Solving Iskyan’s tease: “buying this stock today is like buying Priceline or Expedia, well before online booking got popular in the U.S.”

International Capitalist teases an online travel agency and a large mobile telecom provider... who are they?

By Travis Johnson, Stock Gumshoe, September 27, 2017

I’ve written a couple times about Kim Iskyan’s teaser ads over the past year, but this is the first time I’ve seen ads for his higher-end International Capitalist (the last offer was a $3,000 “lifetime” subscription).

Iskyan has sold a few investment newsletters over the past decade, first with Stansberry, then later on his own and, just a year or two ago, with Peter Churchouse, a longtime Hong Kong investing majordomo, and now both Iskyan and Churchouse have merged their business with Stansberry. His newsletters in the past have generally been focused on finding overseas stock investments for investors both in the US and overseas, and it seems that the re-connection with Stansberry is getting him a much bigger marketing platform for US investors as he searches for “Adventure Capitalists” who want to invest in frontier countries.

His ad that I saw is mostly about making money by investing in dangerous countries, with the intro pitch all about the foreign investors who’ve been killed or chased out of Russia by Putin’s cronies… so the story is that Iskyan wants to “speculate on ‘trophy’ gains” in these kinds of situations, where he says he has seen thousand-plus percent gains in the past. He mentions examples of ideas that have given investors great growth in the past in places like Mongolia, Pakistan and Turkey, and with the nosebleed growth from tech companies in China.

The ad teases two stocks for you, so let me take a quick look and ID them for you. The first one is a mobile phone network company… here’s the spiel from Iskyan:

“I recommend you get a small stake – as soon as possible – in one company at the absolute forefront of this global mobile revolution.

“It’s one of the world’s largest mobile network operators… But I can almost guarantee you’ve never heard of it.

“This company has almost 100 million more subscribers than Verizon and AT&T…

“And twice as many subscribers as T-Mobile and Sprint put together.

“But this stock, trading for under $5 a share, is completely off the radar of most mainstream American investors.

“It’s like buying AT&T back in the 1980s… before it soared over 3,000%.”

This one also trades in the U.S., he says, which makes things easier… but that’s about it for clues, so what’s the stock?

This is, sez the Thinkolator, VEON (VEON), the former VimpelCom and one of the biggest telecom companies in the world (if you’re going by subscriber count).

VEON has more than 200 million mobile network customers, with about 30 million of them in Italy as part of a joint venture and the rest spread around the emerging and frontier markets — about 100 million of their customers are either in Russia or in one of the former Soviet states in Eurasia, but they also own the leading providers in Algeria, Pakistan, and Bangladesh.

And yes, the stock is under $5 a share (around $4 at the moment), and it’s not a terribly large company — the market cap is about $7 billion, tiny compared to most of the leading telecom firms you can probably think of offhand, and the company trades for less than 10X 2018 earnings estimates and has a current yield of about 8%.

That’s an appealing setup — frontier markets, good profitability, good dividend, cheap valuation. But that’s been true of VEON (and before that VimpelCom) for quite a long time, and yet it’s been a pretty weak stock for years. I don’t know whether that’s mostly because of the strength of the dollar in recent years (in which case the recent weakness in the dollar might help), or if there are other things keeping the company’s numbers down, they haven’t generated any revenue or earnings growth in five years (in US$ terms, at least), so if I had some time to dig into this one further I’d read up on that history and read the annual reports for a few years to try to get a picture for what’s going on.

The business looks pretty attractive at a first glance through the numbers, and if the only blemish is that you have to deal with political risk in Bangladesh and Russia and might see competition in those markets, or that you take on currency risk, perhaps it’s worth that risk at this attractive valuation — but I’d want to dig deeper to see what other risks there might be. If you’ve got thoughts on this one, or have been following VEON recently, please share your wisdom with a comment below.

And then Iskyan dropped hints about another stock in his P.S. Here are those clues:

“I told you earlier about how, in America, we’ve seen online travel booking companies like Priceline (up over 12,500%) and Expedia (up over 2,900%) make some investors a small fortune in recent years…

“Well, I’ve just found a brand-new online travel booking company, serving one of the biggest emerging markets in the world.

“It’s the second-largest online travel booking site in a country with 460 million internet users – and growing fast.

“According to one prominent investment bank, “The online travel market [in this country] should benefit from strong macroeconomic trends, rising internet penetration, and a growing middle class with higher disposable income, combined with a shift in travel spending from offline to online.”

“In short, I believe buying this stock today is like buying Priceline or Expedia, well before online booking got popular in the U.S…

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“And the best part is, you can buy this stock easily in any brokerage account.”

Well… 460 million internet users “and growing fast” pretty much means you’re talking about India… and “second-largest online travel booking site” means, I expect, that the hints are for Yatra Online (YTRA).

And I’d be hypocritical if I didn’t agree with all of that, since I’ve been interested in Yatra since I bought warrants shortly after Yatra went public through a reverse merger with a SPAC back in December. I have shaved off a bit of a profit from that position, but I still like the long-term prospects for Yatra and still own the warrants.

What are the risks? Well, it’s not actually a new company — they’ve been around for more than a decade, competing with several other online travel agencies in India (including MakeMyTrip, which is far larger and is backed by Ctrip, though there are a bunch of other upstarts as well), and they’ve never been profitable. They are newly public, and you can buy the stock easily in the US if you want to.

What first caught my attention with Yatra was the fact that they had warrants trading, which made it a rare opportunity to invest in long-term warrants for a potentially high growth tech stock. My fundamental attraction to this company is, like Iskyan’s (from what I can tell based on the pitch), based on the fact that all the substantial online travel agencies in the US did very well as that sector boomed over the past decade, with a lot of cutthroat competition that led to mergers and acquisitions and, eventually, the current market with a couple dominant players (who still compete aggressively not just against each other, but with the airlines and hotels who would prefer direct booking)… and that we might see something similar in India as internet penetration improves and people begin shopping more online.

One thing that’s different about India is that a huge amount of the new internet access is coming via mobile, so as new and cheaper mobile internet options become available for lower-end consumers the competition is on to appeal to those consumers and get them to start booking online airline tickets and hotel stays through their apps. MakeMyTrip and Yatra are both doing well on the growth front, and Yatra has an easier time of growing rapidly because they’re currently much smaller, but there’s a lot of capital chasing that growth and none of the companies in this sector in India are particularly close to achieving any kind of sustained profitability — so that’s probably the biggest risk, that they’ll keep competing and keep growing but won’t be able t