Q3 2014 IR Presentation FINANCIAL & BUSINESS RESULTS
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Q3 2014 IR Presentation FINANCIAL & BUSINESS RESULTS November 2014 Disclaimer This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of AFI Development Plc (the "Company") or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with the document. This communication is only being distributed to and is only directed at (1) qualified institutional buyers (within the meaning of Rule 144A of the United States Securities Act of 1933, as amended (the "Securities Act") or (2) accredited investors (as defined in Rule 501(a) of Regulation D adopted pursuant to the Securities Act). Any person who is not a "qualified institutional buyer" or "accredited investor" should not act or rely on this document or any of its contents. This document contains "forward-looking statements", which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Neither the Company, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document. The information contained in this document is provided as at the date of this document and is subject to change without notice. 2 SECTION 1 Company Overview Company at Glance Market Cap, as of November 17, 2014 US$ 0.61 bn Price per share, as of November 17, 2014 US$ 0.58 • Full cycle real estate developer NAV (Equity), as of September 30, 2014 US$ 1.69 bn NAV per share, as of September 30, 2014 US$ 1.61 BUSINESS • Focus on unique large scale commercial and residential Portfolio Value* US$ 2.5 bn & projects in Moscow and Moscow region PROJECTS PORTFOLIO STRATEGY • Maintain a mixed portfolio which holds both yielding and Land Bank development projects from different sectors, with varying 17% 1% 21% Pipeline Yielding durations and phasing Projects • Strong global brand • Affiliate of Africa Israel Group (64,88% owner, a major 15% conglomerate with global focus on real estate, Active stage of TRACK construction and infrastructure; Free float – 35,12% construction RECORD 46% AFIMALL • 13 years on the market * Gross Asset Value of Portfolio based on C&W Valuation as for 30 June 2014 and BV of Land Bank projects, Trading Properties and Hotels( inc. JV) • Admitted to LSE in 2007 and Premium listing from 2010 0.95 1,600 Share Price since January, 2014 • 16 completed projects with GBA c. 0,6 mln sqm (incld sold) 0.90 1,400 0.85 1002.96 1,200 0.80 0.75 1,000 0.70 800 • Diversified portfolio: Offices class A and B, Hotels, 0.65 600 Residential Complexes and Retail Shopping Center 0.60 0.58 400 0.55 0.58 PORTFOLIO • 10 Investment Projects with GBA c. 0,5 mln sqm 0.50 200 0.45 0 • Development projects GBA is c. 1,6 mn sqm AFID (B-share) AFID (A-share) Index RTS 4 Key Projects in Moscow Yielding Assets (retail, offices and hotels) Value** US$ 1.7 bn Tverskaya IB Aquamarine Hotel ( C&W, Jun 2014): Berezhkovskaya GLA 194,4K PLAZA SPA ZHEL* (excl. hotels),sqm: NOI stab., US$ 202,7mn PLAZA SPA Kisl* Aquamarine III (excl. hotels): * * Hotels presented with cost value Ownership:50% AFIMALL Paveletskaya,1 H2O * Outside of Moscow Development Projects US$ 825 mn Odinburg** Value*** Plaza IIa (afid share, C&W): ,sqm: 236,41K Paveletskaya II GLA Plaza IC GSA,sqm: 558,10K Kossinskaya Pochtovaya Plaza IV *** Odinburg presented with cost value, Land Bank Yielding Assets Value US$ 17 mn (book value): Projects under active stage of development and pipeline Completed Assets Other Note: the NOI projections are “forward looking statements” based on C&W valuation assumptions and Company estimations and they can be realized or not realized due to factors beyond the Company's control including, among others, the impact of competitive5 pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions SECTION 2 Market Update Market Overview and Capital Markets RUSSIAN MACROECONIMIC OVERVIEW Political and economic uncertainty continues to influence Russian macroeconomic forecasts. Sanctions, Russia GDP Growth, % Y-O-Y falling oil and increasing risk perception have put Russian economic growth under continued pressure. 20 10 0.5% • Russian economic growth: According to estimates from the MED, in Q3 2014 Russian GDP increased by 0,7% Y-O-Y, taking into account seasonable factor the growth estimates around 0%. The forecast for the 0 2014 growth is no more than 0.5% annually. -10 -20 • Longer term, declining oil price will put pressure on the ruble and current account. In September Oil prices Brent dropped down on 19% compared to June 2014. (85 US$/barrel vs 105 US$/barrel.) Compared to the same period the price decreased on 21% ( 85 US$ vs 109 US$). 65 Exchange Currency 0.9 • Exchange rates: Russian national currency continued to depreciate. As for the 10th of November the 55 0.7 USD/RUB broke through the level in 46.9, and EUR/RUB in 58.5. From the beginning of the year the 45 Ruble depreciated more than 40%. 35 0.5 • Liquidity is tightening and getting more expensive. On the back of sanctions, external debt financing has 25 been significantly squeezed rising. Senior debt financing is becoming more expensive and construction 15 0.3 financing is difficult to obtain. EUR/RUB USD/RUB USD/UER • The weaker ruble and ban of food imports resulted in inflation jump. Inflation reached 8% YoY in 180 Oil Price(Brent) vs RUB/USD 50 September 2014 compared to 7.6% the previous month. The main driver of inflation is food price growth as 46.85 40 a result of self-imposed sanctions on the import of certain products. 130 30 RUSSIAN REAL ESTATE INVESTMENT MARKET 20 80 85.04 More than US$ 1,7 bln has been invested in Russian Commercial real estate in Q3 2014. 10 30 0 • After a quiet summer, investment volumes reached USD1.7 bn in Q3 2014, down only 2% YoY. On paper, these are an encouraging set of numbers, with Q3 results exceeding the total investment volume of H1 2014. Brent USD/RUB Given the current headwinds in the economy, particularly in debt markets, it is highly likely that volumes Russian Real Estate Market will remain subdued well into next year. Transactions (2003-2014) 8,000 60 50 • Foreign investors continue tread carefully. In Q1- Q3 2014 local investors continue to dominate the market, 6,000 40 Russian players accounted for 69% of deals in Q1-Q3 2014 vs. 54% in Q1-Q3 2013. Given the tension 4,000 30 20 between Russia and the West, real estate consulting companies do not expect a significant pick up in western 2,000 10 investment before the end of the year. $, mln Volume, 0 0 Amount of transactions of Amount • Total investment volume in 2014 (forecast): Colliers JLL CBRE C&W Source: IMF, MED, C&W, JLL, Colies 4.0-4.5 3.4 3.2 - 4.0 >5.0 7 Office and Retail Markets overview OFFICE MARKET OVERVIEW 1,300 • 15 new office buildings were delivered in 3Q 2014, totaling 496K sqm of Office Price (Class A, Class B), US$ psqm Key indicators Units additional office space.