AFC Uzbekistan Fund valuations as of 30th November 2024:
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Estimated Weighted harmonic average trailing P/E (only companies with profit):
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4.09x |
| Estimated Weighted harmonic average P/B: |
0.65x |
| Estimated Weighted portfolio dividend yield: |
3.05% |
Uzbek Commodity Exchange - URTS
November saw the closing of the secondary offering of the Uzbek Commodity Exchange (TSE: URTS), where investors subscribed for 108% of the offering amount (total demand being ~USD 3.35 million), leading many investors to receive only 85% of their requested allocations. This was the most successful offering of this size since the country re-opened in 2016. While in the grand scheme of things this deal was peanut-sized, for Uzbekistan it’s a big deal and shows just how low of a base the market is growing from. Now we only need a handful of other such deals to be equally as successful in order to increase retail investor participation and really kickstart things in the market.
Following URTS’s secondary offering, the company also increased its capitalization via a distribution of 4 shares to existing investors for every one share held, in order to comply with new regulatory requirements around minimum paid up capital requirements for commodities exchange businesses.
Factoring in the increased share count, on 26th November 2024, the share price adjusted from UZS 15,399 to UZS 3,079. The share price ended November at 3,498, 13.6% higher than the adjusted price. Further, in the final four days of trading 281,914 shares traded for roughly USD 75,000. While this is seemingly insignificant, we are aware of several investors looking to acquire, in some cases, up to 1 million shares. This was evidenced by bids we saw in the market for 200,000 shares on several days but which were not filled, which likely means there is risk to the upside in the stock as these investors get more aggressive in building their positions if the market doesn’t come to them. Such investor interest should only increase over time, as we have been harping on, and the below news should add further fuel to this trend over the coming months.
Bloomberg goes live!
During November, after what has been a six-year long wait since we first introduced the Tashkent Stock Exchange to Bloomberg in 2018, stock and bond quotations and financial data are now hosted on Bloomberg with an one-hour delay. This is big news as institutional investors have been asking for years when quotes will be available on Bloomberg as it is much easier than digging into the stock exchange and regulatory websites.
The regulator of Uzbekistan’s capital markets discussed that this achievement is a step in the right direction for increased liquidity in their bid to attract new investors, expanding the base of international market participants, and accelerating integration into global financial markets. Uzbekistan has a long way to go, but later this decade, the government hopes to have the Tashkent Stock Exchange included in the MSCI Frontier Markets Index. If they can pick up the pace of capital markets development from here, that’s not an impossibility. But first, we need to see integration with international custodians, a dramatic increase in investor participation, a step change in local market liquidity, and new IPO prospects.
The next step will be the integration with Clearstream, which is coming as the CEO of the Tashkent Stock Exchange, George Paresishvili, has this among his KPI’s in the pipeline to cross off. Hopefully 2025 is the year we finally see the long-awaited step-change in market dynamics, which would dramatically alter, in a positive manner, the performance of the AFC Uzbekistan Fund, which has been negatively impacted by the slow but steady drift lower across the market over the past two years. The fund remains concentrated in the blue-chip companies of Uzbekistan which are best positioned to benefit from the aforementioned continued market developments.
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