Key metrics moving ahead
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
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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.
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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.
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Market dynamics improved again. Availability of vacant space in Moscow fell during the period and estimated rental values (ERVs) pulled ahead.
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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.
Raven Industries is a technology company providing a range of products to customers within the industrial, agricultural, geomembrane, construction, commercial lighter-than-air and aerospace/defense markets. The company has three reportable segments: Applied Technology Division, which includes application controls, GPS-guidance steering systems, field computers, automatic boom controls, information management tools, and injection systems; Engineered Films Division, which produces plastic films and sheeting for geomembrane, agricultural, construction, and industrial applications; Aerostar Division, which provides products that include high-altitude stratospheric balloons and radar systems.
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