Georgia-ous Update!
CGEO's Year End - 26.5% NAV rise in GEL
Dear reader,
Georgia Capital continues to prosper since my last update setting out the thesis for CGEO and why it belongs in the OB20, particularly supported by its Bank of Georgia holding (+£8.4m), and private assets (+£34.68), with buy backs (£6.5m) and with a slight (3%) FX boost too.
Let’s revisit the picture as at 3Q23:
And compare to 4Q23:
What is of particular note is the post period for BGEO. We do not yet have BGEO’s Q4 update but we do know today’s share price and market cap. A post period £87.1m gain and £8.4m Q4 gain is an astonishing result.
We know the JSC Bank profits GEL1,300.9 this being the mainstay of BGEO profits about 91.7% based on the 9m23 results. Extrapolating this and it appears BGEO profits for 2023 to be around GEL1,413 or £424m. It certainly explains the post period change in share price since £424m as a PE of its market cap of £2,080m still only puts BGEO on a PE of 4.9.
We know BGEO is seeking to acquire Ameriabank in neighbouring Armenia at 2.6x earnings and 0.65x book. Given that its own P/B is above 1 that seems good value. It also raises intriguing possibilities to replicate the CGEO model to neighbouring jurisdictions…. who better to do this?
What eagle-eyed readers will see is post period the impact of stripping out the (last known) cash and the value of CGEO’s BGEO holding from today’s market cap we arrive at £82.8m for £608.1m of assets. Or if we include the Water Company (also publicly listed - and valued 31/12/23 at £47.3m) then we are talking about paying £35.5m for £560.8m worth of assets. In the former that’s an 86% discount or the latter it’s a 93.7% discount to NAV!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Once you strip out publicly listed and cash it’s a 93.7% discount to NAV!!!!!!!!!
Also noticeable is the debt to assets ratio is now 15.6% (from 15.9%). This has been achieved through assets appreciating rather than debt decreasing but given the active buy backs it’s clear cash is being channeled for that purpose. Over the whole of FY23 debt has halved from GEL819.6m to GEL405.6m. (£121.7m)
Reading the update, each private business except the hospitals/clincs are progressing well, pharmacy is expanding, the insurance business acquiring a competitor giving it a ~35% market share and its valuation is 35% in 12 months! Renewable energy valuation up 18.5% and Education up 15.2%.
Its portfolio generated GEL235.9m dividends or £70.7m which again if we use that as a proxy for PE gives us a PE of 7…. and of course that excludes capital appreciation.
Conclusion
CGEO has returned 20% net gain since I included it in the Oak Bloke 20 ideas for 2024.
But it has much further to run. Once you strip out BGEO the value on offer is astonishing. 93.7% discount on the ex-BGEO assets which are growing up to 35% a year and which generated GEL82M or £24.6m of dividends for a net £35.5m investment is a 66% ROI in simple terms!
Not that binning BGEO is any kind of great idea. Its performance continues to excel, and expansion to neighbouring Armenia perhaps provides a runway for even more growth.
This is not advice
Oak
Thanks for the update.
How do you feel about the CFO selling ~10% of shares in recent days? If the company is significantly undervalued, of all people, the CFO should know and it would make sense if he was hesitant to sell until most of the value was captured.
Happy to hear your thoughts on this.
Cheers,
Robin
I see CGEO's trajectory continues slowly and solidly upwards. And yet a crazily low P/E and discount to NAV remains. There is so much left in this tank, and BGEO's results will ratchet up that trajectory even more.