OREANDA-NEWS. The National Rating Agency has affirmed its national scale ‘A’ credit rating on Dvina Capital LLC and removed the company from its Watchlist.

Dvina Capital LLC was assigned an ‘A’ credit rating in March 2013. In July 2014, the rating was suspended and placed on the Watchlist as a result of the company’s failure to provide information needed for updating the rating.  We were able to update (affirm) the company’s rating score after obtaining the necessary information.

The rating affirmation is driven by the company’s positive financial performance, which continued to improve through 2Q 2014. We note, for instance, the growing capital, core earnings and net profit, as well as the improving debt, profitability and liquidity ratios. The rating is underpinned by Dvina Capital’s high quality and high value assets, as well as the presence of strong and supportive strategic partners and ultimate beneficiaries, capable of providing extraordinary financial support.

The rating is constrained by the company’s short operating track record and previous losses due to the project's investment phase. We also note that Dvina Capital reports negative equity before the deduction of fixed asset revaluation and has a modest liquidity position, which is partially due to the nature of its business.

Registered in 2010, Dvina Capital LLC specializes in property sales. In January 2013, the company won a tender from the Presidential Administrative Department for the acquisition of properties in Uspenskoe (Odintsovo Rayon, Moscow Oblast). Currently, the company owns around 250,000 sq. meters of land that can be it sold for cottage site development. In 2013, the company completed all necessary procedures for making land parcels available for presale reservation and started sales in 2014. By the end of 1H 2014, it sold around 240,000 sq. meters of land plus six cottages, which allowed it to report fairly good financial results for 2Q 2014.

The company’s property sales totaled RUB662 million for 1H 2014, EBITDA reached RUB330 million and net profit exceeded RUB100 million (versus the previous year’s losses associated with the project’s early phase). As a result, the company’s profitability metrics as of June 30, 2014 were very high, with EBITDA margin at around 49% and net profit margin at 16%. Currently, the company’s assets can be valued at around RUB7 billion (based on sales that have occurred by now), and its equity therefore can be put at RUB5 billion. As there had been no market revaluation of fixed assets according to Russian Accounting Standards, the company’s total assets amounted to RUB1,819 million, while net equity position was negative RUB224 million as of June 30, 2014. Dvina Capital’s total debt as of the same date stood at RUB1,818 million, with around 40% of this being long-term loans. The company’s debt tends to go down (a 15% decrease from Dec. 31, 2013). The debt is represented by loans from Otkritie FC Bank (OJSC). We assess the company’s debt burden as moderate, considering that the debt-to-EBITDA 1H 2014 annualized ratio is less than 3x.