Vostok holds 7% of Hemnet (and wanted more)

16 Feb 2017

Apart from the crown jewel Avito, Vostok New Ventures also has investments in other classifieds in its portfolio, such as Propertyfinder, Merro, Wallapop, Naseeb Networks (operator of leading job sites, such as Rozee in Pakistan, Mihnati in Saudi Arabia, and leading job vertical Wuzzuf in Egypt).

In Vostok’s Q4 report (published yesterday) CEO Per Brilioth revealed for the first time that the company invested in the leading Swedish real estate site Hemnet in January, and now holds a stake of 7 percent. Per Brilioth said: “We wish we could have bought more!”

Per Brilioth, CEO of Vostok New Ventures (photo from his LinkedIn profile with thanks)

Per Brilioth could also brag about a successful sale. His company sold all of its shares in IZH Holding (Zameen and Bayut) in December 2016 for $4.7 million U.S., which was a multiple of 2.4 times on capital invested over an 18-month period.

Per Brilioth explained why his company left, despite the fact that ”the three founding brothers Ali Kahn are very strong entrepreneurs, with whom we hope to stay in touch in years to come”.

“The reasons for selling were firstly the 135-percent, or so, uptick in the price over the year we were invested, and most of all, the growing complications over a potential conflict of interest with our holding in Propertyfinder, specifically over the regional ambitions of both groups.

“Whilst we feel that Zameen is very strong at home in Pakistan – an asset we would have liked to stay exposed to – they are up against formidable competitors in the region, such as Propertyfinder, which reduces the favorable risk/reward ratio,” he said.

“Hemnet is another case. (But), here is only upside.”

This is what Vostok New Venture wrote about Hemnet:

In December 2016, we acquired 7 percent of Hemnet together with a group of other investors led by General Atlantic, a leading global growth equity firm with stakes in Airbnb, Delivery Hero, and Axel Springer, to name a few.

The transaction closed early in January 2017. The process was run by Pierre Siri and Henrik Persson of Merro, and it is, by this association, that our involvement was organized. Pierre and Henrik will remain active in Hemnet. Sweden is not our typical hunting ground (although it is home to many of us at Vostok…), but Hemnet offers an exceptional risk/reward in our preferred space of businesses with strong network effects.

Hemnet is the market-leading Swedish real estate vertical, and a household name in the country, as well as the fourth largest site in the country.

The investment case rests on the fact that it monetizes at roughly $2.30 per internet user (valid 2015) in the country, compared to other market leading players around the world, which monetize at $10 to $20 per internet user in the country.

Whilst one should not expect a sudden change in the economic model of the company, long-term, there is ample opportunity to run the company in line with international benchmarks, in turn providing very good upside for shareholders. We are well acquainted with the business model from our experience with Avito, Domofond, Propertyfinder and Zameen.

We only wish we could have bought more!”

The income statement of Vostok New Venture is all about valuation, since results of financial assets are reflected in the profit and loss statement at fair value.

Thanks to the revaluation of the Avito holding (we reported here) Vostok New Venture shows a strong financial report, with a profit before tax of $135 million U.S.. (The revaluation of Avito stands for $110 million of that.)

The Vostok share was up 2.4 percent after the publication of the Q4 report.

Link to report.

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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.