East Capital Explorer Q1 2017

Transcription

1 East Capital Explorer Q May

2 Today s Presenters Welcome to today s conference call Mia Jurke CEO, East Capital Explorer Kestutis Sasnauskas Chief Investment Officer, East Capital Explorer 2

3 Agenda Key highlights and NAV development Our portfolio and quarterly performance Update on our holdings Focus going forward Q&A 3

4 Key highlights and NAV development

5 Key highlights Q Positive development in the Real Estate and Private Equity segments, while the Public Equity segment decreased in value NAV per share on 31 March 2017: EUR 9.83 (SEK 94) Increase of 1.7% during the quarter (SEK +1.4%) Good development in RE and PE, decrease in public equity holdings; Real Estate segment continued to show stable performance based on operating results (+1.8%) Largest contribution from Private Equity segment, following increased value in MFG (+6.8%) Public Equity segment decreased (-3.4%), largely affected by the impairment in B92 in the East Capital Deep Value Fund Share price increased +8.6% during the quarter (+8.2% in SEK) *adjusted for dividend 5

6 Key highlights Q Fair value adjustment in MFG and 3 Burės Transaction intense quarter Construction of a third tower by 3 Burės proceeding as planned No changes in underlying valuations in Q1, however; MFG increase of 6.8% due to RUB appreciation 3 Burės +1.2%, due to positive operating result Further investments of EUR 3.0m in the ongoing development project of 3 Burės third tower Pre-lease agreements now cover 98% of the new leasable area Expected total investment for the project EUR 25m Sale of Trev-2 completed for total cash consideration of EUR 5.7m 2% gross IRR, no effect on NAV Continued divestments in East Capital Deep Value Fund Additionally EUR 2.1m during the quarter 6

7 Key highlights Q Repurchase program connected to NAV discount remains in place New CEO to be appointed EGM in January Göran Bronner elected new board member, and 2,500,000 previously repurchased shares cancelled Repurchase program continued; 604,824 shares (2.4% of outstanding shares) repurchased during Q1 for, in total, EUR 4.4m In March, CEO Mia Jurke announced her decision to resign from East Capital Explorer Recruitment process for new CEO ongoing 7

8 Change in NAV per share Q1 2017, EUR 0,11 0,06 0,05 0,03 0,03 9,83 9,67 8

9 Highlights after the end of the quarter Repurchase program will run until the AGM Strengthening of ECEX position within A-class offices in Vilnius through new acquisition Repurchase program linked to NAV discount continues 1 April 5 May additionally 331,987 shares repurchased, corresponding to 1.3% of outstanding shares Based on new NAV, repurchases to be made up until SEK Current program will run until the mandate ends 14 May, new mandate for approval on AGM 15 May Further divestment in East Capital Deep Value Fund of EUR 2.1m In April, an agreement to acquire Vertas was signed Fully let, 9,400 sqm A class office property in Vilnius Purchase price of EUR 29m, implying yield of 6.5% Transaction expected to close during the summer 9

10 Portfolio development Q1 2017

11 Value 31 Mar 2017, meur NAV/Share EUR Portfolio 31 March 2017 % of NAV Value 31 Dec 2016, meur Value change Jan-Mar 2017, % IRR, % Portfolio on 31 March 2017 Private Equity Melon Fashion Group Total Private Equity Real Estate 3 Burės East Capital Baltic Property Fund II East Capital Baltic Property Fund III Total Real Estate Public Equity East Capital Deep Value Fund Komercijalna Banka Skopje Total Public Equity Short-term Investments East Capital Frontier Markets Fund Other short-term Investments Short-term Investments Cash and cash equivalents Total Short-term Investment Total Portfolio Other assets and liabilities net Net Asset Value (NAV)

12 Value 31 Mar 2017, meur NAV/Share EUR Portfolio 31 March 2017 % of NAV Value 31 Dec 2016, meur Value change Jan-Mar 2017, % IRR, % Portfolio on 31 March 2017 Private Equity Melon Fashion Group Total Private Equity Real Estate 3 Burės East Capital Baltic Property Fund II East Capital Baltic Property Fund III Total Real Estate Public Equity East Capital Deep Value Fund Komercijalna Banka Skopje Total Public Equity Short-term Investments East Capital Frontier Markets Fund Other short-term Investments Short-term Investments Cash and cash equivalents Total Short-term Investment Total Portfolio Other assets and liabilities net Net Asset Value (NAV)

