AFC Uzbekistan Fund valuations as of 31st August 2024:
|
Estimated Weighted harmonic average trailing P/E (only companies with profit):
|
3.40x |
| Estimated Weighted harmonic average P/B: |
0.74x |
| Estimated Weighted portfolio dividend yield: |
4.65% |
Market update
On 28th August 2024, the government announced that a national investment fund would be created to hold the government’s share in 18 state-owned enterprises and whose shares will likely be listed on the Tashkent Stock Exchange and abroad on a foreign bourse. The fund’s holdings will include Uzbekistan Airways, Uzbekistan Airports, the government’s 40% share of the Uzbek Commodity Exchange (TSE: URTS), as well as telecommunication, financial services, and infrastructure related companies.
This fund will accelerate the government’s SOE transformation toward stronger corporate governance standards, in line with the OECD, upgrade financial reporting standards from local standards to IFRS, and hopefully attract new private sector foreign investment into these companies. Through the end of the decade, the minimum dividend payout ratio will also be set at 50% of the profits generated by the fund’s holdings, providing some clarity on cash flows for investors through the rest of the decade.
What remains to be seen is who will manage this vehicle, though the government has stated that it will attract an international management company. Franklin Templeton naturally comes to mind as they have spent significant time on the ground to create such a structure in partnership with the government. Further, Templeton did something very similar with the Fondul Proprietatea scheme in Romania, which proved to be very successful. Having a well-known international manager involved in this process would be a big step in the right direction for Uzbekistan. For now, however, we are awaiting further details.
Uzbekistan’s Olympic achievement
Over the last three years, Uzbekistan has invested roughly USD 50 million to prepare for the Paris Olympics. The results were pretty impressive as Uzbekistan won 13 medals, including 8 gold. This placed Uzbekistan 13th among the 206 participating countries, making it the top performer among Turkic, Muslim, and Post-Soviet states, coming in with the fourth most medals in Asia as well. 5 out of the 8 gold medals won were in boxing, which the region is well known for, along with judo and wrestling.
Uzbekistan continues to let its presence be known on the world stage, whether through the Olympics or increasingly investing in international advertising for tourism, in line with increasing flight connectivity to Europe, the Middle East and Asia. Hopefully, in time, we will see an equally strong push in the development of the capital markets, which could mirror such performance in developing other sectors of the economy.
| 
