jawn619 Posted December 8, 2014 Share Posted December 8, 2014 With the Russian Economy tanking, QIWI looks very interesting. QIWI is a leading provider of next generation payment services in Russia and the CIS. Vish_ram pointed out that the company has surprisingly strong fundamentals. Other points about the company that look interesting. Is growing at around 20% a year Has virtually no debt Trades at Enterprise Value/EBITDA of 6.5 Significant insider ownership. CEO Sergey Solonin owns 43.7% of the class A shares outstanding Link to comment Share on other sites More sharing options...
berkshire101 Posted December 18, 2014 Share Posted December 18, 2014 And it pays a dividend too! Link to comment Share on other sites More sharing options...
writser Posted June 28, 2017 Share Posted June 28, 2017 Another idea. No position (yet) and haven't looked at it extensively. Nevertheless it looks interesting. QIWI is a provider of next generation payment services with over 18.0 million virtual wallets, over 157,000 kiosks and terminals, and enabled merchants to accept over RUB 69 billion in cash and electronic payments monthly from over 53 million consumers using its network in the Russian Federation and the CIS. QIWI operates in and targets markets and consumer segments that are largely cash-based or that lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile environments. Current share price ~$24. Shares outstanding: ~15.5m class A shares (10 votes), ~45m class B shares (1 vote). The founder and CEO, Sergey Solonin, owns ~77% of class A shares and effectively controls the company. A Russian bank, Otkritie, recently announced that they want to commence a tender offer, buying up to ~25m class B shares (each ADR equals one class B share) for $28 per share. Otkritie already owns ~9% and is looking to increase their stake to ~64%. Interesting tidbit from the tender announcement: Substantially contemporaneously with announcement of their intention to increase their investments in QIWI by means of the Offer, Parent and Purchaser have initiated discussions with and are considering an opportunity to cooperate with Saldivar Investments Limited (“Saldivar”), the controlling shareholder of QIWI, and Mr. Sergey Solonin, the controlling shareholder of Saldivar and Chief Executive Officer of QIWI. The discussions are preliminary only and there are no agreements or understandings, written or oral, between the parties as of the date hereof. Parent and Purchaser do not expect any agreements or understandings with Saldivar or Mr. Solonin to be reached until after completion of the Offer, and there can be no assurance that any such agreement or understanding will be reached. Such discussions with Saldivar and Mr. Solonin may continue following the Offer, however, the consummation of the Offer is in no way contingent on the outcome of such discussions. Looks to me as if they are going to take the company private. Thesis looks extremely simple: buy now, tender shares and if you have some leftovers either sell them in the market or wait for the going-private. IRR should be very decent, upside from current price is 16% and you sell at least half your shares in a few weeks if the tender offer goes through as planned. The board still has to approve the tender offer but that looks like a done deal given the founder / CEO is 'in discussions' with the buyer. The whole situation looks very attractive to me but I could very well be missing some things. Nevertheless, it looks like a stock that could potentially be mispriced: "A shady Russian bank is trying to help a shady Russian dude taking private a shady Russian internet payment business. Return look extremely attractive. Oh, and you have almost no voting rights.". 95% of investors probably already not interested anymore. Also, hardly any SeekingAlpha articles, tweets, etc. Stock looks a little bit off-the-radar, just the way I like it. The whole situation reminds me a bit of CTCM, another Russian company taken private that was trading at ridiculous levels shortly before the deal completed. I don't know if and how it is taxed for US holders but I should not pay any taxes. Did anybody else take a look at this? Link to comment Share on other sites More sharing options...
