JPMorgan Russian Securities Outperforms Benchmark, Hikes Dividend

LONDON (Alliance News) - JPMorgan Russian Securities PLC on Monday reported a rise in its annual ...

Alliance News 21 January, 2019 | 1:08PM
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LONDON (Alliance News) - JPMorgan Russian Securities PLC on Monday reported a rise in its annual net assets and outperformed its benchmark despite relations between the west and Russia "reaching a new low" during the year.

At October 31, JPMorgan Russian Securities NAV per share stood at 617.6 pence compared to 574.7p the year before, an increase of 7.5%.

The investment trust dedicated to Russian companies' increased its net assets slightly in the period to GBP303.2 million from GBP300.4 million the year before. During the year, JPMorgan Russian Securities bought back about 6% of its issued share capital.

JPMorgan Russian Securities intends to pay a final dividend of 6.0p, taking its total dividend for the financial year to 26.0p, a 24% increase on the 21.0p payout last year.

Chair Gill Nott talked of the "importance" of international politics to the importance of the trust.

"This year has been no different; indeed arguably relationships between the West and Russia have reached a new low. This has a serious impact on investor sentiment and therefore affects company valuations on the Russian stock market," said Nott.

JPMorgan Russian Securities outperformed its benchmark, however, achieving a total return of 12.1% compared to the benchmark RTS Index returning 10.6%. The RTS Index is the top 50 stocks traded on the Moscow exchange.

Nott continued: "Russia remains one of the cheapest major stock markets, globally. This is despite the fact that the Russian economy continued to grow in the reporting period, benefitting from a number of factors including growing revenues from exports of energy and materials, lower inflation and declining interest rates."

JPMorgan Russian Securities portfolio is constructed with 50% of its holdings in the energy sector. Investment managers Oleg Biryulyov and Habib Saikaly said prices and dividends from the sector improved in the year.

The trust increased its position in Lukoil - which saw a rise in sales and profit of 40% and 54% during the period.

The investment trust said Gazprom and Tatneft both provided positive contributions during the year, as well.

JPMorgan Russian Securities reduced its exposure to oil and gas company Surgutneftgaz on a weakened ruble but still believe it holds value due to its "significant" US dollar cash reserves.

In Russia's finance sector, JPMorgan Russian Securities said not holding VTB, Russia's second largest bank, was a positive for the trust following US sanctions during the period.

JPMorgan Russian Securities' holding in Russia's largest bank, Sberbank, continues to be a "core" holding for the trust but it sold some of its holding to "take advantage" of its share price strength.

Nott added: "There are undoubtedly political risks to investing in Russia and heightened sensitivities to possible significant changes to sanctions, however, there are attractive investment opportunities if the right stocks are selected."

"Dividend payments from Russian companies are currently expected to remain strong, offering another positive dimension to the market, although recent significant falls in the price of oil may challenge these positive forecasts. For those investors prepared to take the risk, the long term potential on investing in Russia remains attractive given the reasonable valuations of the companies in which the company invests."

Shares in JPMorgan Russian Securities were down 0.2% Monday at 528.83 pence each.

By Paul McGowan; paulmcgowan@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
JPMorgan Russian Securities Ord 640.00 GBX 0.00

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