Ozon IPO: What Investors Should Know About The Amazon Of Russia

One IPO is set to price the shortened week of Thanksgiving, but it's a big one.

The Offering: Ozon Holdings OZON plans to sell 30 million ADS at a price point of $22.50 to $27.50. Ozon is a large e-commerce company in Russia, a large fragmented market.

The two largest shareholders BVFVNL and Sistema will take part in private purchases of $67.5 million each to maintain their 40%+ ownership stakes after the IPO.

Financial Times reports the company had originally planned on raising $500 million but increased the IPO amount to the $750 million to $1 billion range due to demand.

The IPO will value Ozon at $5.6 billion at its current mid-point of the pricing range. Reuters reported valuations given to the company ranged from $4 billion to $12 billion prior to the IPO.

About Ozon Holdings: Ozon Holdings has 11.4 million active buyers. More than 51 million people have downloaded the company’s shopping app, which had 41 million monthly active users in the third quarter.

The company’s third-party sellers represent 45% of total gross merchandise revenue and 15% of company revenue in the first nine months of 2020. Direct sales represented 51% of gross merchandise value and 79% of company revenue for the same time period.

The product offerings of Ozon Holdings are diversified with electronics, home décor and children’s goods making up the largest percentage of sales at 25%, 13% and 10%, respectively.

Ozon Holdings has over 12,000 locker san pick-up points and also more than 2,700 delivery couriers. The company owns and operates its own logistics service.

Russian E-Commerce Market: Ozon coves 40% of the Russian population with next day delivery.

“We believe that we are one of the pioneers of ecommerce and the most recognized ecommerce brand in Russia,” says the filing.

Ozon reports it has 32% brand awareness compared to 18% for the next highest competitor.

Russia is the 11th largest economy in the world with a GDP of $1.7 trillion. The country has the highest GDP per capita of the BRIC countries. Russia’s population of 147 million ranks ninth in the world.

Ozon could be set to capitalize on a country that ranks first in Europe and seventh in the world for the most internet users. Russia has 113 million internet users, which is 83% market penetration.

The top 10 online and offline retailers made up 25% of total retail sales in Russia for 2019, compared to countries like the United States, Germany and United Kingdom where the top 10 made up 35%, 40% and 42%, respectively.

Other eCommerce players in Russia are Wildberries, Yandex YNDX and a joint venture between Mail.ru and Alibaba Group Holding BABA.

Financials: Ozon saw gross merchandise value increase 93% year-over-year in 2019. GMV increased 142% year-over-year for the first nine months in 2020.

The 142% increase in GMV for 2020 grew three times faster than the overall e-commerce market for Russia.

Revenue grew from 37.2 million Russian Rubles in 2018 to 60.1 million in 2019. The first nine months of 2020 saw the company hit 66.6 million Russia Rubles compared to 39.2 million in the prior year’s comparative period.

Plans for Growth: Ozon launched financial products and services for buyers and sellers, which added to its services offered. The company also added advertising and logistics services to sellers.

The company’s Ozon branded debit card has had 260,000 cards activated as of Sept. 30.

Growth strategies include enhancing buyer loyalties, expanding logistics regionally and building a diversified ecosystem of complementary services, like the company’s financial and travel offerings.

Other Global E-Commerce Plays: Amazon.com AMZN has been one of the bigger success stories for early investors. Shares are up 1,700% over the last 10 years. Other global e-commerce plays have also seen large share gains in markets that are under-penetrated and growing.

Jumia Technologies JMIA, an African e-commerce company, has risen 268% in 2020. A recent report pointed to Jumia being the next big thing for global e-commerce and compared its potential to the success stories of Alibaba, MercadoLibre MELI and Sea Limited SE.

Benzinga’s Take: Ozon is the e-commerce play for Russia that resembles these other companies and could follow a similar success story.

The huge population of internet users and highly fragmented market could make a compelling case for Ozon to be a top-performing e-commerce stock over the next five years.

The company’s logistics business and growing services like travel and financial offerings are catalysts investors should watch.