Hielko Posted June 28, 2017 Share Posted June 28, 2017 Think the fact that there is a minimum # of shares that needs to be tendered in a potential deal breaker... Link to comment Share on other sites More sharing options...
writser Posted June 28, 2017 Share Posted June 28, 2017 Yes, good point. They want at least ~20m shares which is roughly a 50% acceptance rate (though they can waive the minimum and/or extend the tender offer). Question is: is this a real risk? Will many institutional holders not tender their non-voting shares at the highest price of the past two years, 16% above current market price? And what is the final goal of Otkritie? Assuming they want to take the company private, will they abandon the whole plan if somehow they only get to a 40% acceptance rate? I agree it is a risk - not sure how large it is. Link to comment Share on other sites More sharing options...
valcont Posted June 28, 2017 Share Posted June 28, 2017 Yes, good point. They want at least ~20m shares which is roughly a 50% acceptance rate (though they can waive the minimum and/or extend the tender offer). Question is: is this a real risk? Will many institutional holders not tender their non-voting shares at the highest price of the past two years, 16% above current market price? And what is the final goal of Otkritie? Assuming they want to take the company private, will they abandon the whole plan if somehow they only get to a 40% acceptance rate? I agree it is a risk - not sure how large it is. I bought a few shares couple years ago when the Russian sanctions hit the company hard. My thesis was that the sanctions will eventually lift and they will be bought by Visa who they are already partnered with in the ECommerce segment. I was early and saw the price collapse from $18 to $11. Bulk of their revenue is via money remittance through hundreds of thousands of kiosks located at high traffic areas across Russia and other countries. They don't own the kiosks so not very capital intensive. Ecommerce segment is growing nicely too. And the company has no debt. QIWI and Yandex are probably the only Russian companies that I found relatively credible. There were rumors last year though that Putin may severely restrict cash remittances to tackle tax evasion and illegal businesses.CTCM replay spooked the investors. Have to look at this offer, thanks for pointing it out. Link to comment Share on other sites More sharing options...
Guest roark33 Posted July 5, 2017 Share Posted July 5, 2017 Looks like the board gave a no opinion recommendation. The large minimum seems like the hardest hurdle here. I wonder how flexible they will be with that requirement. Link to comment Share on other sites More sharing options...
writser Posted July 5, 2017 Share Posted July 5, 2017 Yeah, we'll see. That the offer wasn't recommended is not really a surprise given that all insiders refrained from voting. I bought a decent position the past few days. Link to comment Share on other sites More sharing options...
Guest roark33 Posted July 5, 2017 Share Posted July 5, 2017 I don't think I have ever seen a tender offer requiring this large of commitment (when it wasn't the whole company, like CLMS). Should be interesting to see how many they get. I would bet they don't get it fully subscribed, but still take the shares, which would actually be good if you want to sell all your shares. Link to comment Share on other sites More sharing options...
Homestead31 Posted July 6, 2017 Share Posted July 6, 2017 any idea why russian people use a kiosk to put money on a prepaid card rather than just using a credit card? it seems like this business should go away at some point? Link to comment Share on other sites More sharing options...
Green King Posted July 6, 2017 Share Posted July 6, 2017 any idea why russian people use a kiosk to put money on a prepaid card rather than just using a credit card? it seems like this business should go away at some point? You'll do it too if your bank system goes to zero and all your saving turns to dust. Back in the 90s. Like depression mentality here in the US. Link to comment Share on other sites More sharing options...
Guest roark33 Posted July 6, 2017 Share Posted July 6, 2017 I have to admit, the risk factors for this company are some of the funniest I have seen. Link to comment Share on other sites More sharing options...
Green King Posted July 6, 2017 Share Posted July 6, 2017 I have to admit, the risk factors for this company are some of the funniest I have seen. Elaborate ? Link to comment Share on other sites More sharing options...
Guest roark33 Posted July 6, 2017 Share Posted July 6, 2017 just open the 20-F, just a long list of really huge concerns....not your typical US things. Link to comment Share on other sites More sharing options...
Green King Posted July 6, 2017 Share Posted July 6, 2017 Main risk government taking everything. People stop using cash in a 90% cash dark economy. FX. Losing Visa Brand. Due to the lack of trust and financial development. QiWi has the same position as an early AXP in Russia. The CEO is adventurous and entrepreneur he sees what is happening and is very good at exploiting change. I am quite impressed with the last few conference calls. Regulatory capture might be occurring here with the development of Fintech and payment. Also, the Western Union and MoneyGram is still around so these thing had tails. Would not buy at this price unless oil price recovers but this is a good strategic acquisition for the long run. Link to comment Share on other sites More sharing options...
