Page 115 - RusRPTMar19

flight hours and average flight time per aircraft are strong as well. Meanwhile PLF is disappointing sitting at its lowest levels since January 2016. January traffic data provides a mixed read across for January profitability, in our view.”
9.2.4 Construction & Real estate corporate news
Following speculation in the market that leading real estate developer Etalon Group would sell a stake to AFK Sistema , it did. The largest shareholder in Russian leading real estate developer Etalon, the Zarenkov family, sold the majority of its 30.7% stake to Sistema on February 19. The Zarenkov stake was worth RUB11.5bn ($175mn) at last week’s market prices. Etalon announced last week a binding agreement to acquire a 51% stake in Leader-Invest (aka Lider-Invest), a Moscow-based developer, from Sistema for RUB15.2bn. The target has a portfolio of 1.3mn sqm, which was valued at RUB66.6bn by Colliers as of October 2018 (assuming a 55% discount). Etalon has announced that Sistema has bought a 25% stake in the developer’s share capital from the family of its founding shareholder. The acquisition price for the deal was $3.07/GDR, implying a total deal value of $227mn and 55% premium to Etalon’s closing price yesterday. Etalon has highlighted that it has no intention of changing its strategy and has called for the continuation of its current dividend policy (40-70% payout ratio of IFRS net income). The BoD is to see the arrival of two Sistema representatives (one as chairman) as well as two new independent directors. The total number of Board of Directors members is to increase from nine to 11. “We believe that the market environment will remain challenging and the integration process could take time. Further, Sistema still has to prove itself as a key shareholder in the business. Due to uncertainties arising prior the finalisation of the deal and the presentation of a proper strategy for the new company, we are putting the stock Under Review,” Maria Kolbina of VTB Capital (VTBC) said in a note. The new company would control a portfolio of 3.6mn sqm, strengthening its position in the top-10, and becoming the second-largest developer in Moscow. Etalon plans to take a RUB15.2bn loan at an interest rate of 10.1% in rubles; combined net debt/EBITDA would be around 1x. “Etalon has lost one third of its market capitalisation in the last twelve months as sentiment to domestic stories in general and developers in particular has materially worsened, and investors feared the exit of the key shareholder. The arrival of Sistema to Etalon’s share capital brings uncertainty in terms of the sustainability of management, as well as its strategy and capital allocation for the new company. At the same time, we acknowledge that Sistema is a more aggressive shareholder that could bring much needed change and speed to the combined company if it chooses strategy wisely,” Kolbina said.
9.2.5 Retail corporate news
The management of Russia’s struggling second tier supermarket chain O’Key met with investors to explain the new strategy, but left analysts unimpressed. “O’Key has held a strategy update, chaired by recently appointed CEO Armin Burger. Although all the issues were addressed, we do not think there has been any improvement in the outlook on the operational turnaround and an acceleration in revenue growth,” Maria Kolbina of VTB Capital (VTBC) said in a note. O’Key has unloaded dozens of its supermarkets and is focusing more on the hypermarket format as the explosive growth of Russia’s supermarket chains has come to an end and organised retail starts to run up against structural constraints. The leading chains have switched from
115 RUSSIA Country Report March 2019 www.intellinews.com