Is it worth investing in Russian real estate under sanctions. Unprofitable Anaplan finds a buyer. Intel is preparing to spend tens of billions of dollars in Europe - is it possible to make money on this.
Disclaimer: when we talk about, that something has grown, we mean a comparison with the same quarter a year earlier. Since all issuers are from the USA, then all results in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
"Investors benefit from it": sanctions and the real estate market in Russia
In the history of the mass exodus of Western companies from the Russian Federation, the most underestimated victim is the Russian real estate market. We have already talked about, how sanctions can affect the Russian oil and gas sector and Western issuers with a large share of business in the post-Soviet space. And today we'll talk about, how sanctions can affect real estate investments in Russia itself.
The Economist calculated the effect of the departure of about 400 companies from Russia: this will affect about 3.5 thousand retail outlets in 480 cities across the country. This includes 1.2 thousand restaurants and cafes, 500 shoe stores and 400 gas stations.
In the event of a mass closure of all these points, the value of real estate in the surrounding areas, and the market average, can be seriously hurt: availability of numerous restaurants, cafes and shops is of great importance to people, living or intending to live in these areas. So the idea of buying an apartment in Moscow in order to, then to hand it over, becomes very unattractive.
Possible option with, that the Russian Federation will follow the path of nationalization of a number of these retail outlets. However, this scenario is most likely for fast food chains, because many of them rely on local suppliers. And unlikely, that this will greatly save the value of real estate in expensive areas.
In Russia, in connection with the collapse of the ruble, there is an increase in investment in real estate, caused both by the conservatism of the population, and a strong depreciation of the ruble, coupled with serious problems in foreign exchange transactions. For example, the difference in price between the cost of buying and selling foreign currencies has become huge.
It is necessary to take into account the fact, What do you want, who ran to invest in real estate now, did not include in their expectations the loss of attractiveness of the purchased housing as a result of the closure of nearby stores, nor the sharply increased inaccessibility of housing for buyers and potential tenants. Mortgages have become much more expensive as a result of raising the Central Bank rate, and instability or even loss of income can force many to live in a communal apartment or with relatives.
If demand is significantly lower than supply, then the real estate market in the Russian Federation will wait for the collapse, after all, even before recent events, housing prices here did not differ in adequacy: in the Moscow complex "City-Park" the average price for an apartment is over 56 million rubles. As for the Moscow microdistricts with romantic rural names, then the “price-quality” ratio there and until February 2022 raised big questions, and in the context of the economic crisis, we can see a real drop in demand for real estate of this level.
Speaking of paying audience: in two weeks after the beginning of the February events, almost 100 thousand IT specialists left the Russian Federation. For comparison: such numbers in the Russian Federation usually added up for a year.
For the bulk of those who left, rent is typical., so here, it seems to me, the rental market may not compensate for their loss. And at the best of times the idea of, what a kennel 19 square meters in Khrushchev can cost more than 15 thousand per month, looked extremely doubtful and begged for a refutation. And now the times, how could you notice, not very good.
It should also be understood, that the exodus of businesses and some consumers from Moscow will also hit local enterprises, who earned on their service, - and the fall in their income will indirectly hit the real estate market: it is somehow difficult to rent or sell apartments and office space at a high price in areas, where the level of economic activity has become an order of magnitude lower, than six months ago.
Basically it's a vicious circle.: when one tenant moves out, then everyone loses in income - from cafes, where he went, up to the landlord. As a result, they themselves reduce the consumption of goods and services., which leads to a new round of reduction in income and consumption.
PLAN "Hurricane": private fund buys loss-making start-up Anaplan
Private foundation Thoma Bravo plans to buy business management software maker Anaplan (NYSE: PLAN). Here's what investors should know about this deal:
- Anaplan buy at a price of 10.7 billion.
- Anaplan buy at a price 66 $ per share, with a premium 30,45% to the company's share price before the news.
- Anaplan makes software for modeling financial and operational processes in an enterprise. Using Anaplan software, you can manage the sales process, logistics, work with personnel. You can read more about the Anaplan business in the investment idea.
- The company is horribly unprofitable: its final margin following the results of the last 12 months was minus 34,38% from proceeds.
- The company is bought with P / S about 15.
There were two things that could have attracted Thoma to this unprofitable company..
Fell down. The company's shares have fallen heavily since 2021, when they were asked for 72 $. And they buy Anaplan definitely not at the price at historical highs, although close to them.
