Page 20 - bneMag February 2021_20210202

20 I Companies & Markets bne February 2021
state-owned enterprises IPO and/or be privatised through the stock market (Phase II of our thesis). The liquidity and market participation generated by these privatisations and higher valuations should in due course trigger
Phase III of our thesis which is for private companies to pursue IPOs. Listing costs on the Tashkent Stock Exchange are very affordable and listings will provide companies with a straightforward avenue for financing, relative to private equity or debt financing from banks which often come with restrictive conditions.
Back to Phase II. Before private companies aggressively participate in the market, several large state-owned companies in the commodities sector are expected to IPO. This should transform the capital markets of Uzbekistan by attracting new institutional capital, as well as dramatically increasing the market capitalisation and liquidity of the exchange. In mid-November, one of the most notable
(and highest-quality) state-owned enterprises finalized its consolidated IFRS reports which were audited by Ernst & Young. The company has also retained KPMG for pre-IPO analysis before a planned IPO in 2023. The company is Olmaliq Kon-Metallurgiya Kombinati (TSE: AGMK), a large mining company producing copper, zinc, molybdenum, gold and silver. AGMK also accounts for 90% and 20% of Uzbekistan’s silver and gold production, respectively.
Third Quarter YoY Earnings Growth
The miner is scheduled for privatisation in 2023 through an international IPO and secondary offering of existing shares though the Tashkent Stock Exchange. While its valuation
has not been publicly disclosed, it is expected to be several billion dollars. That would nearly double the current
market capitalisation of the exchange. Several other such companies (including Navoi Metallurgical Mining Kombinati which operates the largest open-pit gold mine in the world, Muruntau) are scheduled for similar privatisation towards the middle of the decade and should help to accelerate foreign investor attention as regards the very attractive and highly diversified economy of Uzbekistan.
What economic slowdown?
Projected by the IMF to grow 0.7% in 2020 with growth rebounding to 5% in 2021, at a time when large portions of the global economy are unfortunately subjected to varying degrees of government-mandated restrictions, Uzbekistan very much gives the feeling of January 2020. COVID-19
is certainly an issue in Uzbekistan, though it appears the government has accepted the fact that the virus can’t be stopped through quarantine drives (of which there were
two earlier this year) and has opted to instead open up the economy. This decision by the Mirziyoyev administration can be clearly felt (and should be celebrated) as construction sites are buzzing, schools are back in session, foreign tourists are welcome, cafes, restaurants and pubs are open and there is no “social distancing”. This response by the government, one of the best in the region, is likely what has translated into a very positive third quarter earnings season, with many listed companies reporting superb results.
The table below highlights some of the listed company valuations on the Tashkent Stock Exchange and their earnings growth on a trailing 12-month basis and for the third quarter year-on-year. Valuations for the majority of the portfolio remain far too cheap. Continued growth expectations should be supported by the further liberalisation and diversification of the economy, rising foreign direct investment, growing exports and improved purchasing power among the local population.
Company
Q3 YoY EPS Growth
TTM EPS Growth
Market Cap (mn USD)
P/E
P/B
Dividend Yield
Cement
224%
123%
142.11
2.65
0.77
13.91%
Cement
213%
43%
24.26
1.94
0.54
-
Steel Cable Producer
168%
121%
11.43
2.72
0.46
0.60%
Cement
108%
14%
137.25
6.01
0.92
-
Spirits Producer
55%
22%
14.00
7.21
3.30
8.73%
Gold Miner
50%
1534%
34.50
0.07
0.03
245.94%
Financial Services
39%
53%
51.12
1.49
0.44
-
Consumer Goods Conglomerate
21%
11%
62.86
7.87
3.20
10.06%
Source: AFC Research, Tashkent Stock Exchange
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