• Net asset value per share on 31 December 2009 amounted to EUR 9.61 (EUR
7.31). The total net asset value amounted to EUR 341m (EUR 265m), which is a
change of 5.1% (-16.7%) during the quarter and a change of 29% (-33%) during
the reporting period
• For the reporting period, the net profit amounted to EUR 99m (EUR -151m),
including EUR 109m (EUR -152m) in unrealised value gain on investments.
Earnings per share amounted to EUR 2.27 (EUR -3.56)
• Net profit for the fourth quarter amounted to EUR 19m (EUR -60m), including
EUR 19m (EUR -56m) in unrealised value gain on investments. Earnings per share
amounted to EUR 0.53 (EUR -1.48)
• Cash, cash equivalents and bonds on 31 December 2009 amounted to EUR 88m (EUR
176m), corresponding to EUR 2.47 (EUR 4.85) per share
• In October East Capital Explorer announced a direct investment of EUR 9.0m in
TEO LT, a Lithuanian telecom company
• Net asset value per share on 31 January 2010 amounted to EUR 10.20 (SEK 104).
Cash, cash equivalents and bonds per the same date amounted to EUR 88m (SEK
904m) corresponding to EUR 2.49 (SEK 25.50) per share . EUR 44m (SEK 453m) of
those, corresponding to EUR 1.25 (SEK 13) per share were available for further
investments
• In January, East Capital Explorer announced a EUR 5m direct investment in a
new venture which, together with Intrum Justitia and the East Capital
Financials Fund, will seek to invest in portfolios of non-performing consumer
loans in Russia
CEO COMMENTS ON THE FOURTH QUARTER
Despite the prevalence of fear at the beginning of the year, 2009 turned into
quite a good year for the financial markets. The gradual increase in risk
appetite throughout the year benefited, in particular, the emerging markets,
amongst them, the majority of the Eastern European markets.
The macroeconomic situation has continued to stabilize and many of our
countries will return to growth in 2010. Investors' confidence in Eastern
European markets has improved significantly, and certain Euro zone members now
experience higher risk spreads than Eastern European countries. The majority of
Eastern European countries have managed the crisis quite well, although
challenges remain.
We have decided to increase the amount of information which we disclose about
our portfolio externally as market expectations for transparency have
increased. As of this report, we will publish East Capital Explorer's top ten
holdings on a see-through basis, as well as the top ten holdings of each of our
fund investments. Our ambition is also to provide investors more information
about the portfolio companies, and to provide a more detailed description of
the portfolio managers' work during the reporting period. You will also notice
that our portfolio is very well diversified: our ten largest holdings count for
only 21% of our NAV and through East Capital Explorer we offer access to
approximately 400 underlying holdings.
Our single largest holding is TEO, a Lithuanian telecom company, in which we
made a direct investment during the third quarter 2009. This is a solid
company, which we bought at a very attractive valuation. At the time of this
report, the stock is up approximately 25%. TEO just released its year-end
report, which was relatively strong, considering that Lithuania was one of the
countries hardest hit by the economic downturn in 2009. Although the fourth
quarter was weak, revenues and EBITDA for the full year were only marginally
down, whereas the company managed to grow its bottom line. TEO's Board decided
to put the cancellation or sale of the treasury shares to a shareholder vote.
Either outcome would be positive for the company's shareholders and we are
pleased that the Board of TEO has taken this shareholder-friendly action.
Our second largest position is Fondul Proprietatea, a Romanian investment
company. The company remains attractively valued, its assets trading at a large
discount, and our fund manager has been increasing the holding in this company
in recent months. We have been expecting the company to finalize the management
agreement with Templeton and commit to a clear listing timeline. Although the
speed of those developments has been slower than we had hoped, which explains
why the share price was down during Q4, things have been moving in the right
direction. Just last week, the company's EGM confirmed the signing of the
management agreement and the CEO reiterated his commitment to list the company
in 2010. Both of those steps, when executed, will be a major step ahead.
