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AFC Uzbekistan Fund August 2021 Update


Dear Investors and Friends,

August 2021 was a mixed month sentiment-wise in Uzbekistan as economic momentum continued, but the discussion among the business community was consumed by Afghanistan’s collapse and how it could affect Uzbekistan and the Central Asian region going forward. Uzbekistan is in a strong position economically and militarily, so we view things as neutral while watching the highly fluid situation across the border further evolve now that the USA has officially withdrawn, leaving Afghanistan to the Taliban. The August 2021 fund NAV increased to an estimated USD 1,975.5 (+1.2%) or +97.5% since inception on 29th March 2019.

AFC Uzbekistan Fund valuations as of 31st August 2021:

 Estimated weighted harmonic average trailing P/E (only companies with profit):

 Estimated weighted harmonic average P/B: 1.57x
 Estimated weighted portfolio dividend yield: 5.94%

Afghanistan Situation

As Afghanistan’s former government collapsed during August, followed by the USA having fully withdrawn on 31st August 2021, “Operation Enduring Freedom” came to an abrupt end with the Taliban returning to power.

So, what does this mean for Uzbekistan? We have received a few queries about this, but as far as we can see, there should be little to no change in Uzbekistan going forward. The most visible change is more Afghan’s living in Tashkent (and in some of the cities bordering Afghanistan), though they arrived during the past several months and are mainly of the Afghan middle class who are educated and business owners, some of whom brought with them substantial wealth. Many of these Afghans have historically done business in Uzbekistan, owning everything from English schools to cement plants, and thus Uzbekistan was already a second home of sorts for them. Bringing valuable skillsets and capital is certainly not worrying to us and should be a net positive.

Regarding security and refugees, Uzbekistan hosts the largest military in Central Asia, has a secure border with Afghanistan, and is not accepting any refugees. The few who did flee into Uzbekistan, either via land or by air (as defectors from the Afghan air force flew to Uzbekistan during the middle of August), have been detained and the Uzbek government is working with western countries in order to have them deported abroad. Further, on 27th August 2021 President Mirziyoyev was quoted in local media saying “We predicted these events would happen [and so Uzbekistan] started communicating with [the Taliban] not yesterday, but two years ago. When no country had communicated with them, I gave instructions” to establish a dialogue with them. Uzbekistan has built a good rapport with the Taliban as it is focused on protecting the security of its territory and has been forward-thinking in this regard.

Coca-Cola Bottlers Uzbekistan privatisation – a model for future privatisations or a one-off?

On 6th August 2021 the Agency for State Asset Management, responsible for the privatisation of Uzbekistan’s state-owned enterprises (SOE’s), announced an agreement to sell the state’s 57.118% stake in the local Coca-Cola bottling company to Turkish Coca-Cola Icecek A.S. for  USD 252.28 mln. Rothschild & Co. and Dentons acted as the financial and legal advisors to the deal which was widely regarded as transparent and fair.

The bottling company had been in the pipeline for privatisation for several years and it is highly encouraging that it was sold in a transparent fashion to a foreign strategic investor who should be able to increase efficiencies within the company and further enhance profitability. One benefit of SOE’s being privatised is the low hanging fruit efficiency gains that can be had with new management. For example, a friend who owns a Lebanese cafe in Tashkent will message a sales representative indicating that he needs a delivery of certain Coca-Cola products. It’s not uncommon for a response to take several days and for him to be informed that they don’t have certain SKU’s such as 500ml bottles of Coke or bottles of Bonaqua water. The bar for improvement in this country is anything but high and should lead to some pretty impressive margin and profitability increases for its new Turkish owners, just as publicly listed steel producer Uzmetkombinat (TSE: UZMK) experienced when it went through restructuring with the help of private sector experts.

Looking ahead to the long list of privatisations from wineries to the national airline (Uzbekistan Airways) to several large gold and copper mining operations, if the privatisation of Coca-Cola Bottlers Uzbekistan can become a blueprint for future privatisations, then the broader privatisation proramme over the coming years should be very exciting indeed, for both the government and the population. So, we will patiently wait to see if increased transparency in the sphere of privatisations becomes the new normal or if this flagship privatisation was a one-off due to the brand name. We are hopeful it will be more of the former.

Coca-Cola Bottlers Uzbekistan Ltd.

(Source: PlasticsinPackaging)


Second quarter earning season concludes with another batch of strong earnings

With global steel prices very strong in 2021 and remaining firm as demand grows and China eliminates export rebates (incentives for steel producers to export product), Uzmetkombinat (TSE: UZMK) has been one of the standout performers in our portfolio during the second quarter. Net income grew 2,512% Y-o-Y in the second quarter, while trailing twelve-months earnings increased 237% and book value per share grew 35.2%. UZMK ended August at UZS 86,999 per share, up 164% since the start of the year and is but one example of the continued high growth we see among our portfolio companies. While UZMK's price has begun to re-rate, we also see continued upside as it trades at a P/E of 3.96x, P/B of 1.56x and a dividend yield of 4.38%.


(Source: Toshkent Stock Exchange, AFC Research)


As UZMK benefits from a strong economy and robust steel prices, the government of Uzbekistan is continuing to liberalize the domestic economy, benefiting other core positions of ours, specifically in the cement industry. On 31st August 2021 a presidential decree was signed stating that from 1st October 2021 the income tax rate for cement producers would decrease from 20% to 15% and the subsoil use tax for the extraction of limestone (the main ingredient in cement production) will be cut in half from 1st January 2022. As one can imagine, this will be very positive for our cement holdings going forward.


For further viewing here are some interesting, relevant news links related to Uzbekistan:

How AGMK intends to develop one of the world's largest copper and gold deposits (Russian)               

Uzmetkombinat Vlog (Russian)       

Kvarts Video (Russian)                                 

AFC Uzbekistan Fund Marketing Information as of the end of July 2021



The next cutoff date for subscriptions will be 24th September 2021. If you would like any assistance with the subscription process, please get in touch with us at This email address is being protected from spambots. You need JavaScript enabled to view it.

Best regards,

Scott Osheroff

CIO AFC Uzbekistan Fund