Page 88 - bne IntelliNews Country Report: Russia Dec17

homebuilders, VTB analysts note. At the same time, the risk of delaying commissioning of a property or the bankruptcy developers are generally taken into account by the participants in share agreements.
"Were share agreement schemes to be eliminated, the constructors of residential projects would have to look for other ways of financing, and project financing was previously raised as preferred option," VTB believes, adding that "operational risks could be taken by professional players, i.e. banks or other financial institutions."
At the end of the day such a shift could result in higher interest payments for developers and, as a result, a rise in residential prices, less affordable real estate, stretched consumer budgets, and a greater focus on more affordable mass-market offers, VTB argues.
Should the situation play out this way large developers could benefit due to their greater access to capital and land plots.
Stocks of the building majors such as Etalon , PIK , and LSR Group (LSR) have been performing well on a sector that underwent massive consolidation as small players were pushed out of the market in 2016.
In particular, Etalon was marked as the preferred sector exposure in the latest sector overview by VTB Bank , as the company's portfolio was seen by the analysts as particularly well-adapted to sluggish recovery of income and demand. Etalon mainly builds medium-scale projects offering robust returns and putting limited pressure on cash flows.
9.1.4 Retail sector news
Russian food retailers are better positioned than some western European retailers to adjust to consumers' increasing preference for shopping at smaller convenience stores rather than at hypermarkets, Fitch Ratings said on November 23. Competition in Russian retail segment has been tight in the past years, with rivalry between market leaders X5 Group and Magnit pressured by smaller players such as Lenta, Dixy, O'key and others. Ten retailers were among Russia’s 50 fastest growing companies in 2016 according to the annual ranking compiled by RBC business portal. The retail segment accounted for RUB606bn ($10bn), or more than half of the aggregate revenues of top 50, soaring from 18% of the total in the preceding year, but still lagging behind RUB1.38 trillion grossed by fastest growing retailers in pre-crisis 2014. Fitch sees consumer interest in hypermarkets continuing to decline globally as shoppers put more of a priority on speed and convenience. The consumers are increasing their demands for fresh produce, which is leading to more frequent shopping trips favouring smaller convenience store format as well as online grocery shopping.
9.1.5 Agriculture sector news
Russia’s grain export expansion looks set to hit a wall because of a lack of infrastructure. While Russia has increased its capacity to export grain ninefold over the last 15 years even that impressive increase will not be enough to keep pace with its 2017-18 grain harvest which is expected to be a record 133mn tonnes. Out of that crop, 44.5mn tonnes are earmarked for
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