Our third largest holding, a direct investment into Melon Fashion Group,
continued its fast growth by opening 81 new shops in 2009. This enabled the
company to grow its turnover for the full year 2009 by 43% in RUR (18% in EUR),
compared to 2008, in spite of the fact that the Russian retail market
experienced a significant contraction. MFG's sales in comparable stores
decreased by 3% in RUR terms (decreased 20% in EUR terms) during the period. In
spite of opening shops at a fast pace, the company ended 2009 with a higher
level of cash than it had in the beginning of the year. Management is actively
investigating various alternatives for growth, including acquisitions,
international expansion and partnerships. We follow this process very closely
as organic growth with existing concepts has its natural limits. In late 2009,
we requested E&Y to perform an independent valuation of our holding in MFG. As
a result of this, the fair value of the holding was increased by 4.6% compared
to acquisition cost.
Five of the names on our top ten list are utility companies, as our largest
fund investment, to date, is in the East Capital Power Utilities Fund. This
fund performed very well during the year, both in absolute and in relative
terms. Its value increased by 177% in 2009, and as of the end of January 2010,
the fund's net asset value was back to its level at inception. You will find
additional information concerning the largest utility holdings in the fund
section. We remain positive to the sector, and see further potential for value
growth, although repeating the 2009 performance will not be easy.
The company's net asset value increased by 5.1% during the fourth quarter,
taking the total gains in 2009 to 29%. Since inception, the net asset value, as
of the end of 2009, was down 10.4% in EUR-terms, and 1.6% in SEK-terms. We are
pleased that as at 31 January 2010, the net asset value in SEK-terms had
surpassed the levels reached before the financial crisis.
Although still no deals have been made in the East Capital Russian Property
Fund, activity level in this segment is high, and we expect to see results
shortly. As no investments have been made by the fund, the management fees
charged for 2008 and 2009 have been refunded to us by East Capital.
In January, we announced our third direct investment which is a venture
together with Intrum Justitia and the East Capital Financials Fund. This new
venture will seek to acquire portfolios of consumer debt in Russia. This is a
new market segment in Russia, and we are excited to be one of the first players
to enter the market and to start building a franchise. We are also pleased to
have partners who can bring a lot to the table in terms of knowhow and access
to deal flow. Our commitment to this venture is EUR 5m.
We are looking forward to another interesting year and we will keep investing,
expecting to be fully invested during 2010. We also expect to see improvements
in the performance of those fund investments that did not perform according to
expectations in 2009.
Gert Tiivas, CEO
The full Interim Report is available in the attached PDF-file and on the
website www.eastcapitalexplorer.com.
TELEPHONE CONFERENCE
The report will be presented and commented at a telephone conference with Gert
Tiivas, CEO and Mathias Pedersen, CFO.
Date: today, Wednesday, 17 February 2010
Time: 10.00 am CET
Telephone details: +46 (0)8 505 598 53 (Sweden) or +44 (0)203 043 24 36 (UK).
Please dial-in a few minutes before the conference starts. A presentation for
the telephone conference will be made available on www.eastcapitalexplorer.com
before the conference.
The telephone conference will be webcasted simultaneously and can be viewed on
www.eastcapitalexplorer.com. The webcast will also be recorded and made
available on the website after the telephone conference.
CONTACT INFORMATION
Gert Tiivas, CEO, +46 8 505 977 30
Mathias Pedersen, CFO, +46 8 505 977 48
FINANCIAL CALENDAR
• Monthly net asset value report on the fifth working day after the end of each
month
• Annual Report 2009 available in the week of 5 April 2010
• Annual General Meeting 2010 on 28 April 2010
• Interim Report 1 January - 31 March 2010, 11 May 2010
• Interim Report 1 January - 30 June 2010, 20 August 2010
• Interim Report 1 January - 30 September 2010, 11 November 2010
About East Capital Explorer │ East Capital Explorer AB is a Swedish company,
created with the specific aim of bringing unique investment opportunities in
Eastern Europe to a broader investor base. The company invests mainly in East
Capital's private equity and semi-public equity funds that provide exposure to
companies not otherwise accessible via the local stock exchanges in Eastern
Europe. East Capital Explorer targets fast growing sectors such as the power
utilities, financial, retail and consumer goods and real estate sectors. East
Capital Explorer has appointed East Capital to manage its investment
activities. Since 9 November 2007, East Capital Explorer is listed on NASDAQ
OMX Stockholm, Mid Cap.
The information in this interim report is that which East Capital Explorer AB
is required to disclose under Sweden's Securities
Market Act. It was released for publication at 08:20 a.m. CET on 17 February
2010.
