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Raven Russia begins to fly

RESULTS: Moscow warehouse landlord Raven Russia has matured into a very attractive investment - yet its shares still trade at a hefty discount to net asset value
March 12, 2012

Raven Russia offers the promise of both growth and income, which is something of a rarity among today's property companies. That's because it serves a booming market, essentially domestic consumption in Moscow and St Petersburg, with a naturally high-yielding product - logistics warehouses. Yet the group's shares, which trade at a hefty discount to net asset value, don't reflect those prospects.

IC TIP: Buy at 62p

Raven Russia's promise has remained unfulfilled for many years because its cash flow was being absorbed by an ambitious expansion plan that had been hatched before the financial crisis. But the company finally turned an underlying profit last year - the first since 2007 - and 2012 should be even better. Meanwhile, gross profit totalled $91.6m (£58m) in 2011, up from $56.1m. That figure rises to $129m after factoring in rental income contracted since.

One notable letting was to X5 Retail, Russia's largest retailer, which took 76,000 square metres of temperature-controlled space at a premium rent. Raven Russia's vacancy rate is now just 8 per cent, while tight supply across the market as a whole has been boosting rents. That has pushed up the property estate's capital value and, with it, the company's adjusted NAV - which rose from 105¢ to 119¢ in 2011.

RAVEN RUSSIA (RUS)

ORD PRICE:62pMARKET VALUE:£367m
TOUCH:61.5-62p12-MONTH HIGH:71pLOW: 47p
DIVIDEND YIELD:4.8%DEVELOPMENT PROP:$101m
DISCOUNT TO NAV:18%
INVESTMENT PROP:$1.15bnNET DEBT:82%

Year to 31 DecNet asset value (¢)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)*
2007227116.022.706.5
2008143189.0-38.803.0
2009114-148.028.501.0
201011655.78.412.0
2011118129.016.703.0
% change+2+131+99+50

Ex-div: -

Payment: -

*Includes tender offer buy backs

£1=$1.57