Investment focus switching back to the portfolio

By repurchasing the stake held by its largest investor Raven has removed a perceived drag on its equity and source of uncertainty. That should enable attention to steer back towards the positive dynamics of its predominantly Moscow-based warehouse and logistics portfolio.

Raven has completed the £51.1m repurchase of a substantial share overhang held by its previously largest shareholder (IAM / Invesco Funds). It bought back and cancelled 9.85m ordinary shares and acquired 100m ordinary and 32.5m preference shares via a new JV (Raven Holdings), jointly owned by Raven and its Executive Management. In addition, the balance of the IAM holdings, 46.82m ordinary and 31.07m preference shares, were placed with new investors.

This deal, plus a simplified equity structure post redesignation of convertibles last year, helps return focus back to the core investment case and its two underlying drivers: a highly resilient portfolio, well-located and focused upon one of the strongest real estate sectors currently, driven by demand from large supermarket and e-commerce players / the rebound in Russia’s economy post lockdown and strength of key commodity markets which provides a potentially more stable outlook for the Rouble.

The FY20 results confirmed a robust underlying (local currency) operational outlook underpinned by an inherently resilient, stable asset base. Finances are benefiting from a progressive switch of the group’s debt and leases from USD and EUR into RUB denomination. Forex remains the main imponderable. Local current asset valuations were broadly unchanged y‑o‑y, but results presented in sterling reflects gearing to RUB/GBP, and a weaker 12 months is visible in the fall in diluted end FY20 NAV/share.

To us, the valuation of Raven’s Ordinary and Cumulative Pref shares appears to provide inexpensive access to a high-quality warehouse portfolio, respectively yielding 6.8% prospective and an assured 10.5%.

The PDF of the note can be accessed below.