Raven Prop P Discussion Threads

[cc2014] 27/10/2021 12:34

Good to see another couple of pence on the price over the last couple of days.

Still 10% running yield at 120p and I await the next move up after consolidation here.

[gfrae] 26/10/2021 14:33

On another point relative to Russian interest rate costs I note that they are fully hedged, therefore until 2024 Russian rate rise costs will be fully offset by derivative gains.
As mentioned previously with 38% of their debt in Euros which has significantly devalued will also be beneficial.
Raven for a change appears to be the right way in it's assets and in it's liabilities.
The next NAV calculation is likely to be very significantly above 50p.

[gfrae] 26/10/2021 13:33

Very good point Kenny and catsick about the Euro fall vs Rouble which will further increase NAV.

[catsick] 26/10/2021 12:23

A third of the debt is in euros so not only are rates still in the gutter but has weakened a lot vs the rouble add that to the higher rent and highr occupancy and higher valuations and the next set of results will be mind blowing

[kenny] 26/10/2021 11:48

Agreed gfrae and perhaps even higher because the Euro has weakened against Sterling. However, the problem with exchange rates, especially the rouble, is that they can swing all over the place over a few short months.

[gfrae] 26/10/2021 10:23

OK Kenny, using 100.2 at Yesterdays exchange rate the NAV was 53.25p before the release of the accounting provision. Using the exchange rate as of now of 95.6 NAV equals 53.9p plus the 0.5p equals 54.4p
Unless the BofE raises rates I only see NAV going one way.

[kenny] 25/10/2021 16:12

In terms of the exchange rates used for income, the accounts state the following:

"These are the average rates for the six months ended 30 June 2020 and 2021, which are used unless this does not approximate the rates ruling at the dates of the relevant transactions in which case the item of income or expenditure is translated at the transaction date rate."

If we take the Edison methodology, that is 52.55 plus 0.5p for the release of accounting provisions equals 53.05p NAV.

[flyfisher] 25/10/2021 15:39

What about the post b/s provision reversal.

Do they use an average fx rate for the income statement and a period end fx rate for the b/s?

Yes, I see from the accounts that they do use two different fx rates. So i make it 53.5p nav.

Thanks.

[kenny] 25/10/2021 11:32

Thanks, flyfisher.

I have found the quote in question - in Edison’s report of 10.09.20 they did indeed state, “We estimate that a 1% strengthening/(weakening) of the rouble versus sterling compared with our forecast increases/(decreases) net assets by c 1.7%.”

However, I think you have picked up the wrong exchange rate. You have used the average rate at which income was received and booked in the six months to 30.06.21. That rate is irrelevant to the NAV movement since 30.06.21. The exchange rate at the balance sheet date of 30.06.21 was about 100.2 and since that date the strengthening is about 3%.

Using Edison’s methodology gives an increase of 2.55p in NAV since 30.06.21 (50p at 5.1%) whereas my methodology gives 2.8p. I defer to Edison, as mine is a bit rougher and, in any event, the difference is negligible.

[flyfisher] 25/10/2021 10:41

Kenny, My sums.
A recent results rns or brokers note had a fx sensitivity analysis, it commented that a 1% change in fx alters nav by 1.7%.
The fx rate at the last results date was 103.1.
A post b/s R255m provision reversal adds 0.5p to nav.
Current fx rate 96.7.
Current nav 55.9p

[kenny] 25/10/2021 10:26

flyfisher - I would be interested in seeing your calculation of the NAV increase since 30.06.12.

I compute a much smaller increase and here's my calculation, in very rough terms:

RUB has moved from 100 to 97, so a 3% strengthening. NAV at 30.06.21 was £265m so 3% of that is £8m, divided by 566m shares is 1.4p per share.

Because not all debt is in roubles, I appreciate the actual rise caused by rouble appreciation will by more than 1.4p perhaps doubling the increase to 2.8p. Non rouble debt is roughly £255m so 3% of that worked through is roughly 1.4p also, therefore, giving a total increase in NAV of 2.8p.

[flyfisher] 24/10/2021 12:22

Rouble strength increases nav to around 55.9p, which provides a greater comfort margin for prefs holders.

