pricing in a fair amount of growth,” Andrew S. Zamfotis, an analyst at evaDimensions LLC in New York, who has a sell recommendation for the stock, wrote in an e-mail yesterday. An escalation of the crisis in Ukraine “has the potential to interrupt its business,” he said.

While the majority of Luxoft’s programmers are based in Russia and Ukraine, the company generates most of its revenue from the U.S. and the U.K. Russia accounts for about 30 percent of the company’s engineers globally, according to Plaia.

“If there is no war, we will be hiring more people in Ukraine,” Plaia said. “They are fantastic, highly qualified and committed to a degree that can not be even expected from a human being in such circumstances.”

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