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BlackRock Emerging Europe (BEEP)


Friday 23 February, 2018

BlackRock Emerging Europe

Portfolio Update

All information is at 31 January 2018 and unaudited.
Performance at month end with net income reinvested


One Three One Three Five *Since
Month Months Year Years Years 30.04.09
Share price 9.4 10.5 30.9 96.7 45.4 170.3
Net asset value 6.6 9.8 19.9 77.7 31.8 150.1
MSCI EM Europe 4.5 7.8 14.9 55.1 2.7 87.9
US Dollars:
Share price 15.0 18.3 48.0 86.2 30.4 159.4
Net asset value 12.1 17.5 35.4 68.2 18.3 140.1
MSCI EM Europe 9.9 15.4 29.8 46.9 -7.86 80.3
Sources: BlackRock, Standard & Poor’s Micropal
*BlackRock took over the investment management of the Company with effect from 1 May 2009
At month end
US Dollar:
Net asset value – capital only: 558.53c
Net asset value* – cum income: 574.48c
Net asset value – capital only: 392.76p
Net asset value* – cum income: 403.97p
Share price: 386.50p
Total assets^: £145.1m
Discount (share price to cum income NAV): 4.3%
Net gearing at month end: 3.3%
Net yield^^^^: 1.5%
Gearing range as a % of Net assets: 0-20%
Issued Capital – ordinary shares^^ 35,916,028
Ongoing charges^^^ 1.2%
* Includes year to date net revenue equal to 11.21 pence per share.
^ Total assets include current year revenue.
^^ Excluding 5,000,000 shares held in treasury.
^^^ Calculated as at 31 January 2017, in accordance with AIC guidelines.
^^^^ Yield calculations are based on dividends announced in the last 12 months as at the date of release of this announcement, and comprise of the final dividend of 7.50 cents per share, (announced on 28 March 2017, ex-dividend on 18 May 2017)
Gross assets (%) Country

Financials 37.5 Russia 55.8
Energy 28.5 Poland 17.8
Consumer Staples 10.1 Turkey 7.5
Telecommunication Services 7.4 Greece 6.7
Health Care 5.6 Hungary 3.6
Materials 4.2 Ukraine 3.6
Information Technology 3.0 Pan-Emerging Europe 2.9
Industrials 1.2
Consumer Discretionary 0.4
Net current assets     2.1 Net current assets 2.1
----- -----
100.0 100.0
===== =====
Short position (1.6) (1.6)

Fifteen Largest Investments
(in % order of Gross Assets as at 31.01.18)
Company Region of Risk Gross assets
Sberbank Russia 9.3
Lukoil Russia 8.9
Gazprom Russia 8.6
PKO Bank Polski Poland 7.1
Bank Pekao Poland 5.1
Novatek Russia 4.9
Lenta Russia 4.4
Rosneft Oil Company Russia 4.1
PZU Poland 3.9
Gedeon Richter Hungary 3.6
National Bank of Greece Greece 3.4
Mobile Telesystems Russia 3.4
Alpha Bank Greece 3.2
MHP Ukraine 3.0
Erste Group Bank Pan-Emerging Europe 2.9
Commenting on the markets, Sam Vecht and Christopher Colunga, representing the Investment Manager noted;
Market Commentary
The MSCI Emerging Europe 10/40 Index gained +4.5% (GBP) in January (+9.9%* in USD terms) marking the region’s best start over the last six years, as strong global growth and commodity prices helped support markets. The Company outperformed the index over the period, returning +6.6% in GBP or +12.1%* in USD terms.
Russia was the region’s top performer, rising by 12.1% in US Dollar terms** in January. The equity market finally started to catch up to the higher in oil prices, and was further supported by a weak US Dollar. Central Europe continued its streak of outperformance as currencies strengthened against the US Dollar and growth remains robust. Poland ended the month up +8.8% in US Dollar terms**, while the Czech Republic and Hungary both saw +8% gains in US Dollar terms**. Similarly, Greece rallied +11.8% in US Dollar terms** on faster growth and further supported by a preliminary agreement on the latest review of their bailout memorandum. Turkey lagged the region but still rose +4.9% in US Dollar terms**; the market seems to be holding up well following upgrades to the banks 2018 earnings expectations.
Focus on: Rosneft

Rosneft is one of the world’s largest integrated oil companies, with a majority of its operations in Russia. The company’s business lines span across exploration and production, refining, exports and retail distribution. Despite a supportive macro backdrop, including positive monetary and fiscal policy trends and record low inflation, as well as a pick-up in oil prices, the stock has lagged its peer group.
We believe that recent stock price underperformance is overdone given that both earnings and dividends are some of the most highly levered in Russia to oil prices. The company should start to generate high levels of free cash flow in 2018 as several new greenfield sites begin production. These new fields will also benefit from tax breaks, improving the profit Rosneft generates on each barrel. This coupled with the company’s announced 50% dividend pay-out policy, leads us to believe that Rosneft is uniquely positioned to catch up to its peers in early 2018. The stock remains our largest overweight within the Russian energy space.
*Source: BlackRock, data as at end January 2018.
**Source: JPM, data as at end January 2018.
23 February 2018
Latest information is available by typing on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.

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