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FOCUS: Analysts say recruiting giant HeadHunter picks right time, place to go public

By Yekaterina Yezhova

MOSCOW, May 13 (PRIME) -- HeadHunter, the worlds third most popular online recruiting service, wants to raise up to U.S. $250 million from flotation of a third of its capital on the Nasdaq reportedly in late May or early June, and analysts called the timing perfect and liked the floor with rich liquidity and almost no direct trading competitors.

The move is evidently well calculated. HeadHunter is an obvious leader of the Russian online recruiting market with an ever growing revenue, senior analyst at information and research center Alpari Anna Bodrova told PRIME.

The companys net profit almost doubled in 2018 to 1 billion rubles and revenue rose 29% to 6.1 billion rubles. According to researcher Json & Partners, Russias online recruiting market gained 28% in 2018 to 10 billion rubles. Working since 2000, HeadHunter operates in Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Russia, and Uzbekistan.

In the future HeadHunter will expand its presence on the Russian market through entering small towns and buying competitors. Thanks to the strategy and uniqueness of provided services, the company is an appealing investment project for donors with appetite to promising risky assets from the IT sector of emerging markets, said investment company IC RUSS-INVEST analyst Ivan Rodos.

According to analytical platform SimilarWeb, HeadHunter is the worlds third most popular private staff scouting resource after the U.S. Indeed and Ukraines Jooble.

HeadHunter looks strong compared to its international peers that have already listed their securities. The company seems well-positioned to list its securities, as it enjoys strong revenue and net profit growth, investment company ITI Capital analyst Irina Fomkina said.

Investors are in a good mood. High demand during initial public offerings (IPOs) of U.S. ride-sharing company Lyft and photo hosting Pinterest promise a bright future for the startups that dominate in their sectors, and HeadHunter, the U.S. taxi-hailing service Uber and hospitality service Airbnb could count on success, Rodos at IC RUSS-INVEST said.

HeadHunters IPO is organized by Morgan Stanley, Goldman Sachs, Credit Suisse, BofA, Merrill Lynch, Sberbank CIB, and VTB Capital, which will receive a 30-day option to buy 5% of shares.

The company is set to offer 16.3 million of American depositary shares (ADSs) at a $1113.5 range. The inputs suggest that the company may raise $179.3220.1, implying a $550675 million valuation. The high-end placement range including an option to the banks-organizers is seen at $253.1 million, Fomkina at ITI Capital said.

Following a road show on April 26May 7 in Moscow, London, Boston, New York, and San Francisco, a final price for HeadHunter securities will be set. Fomkina expects the demand for ADSs to be moderate.

Starting from 2019, according to the board of directors recommendation, the company plans to distribute at least 50% of its adjusted net profit in annual dividends. A decision on dividends will depend on a range of factors: availability of distributed profit, liquidity, balance sheets, and a development strategy, the ITI Capital analyst said.

The service is owned by private Elbrus Capital Funds by 60% and Goldman Sachs by 40%. After the IPO, their stakes will shrink to 40% and 27% respectively. Foreign ownership is one of the reasons why the Nasdaq was chosen over the Moscow exchange, Fomkina said.

Bodrova at Alpari found it only logical that in the period of political tensions the company is not going to trade on the Moscow Exchange. Investors from the U.S. and the E.U. will find it more convenient to buy ADSs on the Nasdaq, she said.

The Nasdaq is a high-tech exchange and that is one of the reasons behind HeadHunters choice of listing venue, Fomkina at ITI Capital said.

Rodos said choosing the Nasdaq as a placement floor can be explained by its high capitalization and liquidity.

The company is most likely worried by the fact that the Russian market, if picked, is not capable of accumulating enough cash for the purchase of the offered shares at a fair price because of a lack of investors, the analyst at IC RUSS-INVEST told PRIME.

The trend proves that Russian investors gravitate more to the petrochemical, metallurgical, and banking sectors, as well as integrated utilities. This is why securities of such issuers are mainly traded on local bourses. Local high-tech companies, like Internet company Yandex and payment system operator Qiwi, believe they are of higher interest abroad.

Both Yandex and Qiwi are traded on the Nasdaq, although the Internet companys ordinary shares are also traded on the Moscow Exchange.

Fomkina at ITI Capital said it is still unclear whether HeadHunter will succeed with the placement. Russian Internet company Mail.Ru Group picked the London Stock Exchange as its listing venue, which is an uncommon choice for an IT-company. Following the listing, the groups global depositary receipt price stood at $36.7 in 2010, then soared to $44.6 and then slumped as investors started to flee Russia over the Ukrainian crisis. Mail.Ru Group closed the May 7 session at $22.52.

Yandex entered the Nasdaq in May 2011 at $33.45 per American depositary receipt and traded lower till 2013, but then rebounded and closed on May 7 at $36.32.

HeadHunter can easily follow other Russian IT companies in securities performance in the short-term and long-term, Fomkina said.

The closest rival for HeadHunter on the Nasdaq will be 51 Jobs, a fast-growing Chinese service that enjoys strong revenue growth on a yearly basis, she said.

(65.2287 rubles U.S. $1)


13.05.2019 09:14
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