[gfrae] 24/10/2021 09:45

And of course the Rouble has risen, and will probably continue to do so.
Russia has a responsible central bank which will at least try to contain inflation.

[kenny] 23/10/2021 00:59

Pundits are predicting another 0.5% rise in December as the "baseline scenario". That would take the central bank rate from today's 7.5% to 8%. Starting to get a bit scary?! Quite a steep rise from last year's historic low of 4.25% - which seems a lifetime away.

[igbertsponk] 22/10/2021 13:28

Gradually tipping up as fears over the rest of the market getting a tad toppy emerge... Russia s safe haven, and everyone wants their gas!

[garycook] 22/10/2021 11:32

Russia interest rates rise to 7.5%,and possible rate hikes at the next meeting !

[kenny] 22/10/2021 11:32

The Bank of Russia increases the key rate by 75 b.p. to 7.50% p.a.

[kenny] 22/10/2021 11:21

Don't forget there is still a large overhang of shares from the placing.

[montyhedge] 22/10/2021 09:43

Back to the good old days 140p coming.

[kenny] 21/10/2021 00:46

Since my post yesterday, I have managed to obtain a copy of the JLL warehouse report for Q3 2021.

So it is one quarter further on than the CBRE H1 2021 report linked above.

Unfortunately it is not available in English but a google translation for part is:

"Growth in construction costs and growing demand from side of online retailers is leading to a gradual increase in rental rates. Since early 2021 average rates in class A increased by 22%. We predict that rental rates in class A will reach values of 5.2 thousand rubles per sq. m per year by the end of the year."

CBRE predicted 4,500 to 4,600 RUB by year end and now one quarter on, JLL is predicting 5,200 by year end.

Further extracts from the JLL report are:

“According to the results of Q3 2021, the vacancy rate fell to 1.2% (41 thousand sq. M in absolute terms), reaching the minimum value for the last eight years. At the moment, only eight properties have space.”
“The main demand is represented by segment companies e-commerce, which at the end of the 3rd quarter 2021 increased their share in the structure of transactions up to a record 54%.”

Looks like it took a boom in online shopping caused by Covid for Russian warehouse rents to regain their 2013/14 levels. This despite the Russian economy, during Covid, being more open than any other part of the World and currently suffering the second worse death rate. Also looks more and more like an inflection point.

[riskvsreward] 20/10/2021 18:44

I have over 10% of my sipp invested in this. Will be very happy to reinvest divs to get a compound 10% return if price stays the same. If also get some price appreciation then ice on cake.

[gfrae] 20/10/2021 17:46

Thanks for that report Kenny. I am pretty sure the Rouble contracts have an inflation adjustment in them, so they should easily recoup any loss due to rising rates.
Moreover, NAV will rise making the company much safer to invest in.

[kenny] 20/10/2021 12:09

A very bullish H1 2021 report from CBRE:

(You may have to register to download the report, but registration is free)

This is currently the most bullish report out there and others are more conservative. Note the view on rising rents - plus 6.5% in the first half - and continuing to rise. Also, constructions costs have shot up so, other than build to suit, no one is building warehouses in Moscow speculatively. Other reports talk of 5% H1 rental increases and more modest moves to year end, very sharp increases in building material costs and lack of labour due to Covid and non-return of foreign workers.

It follows this has to resolve itself in one of two ways in order for it to become economic to build new warehouses. Either building materials come down in price or existing warehouse rents continue to rise (or a combination of the two).

Now the bad news. The interest rate rises in Russia along with those to come, probably wipe out the financial benefit of rental rises in H1 2021. Indeed, the interest rate rises are an immediate additional cost whereas the rental rises only feed into income as leases expire over the next few years, albeit the move in occupancy from 93% to 100% will help.

On balance, very positive for RAVP holders who decide to hold long term because interest rates will eventually come down and in the interim rents and asset values are likely to appreciate. Furthermore, warehouse rents have only now recovered to 2014 levels e.g. pre-Ukraine invasion levels, so have plenty of scope to keep rising.

As a holder since 2014 one hopes this is, finally, an inflection point but being wary of calling an inflection point, I am prepared to be disappointed!