CGEO / BGEO Special Situation…again

9th Mar by Martin VT

34 comments 2182 reads

Bank of Georgia (LON:BGEO) SP has shot up again. This is important for Georgia Capital (LON:CGEO) as when it was split from the bank (2018 I think), it retained 20% shares of Bank of Georgia (LON:BGEO). As the SP of the bank has increased more rapidly that Georgia Capital (LON:CGEO), that means the amount of market cap that is backed by tradable shares increases. This matters because Georgia Capital (LON:CGEO) trades at a huge discount to NAV.
It can be argued that makes sense because Georgia is a developing economy, has issues with Russia, and that the rest of the assets (bar some shares it retained from the sale of its water utility) are essentially privately held businesses, that can be difficult to value (though the fact that the water utility sold at a premium to its valuation a couple of years back undermines that argument).

That said the private businesses are pharmacy / hospitals / diagnostics / insurance / education / energy, plus a few smaller start ups…ie mostly defensive businesses.

Anyway, here are my back of an envelope calculations:

CGEO Market Cap £537m

CGEO NAV GEL 3378m = £988m (as of Dec 2023)

BGEO Market Cap £2.36bn

CGEO 20% holding in BGEO = £472m

Holding in Water Company shares GEL 159m = £46m

Total Value of Shares held by CGEO = £518m

Therefore, the Total Value CGEO, net of its tradable shares = £988m - £518m = £470m

So NAV of private holdings (ie companies that it owns) is £470m

Cost of the £470m private holdings in the CGEO Market Cap = £537m (CGEO Market Cap) - £518m (BGEO and Water Shares) = £19m

Therefore, after accounting for the value of market tradable shares, one can buy £470m of assets for £19m

And final comment, Bank of Georgia (LON:BGEO) still looks to be excellent value with metrics prior to its 2023 results next week of:

SR 98 / PE 5 / Div % 6 …and it’s in the process of buying a bank in a neighbouring state from cash.

I am long term holder in both Georgia Capital (LON:CGEO) and Bank of Georgia (LON:BGEO) so please be skeptical of my advocacy and analysis.

But if such a thing…

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Charles Mitchell

15th May

It has indeed. Not sure what to do- fisti cuffs in parliament is not great

Bank of Georgia (LON:BGEO) falling sharply today. No idea when to start buying Georgia Capital (LON:CGEO) elections are not until October.

Alphaflight

This new bill allows for financial transparency. That is to say, NGOs in Georgia will now have to reveal where their funding comes from. In a normal democratic world, this would be trumpeted as a positive development as transparency is a good thing is it not? Note: The funding for said Georgian NGOs isn't coming from Russia or China:-)

The US are now talking about sanctions:

"...O’Brien warned that the US was prepared to sanction Georgian government ministers and officials over the developing crisis. He said: “If the law advances against EU norms and there is an erosion of democracy and violence against peaceful demonstrators, we will see restrictions from the United States. There will be financial and/or travel restrictions specifically on those responsible and their families.”"

I have just bought back into Georgia Capital (LON:CGEO )

Georgia is moving back into the Russian sphere of influence. Incoming sanctions could equate to this company dropping very hard as we saw with the LSE listed Russian companies . This is a good summary of the geopolitics at play in Georgia.

I do follow Georgia today. In my opinion unlikely to be lasting- Membership of EU is under way and election in October could see a change of government. But there is obviously a risk.

rmillaree

i must admit i thought exactly the same when i read that same text this morning - i must admit to not knowing the detail here as to what is being done so i have to presume the issue that is important here has not been well explained by the guardian article.

hopefully we have learned our lesson and are not over intefering in how other countries run their affairs - i fear we may have not though. In some respects i like how china proceeds with such things in that they dont tend to go round telling other countries how they should run their affairs (i am aware on many levels China does play as dirty as the rest!)

my main worry here is that stupid us politicians shouting their moutrhs off is likely to make things far worse rather than quietly sort behind the scenes whatever issues are going on.

perosnally i do need to do further reading here to find out what is at play if its not as simple as being close to civil war

British media channels are still telling us that Ukraine is winning against Russia. They are not.

As for Georgia, I very much doubt that they will be joining the European Union as he new law is going through, this will mean that if an NGO received >20% of its income from abroad then it will need to disclose the source(s). All of their disruptive NGOs are sponsored by the west (mainly the US), this is the worse kept secret in Georgia.

Our media is telling us that disclosing where your revenue and funding is coming from is anti EU, now that bit is correct. Referring to it as the "Russia Law" is a propaganda error on their part perhaps. The fact that people are protesting in favor of less transparency however is perplexing.

Time will tell.Russia invaded Georgia-2008. We will have to see if the current Gov really want to continue to act against the protestors. I am prepared to buy back in to CGEO- but mindful I may need to take a loss. Everything I read about Georgia online and the research from TBC Bank (LON:TBCG) suggests that Georgia is likely to join the EU. I have no crystal ball. It maybe a contrarian view- but has worked for me in the past. I have a friends son who is recently back and things seemed more stable - but it was a month ago.

doctor dave

Georgia Capital (LON:CGEO) ballsy repurchase!!

doctor dave- is that a comment on my purchase or yours ?

16th May

Citywire today buy Georgia bank TBC Bank (LON:TBCG) https://citywire.com/investmen...

Oh sorry - yours!!

Well at least the Mayor of Tbilisi knows whats going on:

17th May

Consumer spending report from TBC Bank (LON:TBCG)

In April 2024, both the total number of non-cash transactions, and the total non-cash spending volume experienced an annual increase.

Non-resident non-cash spending continued to increase annually. In hotels both the average transaction volume and non-cash spendings have increased.

In Tbilisi residential property transactions, compared to the same period in previous year, have increased. New mortgage issuances also grew.

https://tbccapital.ge/en/publi...

Albertos

4th Jun

https://www.reuters.com/world/...

It really doesn't look safe to go back in here before the result of the elections in October. The current ruling party seem to be committed to introducing legislation which will ensure it will never become a EU member and generally p*ss off the west.

6th Jun

Georgia Capital (LON:CGEO) School tries to have agreement revoked https://georgiatoday.ge/georgi...

Is this the start of the inevitable consequences of introducing the so-called Russian Law?

I don't know who's right and who's wrong, but the timing stinks.

7th Jun

Not sure the "Russian Law" was the issue here, looks more like a disagreement. I am on the sidelines at the moment apart from a holding in TBC Bank (LON:TBCG) which is partially diversified from Georgia and has a great yield.

John LA

12th Jun

Sanctions would be a disaster, the US under the Democrats are to oweak to threaten anyone. Trump has a much better grasp of realpolitik and will more likely heal the wounds

CGEO / BGEO Special Situation…again

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Martin VT

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