Resilient in a tough market - and cash rich

Raven Russia's statement is predictably downbeat, given the background of a troubled Russian economy (on the latest numbers, for calendar 2015 Russian GDP fell by 3.7%, and is forecast by the IMF to contract by a further 1.0% in 2016) and a weak rouble, but the company has displayed its strengths in the 2015 Final results published today.

Property net operating income is only 6.8% down, partly because of timing impacts from rouble devaluation. The non-cash revaluation of the property portfolio pushes NAV to a fully diluted 49p per share. This leaves the Raven Russia ordinary shares standing at a discount of 31% to NAV. The group is well placed in the Moscow market, and has cash balances of $202m (21p per share), a significant strength.

The group has announced a final dividend* of 1p per share (*equivalent on buy-back tender offer), giving the ordinary shares a yield of 5.9%, 1.5x covered on our estimate for the current financial year. The preference shares yield 9.8%, 2.8x covered in 2016.

The Moscow market remains turbulent. Our 2016 estimates suggest further reduction in revenues in US dollar terms, but the effects should be mitigated to some extent by good covenants and the company's emphasis on quality lessees. Valuation in these circumstances is difficult: we have to balance the risks in Russia and the possibility of changing fortunes against the strong market position Raven Russia holds in the key Moscow market. Our last published price target was 55p per share, above the latest NAV of 49p. We have decided to reduce our target price (for the ordinary shares) to 40p. We leave our preference target unchanged at 160p.