Page 120 - RusRPTNov19

routes from foreign airports to Russia starting in November. This means that the airline will have to pass through the EUR25 on average per offline check-in charged by airports to passengers, meaning an increase in ticket prices. Despite the fact that EUR25 is a considerable amount for a budget airline, we think the impact will not be as great as it may look at first glance. First of all, according to Pobeda, only 18% of its passengers flew to or from another country. Given that there is no extra charge in Russian airports, this means that only half of that 18% (tickets for flying back to Russia from abroad) would see higher prices.
9.2.4 Construction & Real estate corporate news
PIK plans to increase St Petersburg land bank 7.5x to 1.5mn sqm with a more aggressive regional strategy. Interfax has quoted PIK’s management as saying it has a strategy to increase the land bank in St Petersburg 7.5x to 1.5mn sqm in the short term. The St Petersburg Metropolitan Area is the country’s second largest residential market, accounting for 15% of the area under the development and 10% of annual completions. Clients are generally more affluent than in Russia’s other regions, seeing a blended salary 18% higher than the Russian average. PIK’s announced target implies 15% of the total portfolio as of YE18, while management said the contribution to total results was some 10%. This announcement highlights to us PIK’s more aggressive stance on the regions, with the sector to see consolidation and smaller developers outside of the capitals seeing access to capital tightening up and providing incremental market share. We note PIK’s operational model and the market offer as the most resilient to fluctuations and think that the company is going to become a prime beneficiary of the sector consolidation. It also offers investors new growth initiatives in residential management and food services. VTBC reiterates its Buy recommendation and 12-month Target Price of RUB500.
Etalon has released its 1H19 IFRS results, with accelerated booking in P&L lines and robust cash flows . Revenues surged 60% y/y to RUB 40bn as volumes added 23% y/y, while the consolidation of Leader-Invest provided a further 10% y/y, and the remainder came from an acceleration in the construction pipeline and completions (246,000sqm vs. none a year ago). The EBITDA margin returned to its historical performance of a seasonally slower first half (14% reported), while revenues and EBITDA accounted for 40-45% of our annual forecast. Etalon reported net debt of RUB 4bn as of June, while dividend payments and the consolidation of the remaining 49% in Leader-Invest mean that our estimate for current net debt is some RUB 20bn, and leverage at 1.5-2.0x net debt/EBITDA by YE19F. This year, the company is to guide for a new strategy but we do not anticipate any significant adjustments, while the focus could be extended to new product features, with gredater automation and the addition of new regions as the sector consolidates in the post escrow era. We reiterate our 12-month Target Price of $2.00 with a Hold recommendation and ETR of 7%. Revenues surged 60% y/y to RUB 40bn as the top line was boosted by a number of supportive factors including impressive sales volumes (up 23% y/y; up 8% y/y on a standalone basis), the consolidation of Leader-Invest (that provided a 10% y/y boost) and robust progress over the construction pipeline, as well as completions moving to 1H19 (246,000sqm vs. none a year ago). Etalon’s gross margin remained broadly comparable y/y at 28%, while Leader-Invest brought 7% (in our view that reflects the still low scale and high cost base). SG&A costs increased 5%
120 RUSSIA Country Report November 2019 www.intellinews.o