We have revised our valuation of Rambler, as we believe there is a high risk that the company will be delisted following the consolidation of a 75% stake by ProfMedia.
We have increased the company specific risk from 5% in our previous report to 35%. This has moved our WACC to 47.4% compared to the previous 17.4%. We have not otherwise altered our model at this stage, as the company itself is performing in line with our expectations and benefiting from the recovery of the Internet advertising market in Russia.
The new WACC decreases our fair value to USD 3.05 per share. We have downgraded the stock to a Sell given the 25% downside to the current price.
Fair value reduction due to reassessment of media market in wake of economic slowdown. Buy reiterated.
We are cutting our fair value of CTC Media from USD 33.60 to USD 22.30 per share as we have reexamined our forecasts for Russia’s media market following the onset of the economic slowdown and the RUB devaluation. We have also increased the country specific risk premium in our WACC calculation, taking the WACC to 14.5% from 12.0% in our last report on the company, pushing our valuation down. Nevertheless, our new fair value still suggests 64% upside. Based on our previous WACC and RUB/USD exchange rate projections, we would value CTC Media at USD 32.29, or just a slight reduction from our last report.
We have cut our fair value yet still estimate 34% upside potential for Rambler
While we have cut our fair value for Rambler due to the RUB devaluation and the potential impact of the economic slowdown on Russia’s media market, our new DCF-based valuation of 8.6 per share still implies 34% upside. This compares to our previous estimate of USD 21.0 per share. Moreover, both Russian internet majors, Mail.ru and Yandex, have postponed IPO plans, so we argue that Rambler is the only play on the Russian internet market, given that we strongly recommend investors refrain from investing into RBC Infosystems due to its highly uncertain financial position.
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