Green King Posted July 6, 2017 Share Posted July 6, 2017 what do you think will happen in Russia? If the Government suddenly takes over one their trust payment network and online money wallet. Link to comment Share on other sites More sharing options...
s8019 Posted July 7, 2017 Share Posted July 7, 2017 Hi writser, Just trying to do math. Lets assume that the uptake of the offer will be 90% of free float (81% of class B outstanding). The price is attarctive after all so why not. So proportinally Otkritie will buy 67% of free float then (25/(45x0.91x0.9)) I have no idea what this business is worth, but lets assume leftover will be traded at $15 (after all that was a price half a year ago) So math expectation of offer: 67%x28+33%x15=$24 Then there is a small chance that by some reason Otkrities reneges on the offer, or some other problem, let's say 5%. Then math expectation is 95%x24+5%x15= 23.5. Current price is 24, so I pass. However I may have misunderstood the math, I did not look at the offer, all calculations are just based on your first post. Is the math correct here? Link to comment Share on other sites More sharing options...
writser Posted July 7, 2017 Share Posted July 7, 2017 Your math is correct. I just work with different assumptions. In particular I really don't think shares will drop to $15 if the tender offer succeeds. Link to comment Share on other sites More sharing options...
s8019 Posted July 8, 2017 Share Posted July 8, 2017 Ok, thanks. May be I just too dumb to value this type of business on a standalone basis. Link to comment Share on other sites More sharing options...
Guest roark33 Posted July 10, 2017 Share Posted July 10, 2017 Well, if you liked it at 24..... Link to comment Share on other sites More sharing options...
Patmo Posted July 10, 2017 Share Posted July 10, 2017 Never mind governance and business risks, I find that it's pretty hard to justify an investment at any price where you will forever be uncertain whether you really own an economic interest in the business or only a piece of paper. Link to comment Share on other sites More sharing options...
Guest roark33 Posted July 11, 2017 Share Posted July 11, 2017 Not really sure why they bother with the tender offer if the ADS aren't worth anything. Link to comment Share on other sites More sharing options...
Jurgis Posted July 11, 2017 Share Posted July 11, 2017 Not really sure why they bother with the tender offer if the ADS aren't worth anything. Cause they feel for American investors? 8) ::) ;D Link to comment Share on other sites More sharing options...
bskptkl Posted July 11, 2017 Share Posted July 11, 2017 Hi writser, Just trying to do math. Lets assume that the uptake of the offer will be 90% of free float (81% of class B outstanding). The price is attarctive after all so why not. So proportinally Otkritie will buy 67% of free float then (25/(45x0.91x0.9)) I have no idea what this business is worth, but lets assume leftover will be traded at $15 (after all that was a price half a year ago) So math expectation of offer: 67%x28+33%x15=$24 Then there is a small chance that by some reason Otkrities reneges on the offer, or some other problem, let's say 5%. Then math expectation is 95%x24+5%x15= 23.5. Current price is 24, so I pass. However I may have misunderstood the math, I did not look at the offer, all calculations are just based on your first post. Is the math correct here? I am guessing less than 90% tender and stock trades higher after completion. If I had to put numbers to it - 75%x$28+25%x$20=$26 expected value. So I bought some this morning at $23. Today may be last day to tender due to stock needs to be settled - though Fidelity said cutoff is Thursday. Link to comment Share on other sites More sharing options...
writser Posted July 18, 2017 Share Posted July 18, 2017 Number of shares tendered was (surprisingly?) low: 12.5m shares tendered, 20m required. Otkritie terminated the offer. Stock now down ~10% from a few days ago - could have been worse. Might still be an interesting play but I sold and moved on. Link to comment Share on other sites More sharing options...
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