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establishing a strong outlook for cash flow management in 2018. The strong results came on the back of client concerns over prices and the supply of housing under the new regulatory framework.
Mortgages rates have also been a source of concern but fell to record lows and were 9.4% in October. However following the Central Bank of Russia (CBR) decision to hike rates by 25bp in December to 7.75% mortgage rates are expected to rise slightly in 2019. More rate hikes are also expected in the coming months.
“We think the tailwinds for residential demand are going to remain in 1H19 but highlight downside risks thereafter as the implementation roadmap and relationships between homebuilders and credit institutions are still developing. Stocks have dropped a blended 25% in the last twelve months and represent appealing valuations to us,” Kolbina said.
LSR Group currently pays the highest dividend of all the real estate companies in the sector of over 10% and had already attracted investors’ interest as a result.
The company’s strong 4Q18 numbers only increased that interest after residential sales surged 39% y/y to 300,000sqm while the annual figure of 920,000sqm was 8% above management’s target.
The company was hit by an unexpected decline of 20% y/y in the average price in St Petersburg, but analysts say that was due to the sales of flats in Tsvetnoi Gorod project to City Administration that pushed prices down: a more than RUB2bn deal with an average price of RUB68,000 per sqm. The growing share of newly launched mass-market segment projects and inventories sale also depressed prices.
In the development segment, LSR launched 620,000sqm of new projects, which was less than its plan for 880,000sqm, driven by the aim to accelerate sales after the new sectoral rules come into force and by delays to its new proposition at Moscow projects.
9.1.6 Agriculture sector news
Russia’s Ministry of Agriculture has set informal limitations on grain exports from Russia via quotas, Vedomosti reported on February 26. Russia’s he grain harvest in the 2019 marketing year (July 2017 to June 2018) was down 17% y/y from the record high base to 113mn tonnes that Russia brought in last year. Grain is becoming the new oil and earned Russia over $20bn in export revenues last year – over taking arms exports as the second biggest export commodity after raw materials. “The government said that 42mn tonnes of export was optimal and the figure implied a 22% y/y correction. However, established trading relations and the recovery in global prices brought impressive volumes and by January 2019 traders had covered almost 70% of the target,” Nikolay Kovalev of VTB Capital (VTBC) said in a note. “The decline in supply and the impressive exports, coupled with the global recovery in prices and weaker local currency, meant that Russia’s domestic grain prices surged to a record high. Various grain classes are 65-90% higher y/y in February 2019. Were informal limitations to slow trading from Russia, the price growth would be capped until the new harvesting season in June 2019,”
106 RUSSIA Country Report March 2019 www.intellinews.com