Page 146 - RusRPTOct20

Russia which was further enhanced by hosting the Winter Olympic Games in 2014. It has a population of 0.36mn, while travel limitations this year have seen a spike in demand for tourism to the city: local officials anticipate that 6.5mn tourists will come in 2020. The city’s residential market has 0.55mn sqm under construction, or 10% of the total in the Krasnodar Krai and 0.5% for the country. Residential sales reached 62,700sqm in 8m20, according to DOM.RF. Blended primary prices stand at RUB 110,000/sqm, compared with PIK’s average price of RUB 135,000/sqm (a 23% premium) for its total portfolio in 1H20 and RUB 71,000/sqm (a 35% discount) for landplots outside the Moscow Metropolitan Area. PIK is the largest housing developer in Russia, with stable annual volumes of around 2mn sqm. The company’s landbank stands at 12mn sqm and PIK is present as a homebuilder in 12 Russian regions. In 1H20, PIK was rapidly acquiring land, for a total of RUB 24bn, putting pressure on its net operating cash flow, which was negative RUB 3.5bn (adjusted for the cash on escrow accounts). New regions represent an additional growth pillar for PIK, along with the expansion of its construction services, utility management, and tech companies in services related to housing. In our view, this is the most aggressive expansion profile of the listed developers in our coverage universe
PIK has announced several projects in the Russian Far East. They include Primorskiy Krai (city of Vladivostok) and Sakhalin Oblast (Yuzhno-Sakhalinsk).​ The aforementioned residential markets have moderate housing volumes, with consolidated area under construction at 1.1mn sqm in August 2020. Prices stand at RUB 115,000/sqm, implying a 20% discount to PIK’s Moscow portfolio and a 60% premium to its other regions. The total population of both geographies constitutes 2.4mn people (2% of the country's total), while real incomes are 40% higher than on average in Russia (RUB 46,000 per person), potentially implying favourable demand for the company's projects. Limited volumes and relatively high prices (55% ahead of blended in Russia) are driven by large distances and hard logistics that complicate the construction process. The government is stimulating local housing markets via subsidised mortgages at 2% (7.28% blended in July 2020 across the country) and we anticipate more details to what extent PIK can participate in state housing programmes. Previously, PIK announced its entrance into the Sochi housing market, Russia’s leading seaside resort, and now it is further enhancing its position in another regional growth pillar. PIK has a portfolio of 12mn sqm in 12 regions, while properties outside the Moscow Metropolitan Area represent 13% of its total. We see housing markets outside MMA as an important growth driver for the company, alongside construction services, housing utility management, and technology services related to properties.
Etalon​ Group published its 1H20 IFRS results on September 30. ​Although revenues and EBITDA declined significantly y/y, this was widely expected given the impact of the pandemic. We regard the results as neutral for the stock, and we view them as a nonevent given that the company will release a 3Q20 operating update soon (mid-October), which we expect to be very strong
146 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com