Central Asia

Central Asia

Trades in Whisky;

Georgia is often described as the Switzerland of the Caucasus, and with Russia on its borders, a position of neutrality is key. It has enjoyed strong growth of around 6% in recent years as it has embraced a market economy. The population is 3.7 million, inflation is 2.2%, and the currency (Lari) is stable.

Source: Google Maps

There is a basic stockmarket, but it lacks scale. As a result, there are three Georgian companies listed on the London Stock Exchange: TBC Bank (TBCG), the Bank of Georgia (BGEO), and Georgia Capital (CGEO), which owns a 19.81% stake in the Bank of Georgia. These banks are deemed to be well managed, offer good value in a growth market.

There has been some fear since the war in Ukraine, but that seems to have passed. More recently, there has been some pushback from the European Union over the newly introduced law that targets “foreign agents”, i.e. any organisation that receives more than 20% of funding from abroad. Basically, it means NGOs become known as “foreign agents”, and neither the EU nor the NGOs or the media like it. The counter-argument is that it improves transparency, and from the market’s perspective, fears are deemed to have been overblown.

Georgian Banks

I have looked at the two banks, and both of them seem to be compelling with the recent new law causing a dip, which I believe offers an entry point. Both of the banks are very profitable, high-tech, and offer good growth. BGEO is slightly larger, has more liquid shares and has grown slightly faster. But then TBCG has a subsidiary, which could transform it. It is cheaper, and ironically, the shares are slightly less volatile.

Buy the Dip

Source: Bloomberg

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