Raven Russia: Emerging Opportunities
Edison | Mar 27, 2017 06:33AM ET
Management’s outlook is cautiously optimistic and market conditions have improved since the start of 2016. Raven Russia's (LON:RUS) FY16 results show an IFRS profit of $7.7m or $55.4m on an EPRA basis. An opportunistic acquisition of three assets in St Petersburg announced since the year-end and expected to close in Q217 vindicates Raven’s strategy of strengthening the balance sheet in anticipation of the market changing. The defence of occupancy levels kept vacancies at 19% on average with leases covering 22% of gross lettable area (GLA) extended and replaced. This has helped maintain cash flow and leaves Raven well-placed to benefit from an upturn.
Strategy succeeding as seen in FY16 results
Raven ended 2016 with a strong cash balance of $198.6m, which enabled it to conditionally acquire three assets in St Petersburg for $83m at the beginning of 2017, less than the replacement cost and on a yield of 16%. There was some investment property valuation loss, but this was reduced by 84% to $40.2m vs $251.2m in FY15. As a result, Raven posted an IFRS profit of $7.7m and the board intends to make a further 2p distribution by way of a tender offer, bringing the total FY16 dividend to 2.5p. Work to change the mix of debt, including a convertible preference issue, has extended debt maturity, strengthening the balance sheet. Management continues to seek opportunistic additions to the portfolio.
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