ASF header


AFC Uzbekistan Fund November 2021 Update


Dear Investors and Friends,

November was a relatively quiet month, though the Uzbek economy continues to hum along and accelerate its growth, confirmed by the European Bank for Reconstruction and Development, the latest organization to raise its 2021 GDP growth forecast, from 5.6% to 6.8%. Equally, the stock market saw muted activity as the share price of many companies drifted modestly lower during the month. Though, the chop and relative range-bound trading in share prices is coming ahead of what should be an exciting 2022. The November 2021 fund NAV fell to an estimated USD 2,060.40 (-2.0%) or +106.4% since inception on 29th March 2019.

AFC Uzbekistan Fund valuations as of 30th November 2021:

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

 Estimated weighted harmonic average P/B: 1.53x
 Estimated weighted portfolio dividend yield: 5.40%


Privatisation programme

The Ministry of Finance is preparing to implement its ambitious privatisation programme of state-owned enterprises (SOE’s) through IPO/SPO of at least 14 companies on the Tashkent Stock Exchange, and eventual dual listing abroad. Scheduled to kick off in 2022, in our view the two most anticipated deals in the first half of 2022 are the SPO of shares in Uzmetkombinat (TSE: UZMK), Uzbekistan’s largest steel plant and the AFC Uzbekistan Fund’s second largest position, and Almalyk Mining and Metallurgical Kombinat (Almalyk), Uzbekistan’s largest copper producer.

With Uzbekistan’s “crown jewel” assets up for privatisation, previous strict controls on investor access have been lifted as these companies transition toward being publicly traded and therefore are increasing their focus on investor relations. In October 2021, I visited the facilities of Uzmetkombinat and during November our friends at Bluestone Investment Bank hosted a 3-day investor tour they were kind enough to invite me on. The tour included meetings with a handful of private and listed companies, though the highlight was a visit to Almalyk city, about a ninety-minute drive from Uzbekistan’s capital, Tashkent, to meet the CFO of Almalyk, Feruza Rustamovna and subsequently visit the operating mine.

Almalyk, established in 1949, is the largest copper mine in Uzbekistan, and once their geological reports are publicly available, it will most definitely make the list of the world’s top ten largest copper mines. The company has been undergoing a corporate transformation with the help of international consultants since 2018 and in the first half of 2022 is scheduled to have an IPO on the Tashkent Stock Exchange.

In 2018 the mine produced 110,000 tons of copper, while 2021 production is estimated at 148,000 tons, and a current USD 10 bln expansion will bring production to 390,000 tons per year by 2028. As part of this expansion, an existing open-pit mine will be connected with a newly built pit, which once connected, will measure 10 km in length and several kilometres wide. Almalyk this year received a JORC resource estimate by international consultancy SRK Consulting which confirms 19 bln tons of ore containing 45.3 mln tons of copper, 5,374 tons of gold, and 34,800 tons of silver, translating to another 70 years of mine life. According to SRK, Almalyk’s ore is graded 0.37% copper, 0.54 grams per ton of gold, and 3 grams per ton of silver.


Almalyk’s existing super-pit measuring 2 km in length

(Source: AFC Research)


A second pit to be connected with the existing super-pit later this decade

(Source: AFC Research)


With few large-scale copper discoveries made in recent years and the often decade-long lead times between discovery and the commencement of production, while the world is increasingly focused on accelerating the adoption of wind power, electric cars, per attempts at a degree of carbon neutrality, and the more basic electrification of emerging and frontier market economies, Almalyk’s capacity expansion is well-timed for what is likely to be an emerging structural copper deficit over the coming decade.

Emerging copper deficit

(Source: VisualCapitalist)


Private sector companies are also increasing engagement with investors

As stated in previous updates, if the government’s privatisation programme is successful it should significantly improve the capital markets ecosystem (including enhancing free-floats of listed companies, new IPO’s, and new local and foreign investors), paving the way for private companies to IPO.

As part of the Bluestone investor tour, one of the private companies we met with, and which is likely to pursue an international debt issue prior to an IPO, is Artel Electronics Group, Central Asia’s largest electronics and home appliance manufacturer.

Founded in 2011 manufacturing gas and electric stoves and vacuum cleaners, the company has grown its product line to include several dozen products including washing machines and TVs. Artel is also a regional partner of Samsung and manufactures products under the Samsung brand in their factories, while exporting to over 20 countries in Asia, Europe, the Middle East and Africa. In 2020 Artel sold over four-million appliances.

Artel is one of the most attractive consumer-electronics companies in the region and a company we will be keeping a close eye on as they are ideally positioned to benefit from the ongoing real estate boom in Uzbekistan as new homeowners will stock their homes with white goods, but also expanding its export markets as it can service Europe, the Middle East and Africa cheaper than many Chinese and Turkish producers at present due to global supply-chain bottlenecks.


Artel's washing machine production line

(Source: Artel)



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

Uzbekistan's goldne giant - Navoi

The hoovers of Nukus

Uzbekistan posts 6.9% GDP growth in 9-months 2021

Almalyk plans to raise USD 500 mln through Eurobond issue                         

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