Predictability. The company's business is based on subscriptions. Unfortunately, I did not find anything in the company's statements and presentation materials about its level of revenue retention. But, maybe, Anaplan shared this data with Thoma in a non-public manner - and those numbers suited her. If Anaplan's revenue retention rate is higher 100%, then, given the relative stability of Anaplan's cash flow, the fund in theory can optimize Anaplan and get a profitable business as a result. But that's just my hypothesis..
However, also possible, that Thoma, a couple of years after the acquisition of Anaplan, will again list the company on the stock exchange - and now it is buying the company for this very purpose. Anyway, that fact, that someone is still buying unprofitable IT companies for a lot of money, shows us the validity of the strategy of "taking shares in failed startups, maybe someone will buy them".
More Chips for the Chip God: Intel will spend many billions on Europe
Embedded device manufacturer Intel (NASDAQ: INTC) plans to implement a massive spending program in Europe: the American giant is going to spend 36 billion to build enterprises for the production of chips and related infrastructure in the Old World.
The spending structure looks something like this: about 19 billion will go to the construction of a plant in Germany, about 12 billion euros will be spent to double the existing capacity in Ireland, 4,5 billion euros Intel wants to spend on building a chip packaging and testing facility in Italy.
Other expenses are not detailed., but known, that in France, Intel plans to create an R&D unit of up to a thousand people, which will specialize in tasks like high performance computing. Some research departments plan to expand in Poland.
In total, Intel employs about 10 thousand people in Europe., and its expansion will add 6,000 new jobs. Obviously, that Intel decided to take advantage of the benefits, promised by the European Commission to stimulate the production of chips in Europe.
This is good news for all Western semiconductor companies., and they testify, that in the West they are serious about the development of high-tech production at their own expense to China. This allows us to hope for a positive financial effect for many companies., working at various stages of semiconductor production. Think, that following Intel, other large Western companies will begin to expand production in developed countries.
This will weaken the position of China, playing an important role in modern production chains of high-tech products. If the Intel example becomes mainstream, then in 10-20 years China will be able to "exclude" from the international economic and political alignments.
We summarize here the main news on this topic: US deliberately imposes sanctions on leading Chinese tech companies, contributes to the pumping of high-tech enterprises in other Asian countries, tightens supervision of Chinese issuers and limits the export of high technology to this country. All in all, already clear, where is this train going.
So that, it seems to me, in the medium-term distances, the news about the expansion "away from China" will have a positive impact on Intel quotes. The Western investment community is extremely politically biased. Suffice it to recall the unprecedented fall in the shares of Russian companies in London. If Sberbank can cost a cent, then Intel may well cost more, than now, "because China".
Maybe it will - after all, only if the quotes of Intel and the like are at a sufficiently high level, this will stimulate the flow of private investment in this industry, otherwise, the production of chips in Western countries will never be in sufficient volume, and there are no economic prerequisites for this. In this regard, "the production of chips in the West" may become a new fixed idea of the Western community, like "pumping up electric cars".
There is no other way to explain the stock market and economic success of mediocre companies like GlobalFoundries., inferior to their Asian competitors in that, about business efficiency, - but winning, obviously, due to the maximum distance from China.
Now a huge part of the chip production in Taiwan - which, by the way, China is considered part of China, Taiwan itself considers itself an independent country. The island is located 40% production of chips for logic - for the most complex and high-tech operations, - and Taiwanese factories lead in the production of the most high-tech chips.
If the war between the PRC and Taiwan puts these plants out of action for at least a year, then the damage to companies outside the region around the world will be $490 billion in lost revenue. And I generally keep quiet about the consequences of the shortage of chips for the military and critical public infrastructure of the Western world.. And to replace Taiwan in manufacturing, we need investments in the region of 350 billion in other countries - an infernal amount.
So the Intel investment program can serve the cause of pumping its quotes by benevolent investors., who would like to see more factories in developed countries, providing the economy of the Western world with a sufficient number of chips.
The only problem I see here is a possible cut in Intel's dividends in order to implement this program.. Option is very likely: Activist investor Dan Loeb asked Disney to shoot him in the foot, more precisely, cancel dividends, so that Disney has more money, to invest in streaming.
Intel pays quite a lot of money: its dividend yield exceeds 3% per annum. So if the payments are canceled, the shares may fall.. And they might not fall.: in the case of the same Disney stock is now magically more expensive, than before the cancellation of dividends, because the company is actively developing unprofitable streaming, which, for some mysterious reason, should please investors.
In any case, over long distances, this investment program will help strengthen both the business of Intel itself., and the attitude of investors towards it.
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