Successfully navigating choppy seas

The interims to end June 2020 reveal operational resilience in a challenging period: 99% collection of rent due during the period plus increases in average and period end occupancy rates. That strong, steady performance by the portfolio during Russia’s lockdown confirms growing demand for exactly the kind of logistics space RAV offers.

Strip out unrealised forex related adjustments taken through the P&L and the picture revealed is a 4.7% fall in underlying pre-tax profit. That shows far more stability and is in line with both forecasts and the ongoing strategy to simplify the group’s finance and equity structure.

The currency effect is not entirely cosmetic, but its operational impact will diminish as RAV converts the remainder of its leases and debt leases into RUB. At current borrowing rates, the latter could, potentially, also reduce debt service costs.

As RAV builds resilience into its finances and reduces exposure to forex shifts, the core focus for the valuation can shift back to its warehouse/logistics asset base. That looks exceptionally well-placed in a fast-evolving economy in which eCommerce becomes more influential every year.

We estimate proforma NAV/share at 63p, post new shares and adverse forex. In a low interest rate environment, reliable income from high-quality assets should progressively be reflected in NAV uplifts.