Vostok raises Avito valuation 33% to $3.4 billion US

15 Feb 2017

The most exciting thing about the financial reports of Vostok New Ventures (for us, anyway), is the information on Avito’s performance. Vostok New Ventures is listed on the Nasdaq OMX Nordic in Stockholm and holds a minority stake in Russia’s leading general classifieds site Avito.ru.

This morning, Vostok New Ventures reported its Q4 and full-year results, and Avito made up 59.3 percent of the entire portfolio value of Vostok New Ventures.

Avito continued to do very well, and one had to wonder how long the Avito rally will still go on. Vostok New Ventures upped its valuation of the 13.3 percent it holds in Avito to $449,281,016 U.S.. That is 33 percent higher than a year ago. And means, Avito is now valued at $3.4 billion U.S..

Vostok New Ventures clearly believes in “the rich future of Avito”, although it talked about “…increased competition and economic headwind” in the report.

“The continued, solid performance of Avito in the face of investments by competitors, shows how difficult it is to replace the largest player once a leadership position has been established,” wrote Vostok New Ventures.

The report even named the main competitors in Russia as Youla (mainly women’s clothing and children’s products), Cian (real estate in Moscow city), Auto.ru (autos, primarily in Moscow) and Drom.ru (autos in Siberia).

Vostok New Ventures has a strong belief in Avito and wrote: “ … over time our belief remains strong that Avito will increase revenue per internet user from about $2 U.S. in 2016 (assuming a Russian internet population of close to 100 million in 2016) to the $10 U.S. (and higher) typically achieved by international peers”.

Vostok New Ventures also discussed a new revenue source of Avito: in Q4 of FY2016, the company introduced a special subscription for professional users.

The new subscription offer combines the possibility to list (i.e., listing fees) with branding products, such as company pages. Vostok New Ventures wrote, this idea has also been ”used extremely successfully by the likes of Autotrader and Rightmove”.

“Not only does the offer have a strong lock-in effect, but it also creates a platform for future revenue increases, by constantly adding new, value-enhancing features to the subscription offer. This will, in turn, enable Avito to increase the monthly fee charged.”

Note: in Q4 revenue grew “only” 54 percent q-on-q, compared to the growth of 75 percent y-on-y. What a slowdown!

Key performance indicators in Q4 of FY2016:

− Revenue of RUB 3,299 million ($54.4 million U.S.) in Q4 of FY2016 from RUB 2,145 million in Q4 of FY2015 (+54 percent);
− Adjusted EBITDA* margin of 47 percent (RUB 1,536 million), compared to 42 percent (RUB 908 million) in Q4 of FY2015;
− Page-views amounted to 31 billion (mobile views – 59 percent) compared to 29 billion (mobile views – 50 percent) in the same
period of FY2015.

Key performance indicators in full FY2016:

− Revenue of RUB 11,678 million ($192.5 million U.S.), grew by 75 percent from RUB 6,674 million in FY2015;
− Adjusted EBITDA* margin of 54 percent (RUB 6,261 million), grew by 49 percent from RUB 3,286 million in FY2015;
− Page-views amounted to 123 billion (mobile views – 56 percent) compared to 104 billion (mobile views – 46 percent) in FY2015.

 

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Lars Herlin

Lars Herlin is an AIM Group senior analyst for Europe, and our expert on Schibsted. He had a long career in journalism at Expressen, Svenska Dagbladet and VeckansAffärer, and served as managing editor and later managing director of Gotlands Allehanda.