Dear reader,
A superb result at OB24 idea Georgia Capital. We see a stunning result in NAV terms
Congratulations to readers who followed this idea most recently discussed in “Let the Beer do the talking”. Since then you’ve been rewarded with a 30% return, yet at a £13.36 incredibly this share remains at a deep discount.
In fact if you strip the GEL1,728.5m of publicly listed holdings from the NAV you arrive at a net GEL1,888.1m or £531.9m of private assets.
But the market cap is just £458m and the publicly listed (mainly Georgia bank) is -£486.9m.
The insanity therefore is you are BEING PAID a net £28.9m to own £531.9m of assets for free.
Assets like the beer business which sold for ABOVE NAV. ($63m of proceeds) The water company back in 2021 sold for ABOVE NAV. (It is partly owned and now forms part of the publicly listed portfolio, being listed on the Tblisi stock exchange. Its shares are up 17.5% in 4Q24.
Bank of Georgia now renamed Lion Capital roared in with a 23.9% return.
A buy back programme of $25m contributed 1% to the NAV increase.
The private portfolio delivered 5% NAV increase…. in 1 quarter! I’d written before about vastly strong operating performances and how those appeared poised to translate into asset value increases. CGEO delivered.
The Georgia economy delivered 9.5% GDP growth in 2024, incredibly, despite the political protests and elections. They do say buy to the sound of the cannons.
Consider how those numbers look 3 months later. Particularly pay attention to the largest holdings Retail and Hospitals and consider the triple digit increases to performance. Yes we see some negatives in the 4th quarter too but year on year only “Other” is a negative. Any idea why? The sale of the beer business of course! If you strip that out there’s growth in “Other” y-o-y too.
I like to look at Operating Performance which is cash generation and EBITDA at the holding level since an ongoing feature is the multiple compression and adverse FX. Both of these will reverse in time. It is astonishing to consider that NAV performance would have been 50% higher but for the effect of FX and multiple valuations!
The GBP to GEL is 3.54 today and over the past year has gently appreciated versus the pound.
The multiple meanwhile puts the businesses at really cheap valuations. For example the EV/EBITDA of its retail (pharmacy) business at 8.8X is depsite increases to EBITDA in 2024 of 4.6% and a 39.3% increase in shareholder’s equity.
Conclusion
CGEO again proves, despite being deeply unloved, that it holds strong businesses and the Georgian economy continues to roar in 2024. Will this rerate in 2025?
Liberals decry the events in Georgia. Hundreds have been arrested and pro-EU protestors have been quelled, perhaps brutally. So you have to decide whether you are comfortable with this. CGEO isn’t directly involved and is focused on running its businesses and not interested in politics, according to the CEO.
Certainly the outlook is strong and as I write it is up 3.6%. If it keeps going up perhaps you’ll end up paying a positive net amount for those £531.9m of private assets after all!
Regards
The Oak Bloke
Disclaimers:
This is not advice. Make your own investment decisions.
Micro cap and Nano cap holdings might have a higher risk and higher volatility than companies that are traditionally defined as "blue chip"
BGEO results incredible too! 36% 2024 EPS growth, 30% RoE, 34% cost-income ratio, 6.3% NIM, 120% NPL coverage