Investment journal 2.7.2019: Vostok New Ventures exit

I exited Vostok New Ventures (VNV), portfolio of VC investments, today @ 61 SEK share because upside to the CEO bonus adjusted NAV dimished to 3%.

I originally bought 5% position in last Christmas during the market panic when the upside to adjusted NAV was 40-70 % so this one played out nicely.

My original thesis was that Avito, the biggest horizontal classifieds platform in Russia that was 55% of the portfolio at the time, was worth the market cap, and you got rest of the VC portfolio for free.

Soon after my purchase, Avito was sold and the proceeds were paid out as dividends. I was a bit upset initially because I had Avito and thus VNV in my ‘long term hold’ bucket.

In reality, Avito’s competitive position seemed to be eroding, as vertical real estate, jobs and cars classifieds were beating it in the easy-to-monetize professional segments and rich regions, and Avito was only winning in the difficult-to-monetize private segment in poor regions.

After the sale, VNV’s portfolio consists mostly of VC investments with no information about their KPIs, so it’s basically black box now.

I have played around with Blablacar’s available KPIs, a car sharing platform that’s the only tech unicorn from France and 26% of the portfolio.

The current valuation mark (1,5 BEUR vs. 75 MEUR revenue) seems to imply that all yet-to-be-monetized markets will be monetized and that all markets reach the same market penetration as in France.

If these are reached with current pricing and take rates while adding nothing to the operating cost, the implied “mature EV/EBIT” is 10x.

I don’t know how many years reaching the maturity would take, my gut feeling says few years rather than ten years, so I think the valuation mark seems reasonable.

It could be thought as undervalued if probability for Blablacar becoming the leading distribution platform for bus tickets is big. That’s possible too and I kind of like the risk-reward ratio, and see potential upside in the Blablacar valuation marks.

Problem is rest of the of portfolio (75%) that I don’t understand anything. There is no information to determine whether their marks are undervalued or not.

There are some healthcare AI platforms, electric scooter platforms, classifieds and other aggregator platforms that I don’t understand.

Now that the stock price equals NAV, only upside would come from knowing that the marks are wrong.

I have suspicion that it could be the case for Blablacar, but no idea for anything else, so basically I have no case for owning it anymore.

It’s almost a shame as I like Per Brilioth, the manager of VNV, and the Blablacar position, but those alone not enough to own the stock anymore for me.

Disclosure: Sold 100% of my Vostok New Venture shares. No position anymore.

7 thoughts on “Investment journal 2.7.2019: Vostok New Ventures exit

  1. Are you also accounting for the hidden value of Babylon Health? It is in Vostoks books at $200m but current value is probably closer to $1bn.


    • Well this is basically the reason I sold. I don’t have a clue what Baybylon does or how much it’s worth.

      I understand Blablacar and some of the classified stuff and can live with their marks, especially before the Avito sale.

      Now that there is no Avito and so much of the other stuff that I don’t understand, I decided to exit at ~NAV.

      So I didn’t adjust for Baybylon, if it’s undermarked the upside could still be nice, but as I said, out of my competence.


  2. I also have no idea about the value of Babylon, but it’s very likely more than $200m, which skews it to the upside.

    How could you exit at NAV when the NAV is at 70 SEK (Q1 2019)?
    I do not understand why you “bonus-adjust”.
    The most recent accounts already include the bonus for Per.


    • Ups. Had to check the numbers after your comment. I have real time NAV in google sheet which updates the NAV for exchange rate. Now saw that I had mistakenly the Q3/18 share count in the real time NAV column instead of the Q1/19 share count.

      With the CEO bonus adjustment and the current USD/SEK, NAV per share is 69,8 SEK/share. So the upside to NAV is 14 %.

      I wondered before selling how come it’s selling at NAV because it basically never happens.

      The upside is still too small though. For example applying typical 20% holdco/investment co discount, the implied downside is -8,5 %.

      Sorry for the inconvenience and thanks for pointing the mistake out!


  3. There is no bonus-adjustment to the NAV needed. Yes, it was paid after Q1 (cash outflow), but it accrued (reducing the NAV) in Q1 already. By adjusting you are double-counting!


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