Raven is understandably pleased with these strong first half results. The business has responded well to efforts to stabilise the portfolio and de-risk its finances. A 40% increase in NAV/share to 67p during the period was driven by both uplifts in property valuations and Rouble/GDP strength. Another 5p was added in August (post the period end) via the repurchase and cancellation of c 14% of its ordinary shares at around half underlying NAV.
Valuation: 45% NAV discount, risk factors being addressed
The shares are currently 45% below NAV, at odds with an investment case that pivots on (a) steady performance of high-quality mainly Moscow-based warehouses, (b) improving local real estate markets, (c) a proactive approach to insulate operations from politically driven external factors and (d) post the half-year, actions taken to deal head-on with issues weighing on its equity value.
Key metrics all moved ahead. Underlying earnings were £13.4m before forex effects (H1 2018: £8.6m). That progress was primarily driven by higher portfolio occupancy; 90% at end June 2019 vs 84% a year earlier and initial rents from lettings and acquisitions completed in H2 2018. NOI was £64.3m (H1 2018: £57.6m).
Outlook: well set for H219 and beyond
Higher portfolio occupancy and acquisitions have built RUB scale and reduced the potential impact of external factors/forex shifts. Over the last two years Raven has strategically shifted its financial base to better match its core, functional currency. A much higher proportion of its leases and debt facilities are now Rouble denominated, and all USD debt is on track to be refinanced by end December.
Portfolio metrics are moving in the right direction. Occupancy is underpinned by further lettings (2% of vacancy) under negotiation and steady lease renewals. The portfolio valuation was also higher, in line with a stronger local warehouse market.
Market dynamics improved again. Availability of vacant space in Moscow fell during the period and estimated rental values (ERVs) pulled ahead.
Raven has a strong position in a market seeing many of the same factors - online retail driving demand for warehouse and logistics space - as Western markets.