13 Value 31 Mar 2017, meur NAV/Share EUR Portfolio 31 March 2017 % of NAV Value 31 Dec 2016, meur Value change Jan-Mar 2017, % IRR, % Portfolio on 31 March 2017 Private Equity Melon Fashion Group Total Private Equity Real Estate 3 Burės East Capital Baltic Property Fund II East Capital Baltic Property Fund III Total Real Estate Public Equity East Capital Deep Value Fund Komercijalna Banka Skopje Total Public Equity Short-term Investments East Capital Frontier Markets Fund Other short-term Investments Short-term Investments Cash and cash equivalents Total Short-term Investment Total Portfolio Other assets and liabilities net Net Asset Value (NAV)

14 Value 31 Mar 2017, meur NAV/Share EUR Portfolio 31 March 2017 % of NAV Value 31 Dec 2016, meur Value change Jan-Mar 2017, % IRR, % Portfolio on 31 March 2017 Private Equity Melon Fashion Group Total Private Equity Real Estate 3 Burės East Capital Baltic Property Fund II East Capital Baltic Property Fund III Total Real Estate Public Equity East Capital Deep Value Fund Komercijalna Banka Skopje Total Public Equity Short-term Investments East Capital Frontier Markets Fund Other short-term Investments Short-term Investments Cash and cash equivalents Total Short-term Investment Total Portfolio Other assets and liabilities net Net Asset Value (NAV)

15 ECEX performance vs MSCI EM Europe (SEK) Past 3 years* EUR SEK NAV/share +4.7% +10.5% ECEX share +39.4% +48.1% MSCI EM E +11.7% +18.7% Q NAV/share +1.7% +1.4% ECEX share +8.6% +8.2% ECEX share +0.0% -0.4% * As of May 5, 2017 ECEX share price ECEX NAV MSCI EM Europe Source: Bloomberg, ECEX

16 Real Estate

17 3 Burės One of Vilnius most modern and well located office buildings 100% holding in 3 Burės (14% of NAV) Average rent remained at EUR 12.5 per sqm but is expected to increase as of Q The construction of the third tower is proceeding as planned ECEX investment in the project during Q1 amounted to EUR 3.0m A long-term lease contract covering the approximately 30% of the new building has been signed with Visma Pre-lease agreements now cover 98% of the leasable area Vacancy was stable at 3.3% Fair value increased by +1.2% from positive operating results Key financials, Q RUBm 2017 Jan-Mar 2016 Jan-Mar 2016 Jan-Dec Existing building: Net rental revenue* Net operating income Property value LTV ratio (%, end-quarter) Vacancy rate (%, end-quarter) Avg. rent ( /sqm, end-quarter) Development project: Property value * Rental income only, excluding income from communal services 17

18 East Capital Baltic Property Fund II 49% holding (12% of NAV) Fair value increased by 2.3 percent during Q1 The Deglava property in Riga operating permit received New anchor tenants for the multi-tenant concept are in negotiation The rest of the properties are continuingly stable Q Since inv. Performance, EUR 2.3% 46.6% Weight % Contribution Location Mustamäe Keskus Tallinn GO Vilnius Tänassilma Logistics Tallinn Metro Plaza 18 8 Tallinn Deglava 3-13 Riga Rimi Logistics Tallinn Property portfolio Tänassilma Logistics is a modern logistics centre outside Tallinn with stable rent revenues. In combination with low interest on its debt this has resulted in earnings of more than 20% on invested equity and a strong positive cash flow. GO9 a well-known high street shopping centre in the heart of Vilnius with an excellent location on the best stretch of Gedimino avenue. Grand opening of redeveloped shopping centre took place in March 2014, with H&M and anchor tenant. Deglava, a big box retail property in Riga is currently being transformed from a one-tenant centre into a new multi-tenant concept centre with new anchor tentants in negotiation Rimi Logistics, warehouse and office complex outside Tallinn purchased in a sale-and-leaseback deal. The property is fully let with a 10+ years unbreakable lease to a leading grocery chain Rimi Eesti Food, a company part of ICA group. Metro Plaza, A class office in Tallinn CBD with excellent location and visibility. Solid cash flow from strong tenants, office areas fully let. Revenue enhancement potential by redeveloping and enlarging retail areas in the ground and first floor. Mustamäe Keskus, shopping centre developed in Mustamäe residential district in Tallinn. GLA 13,500 sqm. Anchor tenant Rimi grocery, key tenants multiplex cinema, fitness club, restaurants.. 18

