BlackRock Emerging Europe offers 100% tender – BlackRock Emerging Europe has been out-performing its benchmark, by 5.7% in US dollar terms in the year to 31 January 2018. The NAV increased by 35.5% in US Dollar terms (19.9% in sterling terms) which compared favourably with the benchmark (MSCI Emerging Europe 10-40 Index) return of 29.8% in US dollar terms (14.9% in sterling terms). The share price increased by 48.0% (30.9% in sterling terms), reflecting the marked improvement in the level of the company’s discount over the period which ended the year at 4.4%.
The chairman says that stock selection in Russia was the main contributor to performance, including significant contributions from off benchmark positions in Globaltrans and Mail.Ru.
The board has committed to submit to shareholders, proposals to provide shareholders with an opportunity to realise the value of their investment in the company at NAV less applicable costs this year should they so wish. For those that wish to take this option, they will allow shareholders to tender up to 100% of their shares for repurchase by Winterflood (the Company’s broker). The tender offer proposals will require the approval of shareholders at a general meeting to be held on 20 June 2018. The board’s expectation is that the remaining assets in the company should remain in excess of £100m.
Extract from managers’ report
“Strong stock selection in Russia contributed the most to returns. The off-benchmark position in Globaltrans, the leading private freight rail transportation company, continued to benefit from rising transportation tariffs in Russia, and has made it into our top attribution list two years running. Another off-benchmark position, Mail.Ru, Russia’s leading social network, contributed positively as the company reported strong results and investors gained confidence in management’s ability to put adjacent businesses (Youla, Delivery Club) onto the social networking platform. On a relative basis the portfolio benefited greatly by not holding index heavyweight Magnit, Russia’s largest food retailer. Magnit continually disappointed on sales and margins throughout the year, causing the stock to drop by 39.6% in US dollar terms. However, our chosen Russian retailer Lenta, detracted from returns as the stock was down by 11% as falling inflation put pressure on food retail businesses.
Our faith in Greece was amply rewarded this year. The overweight position in Greek banks, National Bank of Greece and Alpha Bank, benefited from a stronger economy and continued progress of the bailout reviews. Greek gaming company, OPAP (Greek Organisation of Football Prognostics), also performed well on solid results and we took some profits as the company reached our target price.
In the Central and Eastern European region, stock selection in Poland added value. In particular, the overweight in Polish bank, PKO Bank Polski, contributed to returns as the company announced better than expected third quarter results and was able to fulfil the regulator’s guidelines for paying a
dividend of up to 25% of profits. In Hungary, not holding OTP Bank detracted from performance as the stock rallied in line with other CEE financials on the back of rising global reflation expectations.
Stock selection in Turkey detracted most from relative returns. The off-benchmark position in Eldorado Gold Corporation, a gold miner with operations in Turkey and Greece, was the largest individual detractor as the stock fell after it downgraded production guidance at its main cash flow generating asset. We believe that the stock has seen the worst and continue to hold the position. On a positive note, our position in Turkish Airlines took off on the back of improving passenger numbers and higher margins, which drove substantial positive earnings per share revisions. We also profited from being overweight the Turkish oil refiner, Tupras, which was supported by improving refining margins.
The Company’s off-benchmark position in MHP, a Ukrainian poultry producer, added to performance as it rallied on the back of strong results and increased pricing both domestically and in the export market.”
BEEP : BlackRock Emerging Europe offers 100% tender