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Raven Russia could fly if country's economy recovers

There are tentative signs of the economic picture in Russia stabilising and if it does the warehouse company could be in a good position
September 6, 2016

Economic sanctions on Russia have taken their toll on the economy, and warehouse investment company Raven Russia (RUS) is no different. But there's a drop of optimism coming from chief executive Glyn Hirsch when he says "it may not be the bottom of the market but it certainly feels as though things have stopped deteriorating". This is perhaps bourne out by the stabilisation of occupancy levels at 82 per cent. Also, while 78,000 square metres (sq m) of space had been vacated in the first half and another 62,000 sq m expected in the second half, the group said letting interest had "picked up significantly", and 85,000 sq m had been relet by 30 June.

IC TIP: Buy at 36.5p

The other big news for the group also came after the period end when in July it raised £109m via convertible preference shares, which allowed it to restructure its balance sheet by reducing debt facilities and extending the terms of borrowing. It has agreed terms on seven of its debt facilities and expects to pre-pay $100m (£75m) of debt by the end of the current quarter. The largest near-term maturities of $232m will be extended to 2021. Elsewhere, reduced administrative expenses and foreign-exchange profit mitigated the impact on adjusted profit in the face of lower operating income.

Analysts at Edison upgraded their pre-tax profit expectations and now predict adjusted net asset value per share of 54p at the December 2016 year-end.

RAVEN RUSSIA (RUS)
ORD PRICE:36.75 MARKET VALUE:£245m
TOUCH:36.5-37.3p12-MONTH HIGH:44pLOW: 29p
DIVIDEND YIELD:*TRADING PROPERTIES:$39.8m
PREMIUM TO NAV:-50%NET DEBT:144%
INVESTMENT PROPERTIES:$1.33bn

Half-year to 30 JunNet asset value (¢)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
201572-18.1-3.0nil
20167316.51.4nil
% change+1---

Ex-div: *

Payment: *

*0.5p distribution proposed for ordinary shareholders by way of a share buyback; convertible preference shareholders will receive annual dividend of 6.5p (1.5p has been declared and will be paid on 30 September), preference shares have a fixed coupon of 12 per cent. Edison gives yield at 2.1 per cent.