19 East Capital Baltic Property Fund III 27% holding (4% of NAV) NAV increased by 2.4% during Q1 Vesse Retail centre was the largest contributor, with a 57% contribution to NAV increase Upgrade investments were completed in Q4, and have yielded positive results on attractiveness and attendance Hilton Tallinn Park contributed 43% to NAV Property portfolio Hilton Tallinn Park is the first Hilton hotel in the Baltics and also includes the Olympic Park Casino, both of which are operated by the OEG group and will remain contracted on a long term basis. Vesse Retail Centre is a well-known retail park in Peterburi Road, a main artery in the eastern part of Tallinn. The park is anchored by the flagship store of Bauhof, the largest Do-it-yourself chain in Estonia Q Since inv. Performance, EUR 2.4% 11.8% East Capital Explorer s commitment is EUR 20m, of which EUR 8.1m has been drawn 19

20 Private Equity

21 Melon Fashion Group One of the fastest growing Russian fashion retailers Operating performance 36% holding in MFG (19% of NAV) Q1 sales RUB 2.7bn (RUB 2.8bn) -5.2% compared to Q on the back of 5% decrease in selling area due to non-profitable store closures and a -2.6% like-for-like growth due to weak footfall The Russian economy remained on a recovery track supported by local currency strength, improved oil outlook, a pick-up in domestic growth and high consumer confidence Higher gross margin and stable cost ratio resulted in higher EBITDA, albeit as expected negative, increasing to -3.4% in Q1 y-o-y (-3.0% adjusted for forex/hedge impact) Due to higher pace of new openings and relocations, MFG s expenses increased compared to last year, resulting in a cost ratio of 50.8% (45.8%) Store count reduced to 540 from 558 as 22 retail stores were closed, 3 new ones opened, 1 franchise store opened, and 12 own stores were relocated Fair value in EUR increased by 6.8% on the back of a positive appreciation of the RUB. The underlying RUB value remained unchanged Quarterly development (sales, gross margin) % Key financials, Q % 60% 50% 40% 30% Sales (RUBm) Gross margin RUBm 2017 Jan-Mar 2016 Jan-Mar 2016 Jan-Dec Sales 2,691 2,839 12,474 Gross profit 1,204 1,148 5,926 EBITDA Net profit Sales growth (%) Gross margin (%) EBITDA margin (%) Net debt (neg = net cash) Balance sheet total 4,813 4,820 4,891 Number of stores (end-quarter) Like-for-like sales growth (%)

22 Public Equity and other short-term investments

23 Public Equity and Shortterm investments Komercijalna Banka Skopje East Capital Deep Value Fund East Capital Frontier Markets Fund (short-term) 4% of NAV, ownership 10% (direct) Q1 performance: -2.8% 10% of NAV Q1 performance: -3.6% 5% of NAV Q1 performance: +7.4% Political turbulence in Macedonia and still lacking broad based economic growth Weaker first quarter Net profit dropping to MKD 39m (EUR 0.6m) from MKD 170 (EUR 2,75) y-o-y Net interest income declined due to interest rate pressure (corp), interest income (retail) however growing Provisioning remains higher than expected Dividend paid in April ECEX received EUR 0,5m Weak performance in the fund, mainly attributed to the impairment of B92 (-60.8%) due to continuing poor performance and outlook The largest positive contributor was Caucasus Energy & Infrastructure following the announcement of a buyback at 37.2% premium to fund book value Strongest positive contribution from Argentina during Q1 Two key positions in Argentina, Banco Macro and Grupo Supervielle gained 29% and 27% respectively Going forward, the fund manager s focus will be on identifying trends of disinflation and economic recovery as well as MSCI decisions in the universe 23

24 Focus going forward 24

25 New phase for the Company ECEX to become a Baltic real estate company New name and new CEO expected Strategy further refined - clear focus on Baltic real estate Main focus during last years for new investments, and largest segment in portfolio post Starman exit Goal to build up a strong portfolio of properties in the Baltic capitals Type of investments where ECEX can create value and make use of long term capital Continued divestments of other holdings AGM 15 May to decided on the proposed new name Eastnine AB To approve new repurchase mandate and cancellation of previously repurchased shares New CEO to be recruited Mia Jurke to remain as CEO until new CEO appointed 25

26 Thank you! Our Q report will be published on 30 August 2017 Mia Jurke, CEO Phone: mia.jurke@eastcapitalexplorer.com Lena Krauss, CFO Phone: lena.krauss@eastcapitalexplorer.com 26