Raven Property Group Limited
The Raven Property Group is a property investment company operating a commercial property investment portfolio generating high rental income yields in the under supplied warehouse logistics market in Russia and principally in the Moscow region.
The Group runs its property investment portfolio with the objective of delivering progressive distributions to shareholders over the long term.
Since 2005, it has built and acquired circa 1.9 million square metres of space in major Russian cities, with the majority situated in the Moscow Region. Where appropriate opportunities arise, the Group will look to expand its investment portfolio through both development and acquisition.
Robust trading, rent receipt and occupation
Raven’s positive trading update was reassuringly robust, despite ongoing uncertainty regarding the long-term impact of Covid-19 on the Russian market.
It has tempered its own leasing expectations for the next 18 months and assumes some sectors will delay planned investment/expansion. But sees potential and indeed some evidence that the crisis will accelerate moves to create e-commerce supply chains.
The Group derives its competitive positioning from a 1.9m sqm portfolio of logistics warehouses. These play a crucial role in Moscow’s logistics networks and supply chains, allowing local supermarkets, their suppliers and e-commerce arms to continue to operate during lockdown.
Rent collection reflects a tenant profile which has largely continued to operate during lockdown restrictions. Raven’s warehouse portfolio is currently 93% leased and it has collected on average over 96% of rent due in each month since March.
Underlying portfolio resilience was confirmed by an independent appraisal carried out by JLL as at 31 May 2020, which recorded no material movement in Rouble values vs 31 December 2019.
We believe that kind of performance deserves more attention, and hope to reinstate detailed forecasts post the General Meeting on 31 July (re a simplified capital structure) and the interim results.
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Key metrics moving ahead
Strong FY18, growing operational resilience
Tenacity winning through
Pouncing, delivering promises
On the acquisition trail
Girding the loins
Cash is King
Resilient in a tough market - and cash rich
Raven Russia's statement is predictably downbeat, given the background of a troubled Russian economy (on the latest numbers, for calendar 2015 Russian GDP fell by 3.7%, and is forecast by the IMF to contract by a further 1.0% in 2016) and a weak rouble, but the company has displayed its strengths in the 2015 Final results published today.
Property net operating income is only 6.8% down, partly because of timing impacts from rouble devaluation. The non-cash revaluation of the property portfolio pushes NAV to a fully diluted 49p per share. This leaves the Raven Russia ordinary shares standing at a discount of 31% to NAV. The group is well placed in the Moscow market, and has cash balances of $202m (21p per share), a significant strength.
The group has announced a final dividend* of 1p per share (*equivalent on buy-back tender offer), giving the ordinary shares a yield of 5.9%, 1.5x covered on our estimate for the current financial year. The preference shares yield 9.8%, 2.8x covered in 2016.
The Moscow market remains turbulent. Our 2016 estimates suggest further reduction in revenues in US dollar terms, but the effects should be mitigated to some extent by good covenants and the company's emphasis on quality lessees. Valuation in these circumstances is difficult: we have to balance the risks in Russia and the possibility of changing fortunes against the strong market position Raven Russia holds in the key Moscow market. Our last published price target was 55p per share, above the latest NAV of 49p. We have decided to reduce our target price (for the ordinary shares) to 40p. We leave our preference target unchanged at 160p.
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