TMM Plans to Lift This Year’s Revenue to $61.5 Million

TMM Real Estate Development Plc, Ukraine’s largest property developer, plans to boost revenue to 500 million hryvnia ($61.5 million) this year by diversifying its portfolio, Chief Executive Officer Mykola Tolmachov said.

While the strategy last year, when the country was mired in a recession, was to keep TMM stable, 2013 will be more active, Tolmachov said in an interview at his office in Kiev. Annual revenue didn’t exceed $51.3 million from 2009 through 2011, when the company posted a net loss of $19.5 million.

“Now the task is growth,” he said. “We expect to complete 2013 year with a good increase.”

The Ukrainian government is trying to spur economic expansion to 3 percent this year after the former Soviet republic slipped into a recession in 2012 as global demand fell for steel, the country’s main export. The government said it will support projects to upgrade industry and infrastructure and allocated 2.6 billion hryvnia in the 2013 budget to support bank loans for investment projects, Finance Minister Yuriy Kolobov said Feb. 27.

Because of that, there will be an increase in demand for industrial properties, Tolmachov said.

TMM “is prepared to very seriously consider everything on this market,” he said. Hydro dams, nuclear power stations or waste treatment facilities are among types of projects in which the company would take part and TMM intends to participate in large tenders this year, Tolmachov said, without giving details.

Contract Work

TMM, which has completed 32 mostly residential projects since 1994, took up contracting work for infrastructure and other facilities because of a lack of its own funds.

In 2012, contracted work accounted for 26 percent of revenue, compared with around 1 percent in 2011, Tolmachov said.

Several such projects are in the pipeline now and TMM is in talks with banks, he said. The company is also considering infrastructure projects financed by the European Bank for Reconstruction and Development or the World Bank, he said.

Cash collections from sales of proprieties increased 24 percent in 2012, Tolmachov said. If that trend is sustained, the same increase in cash flow is planned for the current year, he said.

“Cash flow means more than profit these days,” he said.

Bank loans rates in Ukraine are “unreasonable, and the money is very dear,” said Tolmachov. His company pays an annual 15 percent on hryvnia loans. TMM may consider offering more shares in a consolidated package with local partners in the coming years, he said.

“Our dream is that the capital market will come back and the share price will be fair,” Tolmachov said.

Share Price

TMM’s share price is not fair now for many reasons, mainly because of the country’s lost rating and a lack of investment attractiveness, he said.

TMM shares fell to 0.13 euro on Dec. 5 in Frankfurt, the lowest since February 2009, according to data compiled by Bloomberg. The company sold 13.11 percent of its stock in 2007 in the form of global depositary receipts at $15.45 each and raised $104.9 million. Shares declined 0.55 euro today from 0.564 on March 15.

TMM portfolio is valued at $400 million, half of which is income-generating real estate, the CEO said.

Tolmachov expects demand for property to increase should banks reduce deposit rates to at least 10 percent, which would stimulate people to invest in residential property.

Before it's here, it's on the Bloomberg Terminal.