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16 I Companies & Markets bne November 2020
share. With our new status as a public company, we aim to increase our free float to 30-40% over the medium term,” Elistratov adds.
By listing the company is recommitting itself to the high standards of corporate governance as part of accessing more capital to continue the fast pace of the growth, the company said.
The principle shareholder and chairman of the board Dmitry Golubkov added: “The company has set a course
to progressively develop its corporate governance. Today, corporate governance remains one of the priorities in developing the business’s investment case and creating value for shareholders. Today, both the Management Board and the Board of Directors include senior managers from major consulting companies, as well as leading experts in finance and real estate.”
Good corporate governance is a pre-requisite for any listed company, but a generous dividend policy is what really gets investors’ notice.
Russian companies in general have adopted generous dividend policies as owners have on the whole decided to take the cash rather than invest into the business, due to the uncertain long- term outlook. But in the meantime generous dividends have become a general feature of Russian listed companies as they can see the appeal it has to investors and it has become necessary to invest into a companies equity with dividend payments as
a way to counter the traditional perceived “Russia risk.”
Samolet will IPO with a new dividend policy that has a fixed minimum payout of RUB5bn ($64mn) annually, the company said. “The policy takes into account the company’s leverage and aims to increase the amount and regularity of payments.
The formula Samolet is proposing to calculate the size of the dividend pay-outs depends on the debt to earnings ratio and proposes to share any profits with the investors once the debt is taken care of.
If the net debt/adjusted EBITDA ratio is below 1, then the dividend payment for the previous financial period would be not less than 50% of net income, in accordance with IFRS.
If the net debt/adjusted EBITDA ratio is equal to or above 1 but below 2, then dividend payment would represent not less than 33% of net income. And if the net debt/adjusted EBITDA is equal to or above 2, or if the payment of dividends would result in a breach of covenants under the company’s material undertakings, Samolet may choose not to pay dividends at all other than the guaranteed RUB5bn.
As of June 30, 2020, the Company’ s net debt amounted to RUB13.2bn, up from RUB11.4bn as of December 31, 2019.
Mortgage subsidies driving the sector
As bne IntelliNews reported in an interview with the company, Samolet residential real estate business is flying on the back
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of the state-subsidised mortgage programme. The Kremlin has always been keen to promote home-ownership as it sees it as
a “social stabiliser” as well as an effective means of supporting economic growth by indirectly supporting construction. The government’s scheme has brought the effective interest rates down to 6.5% for would be home-owners vs the central bank’s 4.5% prime rate and the programme has just been extended into 2021. The economic uncertainty caused by the multiple crises and the threat of new sanctions last led Russians to
put their cash into property as a value store and the share of mortgage funder transactions has soared as a result.
Indeed, the business has been growing so fast that Alexander Danilov, director of the CBR’s banking oversight department, told PRIME in an interview on October 9 there is a danger of a real estate bubble developing in the future.
"There are no reasons for worry now. About RUB400bn ($5.1bn) of loans were given in the framework of the program as of the beginning of September, while the total limit is RUB900bn. This is not much because the entire mortgage portfolio of banks stands at about RUB8.5 trillion," Danilov said adding that the government scheme could cause demand and price rises.
Samolet business
Samolet has been growing fast, concentrating on the enormous Moscow market. With a population of about
15mn people, including the unregistered residents, the city of Moscow is bigger than most central European countries. And if you add in the surrounding Moscow Oblast (which is a separate administrative region from Moscow City, one of only two city regions in Russia) then the population is even bigger.
Samolet is one of the largest developers in the Moscow combined city and region area, and as of the end of 2019
was the fifth largest developer by commissioning volumes. According to an independent valuation carried out by Cushman & Wakefield, the company has the largest land bank among its competitors, with more than 15mn square meters
of sellable area as of June 30 2020, the company said in its statement. About a third (30%) of these plots are already at the construction stage, and the rest are at the pre-project stage and the design stage, according to Samolet.
“Based on the Company’s current project pipeline, the Group intends to increase its number of active projects to 23 by 2024 and to commission about 1.8mn sqm. According to the same assessment by Cushman & Wakefield, the company’s land bank was valued at RUB176.9bn ($2.3bn) as of June, and its total assets were valued at RUB200.1bn,” the company said.
The company’s strategy is to continue to focus on the lucrative Moscow market and the metropolitan area in particular, where average incomes are multiples of the national average and on a par, or better, than most European cities. However, despite a decade of fast growth in the boom years of the noughties, the housing supply in Moscow is still lagging behind demand and many Soviet-era structures remain.