Yesterday I reminded readers of my new golden rule – Ignore day to day politics. I then immediately introduced an exception around North Korea and China. Today I’m back in course talking about Russia – ignore the politics.Now, I am an unabashed Russian Hawk. I think Putin is utterly dreadful and has blood on his hands from his rise to power – his record in Chechenia and the mysterious tower block explosions early in his tenure beg all sorts of questions. I’m also singularly unimpressed with his blatant interference in Ukraine. Looking to a wider context I also think that corporate governance in Russia is generally deplorable and getting worse with the very biggest businesses. The whole stench of corruption, bilious nationalism and media manipulation makes me

Now, I am an unabashed Russian Hawk. I think Putin is utterly dreadful and has blood on his hands as a consequence of his rise to power – his record in Chechenia and the mysterious tower block explosions early in his tenure beg all sorts of pointed questions. I’m also singularly unimpressed with his blatant interference in Ukraine. Looking to a wider context I think that corporate governance in Russia is generally deplorable and getting worse inthe very biggest businesses. The whole stench of corruption, bilious nationalism and media manipulation makes me seethe.

But on the bright side (!) I also accept that there is a case for some exposure to Russia. Arguably barring a Little Green Men invasion of the Baltics (and thus Third World War) relations with the West can’t get any worse. The Russian economy is also showing signs of being on the mend and there is a renewed focus on economic reform amongst Putin’s henchmen. I’d even accept that in some business sectors there’s been an improvement in corporate governance.

So, while I wouldn’t be racing into Russia, I accept that from an investment point of view there are opportunities. My base line assumption is that unless you have any stock specific insight you should either buy a Russian tracker or invest in a classic bellwether beta stock such as Gazprom.  If you must pick a specific stock (outside of say Gazprom) my best idea would be to look at Raven Russia – technically I suppose a fund which focuses on high-grade logistics warehouses in top tier cities. Most investors in logistics warehouses in places like London or Paris would be lucky to get a yield of much above 6.5% whereas outside Russia that return can be as much as 12% – Raven’s net cost of capital is around 7.5%.  Crucially the Russian consumer is spending more – and demanding better, quicker service. The tailwind behind logistics in Russia is every bit as strong as it is in Europe, just with better returns.

Obviously, those returns are much higher because of a) country risk expressed through FX rates and macro economic concerns and b) local corporate risk i.e somebody decides to shake down the business. Which is where Raven Russia comes in. My guess is that the experienced management

Which is where Raven Russia comes in. My guess is that the experienced management has seen just about every type of shakedown known to man and have worked out how to survive. Crucially they are playing a strong consumer and ecommerce trend that will be just as strong in Russia as it is in the UK. But it is very obviously a risky enterprise which has taken on a shed load of sterling denominated debt – as most developers need to.

The H1 interims were just out and they were half decent, although net income fell a tad – which isn’t bad considering the short term headwinds around the lower oil price. Fully diluted NAV is around $0.70c which implies a NAV of 54p a share which compares to the current share price of 47.7p ( and implies a discount of around 12%). The shares are up quite a bit over the last year – from 36p. There’s also some recently issued convertible preference shares (RUSC) which pay out 6.5p per share (currently trading at 11p) which implies a yield of 5.5%. But as they are convertibles there’s also the opportunity to participate in the upside although the redemption premium (through to 2026) is around 35p at the moment. My hunch is that

The shares are up quite a bit over the last year – from 36p. There are also some recently issued convertible preference shares (RUSC) which pay out 6.5p per share (currently trading at 11p) which implies a yield of 5.5%. But as they are convertibles there’s also the opportunity to participate in the upside although the redemption premium (through to 2026) is around 35p at the moment. My hunch is that these conv prefs might be a smart either way bet. You get the income and if Raven makes a huge success of its business, you also get the potential for equity upside.