Page 27 - bne_December 2017_20171204

bne December 2017 Cover story I 27
Shishkhanov – to bring his stake up to just over 50%. Since then he has increased it further to 74.6% by the middle of October.
At the same time the company has delisted its GDRs from the London Stock Exchange and all trading is now only available on Moscow Exchange (MOEX). As part of this deal Russian state-owned bank VTB bought a 7.57% stake, leaving another 25.41% as the free float.
“Mamut and Shishkhanov were inde- pendent investors. Today Mamut’s main investment is in [Russian online com- pany] Rambler and Shishkhanov was invested as a private individual. There was no connection between us and Binbank,” Gordeev said, who argues that the strength of a real estate company, like a tech company, is in the quality of its management.
The decision to delist from London is part of a growing trend. In the boom years the LSE representatives were con- stantly in Moscow hoping to lure leading blue chips to IPO on its exchange.
But Gordeev voices a recurring com- plaint. “We delisted from London as we didn't see any action in our stock there by investors on the exchange,” says Gordeev.
Now MOEX is connected to the international clearing system Euroclear it makes no difference if the stock is listed in Moscow or London and so Russian companies are increasingly moving their shares home.
On top of this PIK is planning to come back to the market when the current transformation stemming from its merger with Morton is complete.
“We are targeting making an SPO in the future but we want to start from a white page,” says Gordeev.
The company is also reworking its financials. The company reported that net debt increased slightly in the first half of this year to RUB43.6bn from RUB40.7bn as of late 2016, but Gordeev says the company could try to reduce the debt to zero by early next year.
S&P is a little more cautious on the debt pay down, forecasting a deleveraging to about 2x Ebidta in 2018 and 1x in 2019, from 4x in 2017, “on the back of continued growth in buildings completion, recog- nised revenues, and better profitability,” the agency said in its November note.
Gordeev has also committed himself to paying a generous 30% of operating cash flow as dividends semi-annually starting with the 2017 financial year. The compa- ny last paid dividends in 2014 and they “were not very much”, says Gordeev, but that should change next year.
“If we stick to our business plan and there is free cash flow left, then we will share it with shareholders. There are only two good things to spend money on: shareholders and land,” says Gordeev.
The attitude of Russian business owners to their shareholders has changed dramatically in the last decade. In the Yeltsin era the key was to “privatise the cash-flows” as oligarch Boris Berezovsky once described it. Today owners see their equity as a valuable source of capital and are investing into their value by paying out dividends amongst other things: Russian companies now pay the highest dividends in the emerging markets universe, about 5% of net profits, or double the MSCI EM average.
“Russian shares are cheap thanks
to sanctions. So companies want to increase the value of their shares and hence they have a generous dividend policy. Good corporate governance policy is part of the same thing,” says Gordeev.
Leading residential real estate developer by construction volumes
PIK Group LSR Group Setl Group
USI CDS Group
Leader Group 986 Samolet development 899
FSK Lider 851 Etalon Group 842 SU-155 Group 805
3,960 3,442
Source: National Association of Property Developers data as of 1 August 2017
Share of mortgage sales
60% 50% 40% 30% 20%
10% 0%
55% 50%
57%
1,434 1,257
2,798
Current construction volume, th sqm
7% 2010
2011
2012
2013 2014
2015 2016
1Q2017 2Q2017
29% 24%
39% 39% 36%
Source: PIK Group
www.bne.eu