Page 104 - RusRPTJul19

Kerch Strait between mainland Russia and the Crimea peninsular that was annexed by Russia in 2014. StroyProyektHolding is likely to get a major boost from teaming up with VEB. In 2018 the bank was entrusted to Igor Shuvalov, a ex-Deputy Prime Minister and trusted Kremlin bureaucrat, which revamped the bank into the main hub of state investment spending in the economy. VEB will control 50% in the joint venture, which will participate in realisation of the national projects in development of transportation and urban infrastructure. The cooperation could be expanded to energy, port, and railroad infrastructure. Vedomosti previously reported that VEB is preparing to increase its presence on the infrastructure construction market, intending to acquire a blocking stake in Mostotrest and another major construction player Group 1520 of Alexei Krapivin.
One of Russia's largest real estate developers Etalon consolidated its stake in ZIL Yug project in Moscow, by acquiring 50% stake in the project from LSR Group (LSR), another real-estate major. The amount of the deal was not disclosed. ZIL-Yug project is one of the largest projects in Moscow with 1.2mn square meters of construction and 57ha of land including business, comfort housing, commercial real estate and social facilities. The sum of the deal was not disclosed.
Mostotrest of Russian stoligarch Arcady Rotenberg won a tender for the construction of M1 highway "Belarus" in the Moscow region worth RUB31bn ($492mn), RBC business daily reported on June 25 citing the state procurement registration portal. The part that will connect the 450km M1 highway to the Moscow Ring Road will be a combination of a free and toll road.
9.2.5 Retail corporate news
Russian toy store Detsky Mir released 1Q19 IFRS results on April 30 that positively surprised on the EBITDA line, but disappointed on net income. The company had previously reported 16% y/y sales growth, with 6.6% y/y increase in LFL and 12.1% y/y expansion of selling space. Nevertheless, the results were robust despite the slowdown. VTBC has an unchanged 12-month Target Price of RUB120 implies a 46% ETR: Buy reiterated. The company’s EBITDA margin, adjusted for LTI was reported at 6.7%, 70bp higher y/y. The key reason for the improvement came on SG&A (including rent, excluding D&A and LTI expenses), which dropped by 130bp y/y to 22.2% of revenue. The prime component was rent (down 30bp y/y) as the company was able to receive discounts for 10% of its rental contracts and resign 70% of its contracts on the previous terms. Meantime, salaries fell 30bp y/y due to personnel per store reduction (17 vs. 18) and the implementation of staffing automation incentives. At the same time, the gross margin decreased by 60bp, which analysts believe was due to a slight increase in shrinkage expenses (which was most likely due to initiatives on wage line) and more aggressive pricing during the quarter helping sales growth. VTBC says that investors have to wait until the next two quarters of results before drawing any conclusions about the sustainability of the SG&A improvements. Adjusted EBITDA increased 30% y/y to RUB1.9bn, but its strength did not translate into net income due to FX losses of RUB182mn (mainly attributable to forward contracts, which were affected by RUB appreciation) that was higher than in the previous quarters and accounted for 0.7% of sales. Therefore, net income was down 13% y/y.
Russia's third largest retailer Lenta will acquire a storage facility
104 RUSSIA Country Report July 2019 www.intellinews.com