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AFC Uzbekistan Fund valuations as of 31st May 2025:
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Estimated weighted harmonic average trailing P/E (only companies with profit):
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3.52x |
| Estimated weighted harmonic average P/B: |
0.61x |
| Estimated weighted portfolio dividend yield: |
2.63% |
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AFC Uzbekistan Investor Tour
While news was scant on the capital markets and broader economy during May, on 27th May 2025, a group of 20 of us descended on Tashkent for the fourth AFC Uzbekistan Tour where we met Georgia’s TBC bank, with operations in Uzbekistan now driving the company’s growth, and the Uzbek Commodity Exchange (TSE: URTS).
There was significant discussion around the economy, its large and growing population, and the country’s fiscal buffer being its immense gold reserves from Navoi Gold, a company comparable to Barrick Mining (market cap: USD 33 billion) or Newmont Corporation (market cap USD 58 billion), which is slated for an IPO in London by the first quarter of 2026. We estimate Navoi’s market cap at IPO to be in the USD 20 billion range, with significant upside due to multiple undeveloped gold assets.
For years, we have suggested that gold could be a key asset for Uzbekistan and other economies in an increasingly fractured world. Uzbekistan is fortunate to hold several hundred million ounces of gold reserves, with its flagship Muruntau gold mine being the second-largest open-pit gold producer in the world in 2024. Gold and foreign direct investment (FDI) have further boosted Uzbekistan’s foreign exchange reserves, which rose to USD 49.3 billion in May, up from USD 47.9 billion in April, now representing approximately 50% of the GDP.
Further discussions focused on the April announcement that Franklin Templeton would manage Uzbekistan’s National Investment Fund (UzNIF), a portfolio of state-owned enterprises planned for IPO in London and on the Tashkent Stock Exchange next year. In early May, the Uzbek Commodity Exchange (TSE: URTS), which is the second-largest holding in the AFC Uzbekistan Fund at around 14%, became the first company to officially announce that 40% of its equity, owned by the Uzbek government, was transferred to the UzNIF.
The UzNIF is valued at approximately USD 1.7 billion, and many of its assets, including hydroelectric power stations and financial services, appear to be undervalued. However, most of these portfolio companies heavily rely on the state for their survival and are therefore exceptionally inefficient. Nevertheless, price is everything, and cheaply acquiring a set of assets that are not well-managed but have potential for improvement can be a sound investment.
Squeezing out inefficiencies from these state-owned enterprises (SOEs) should not be overly challenging if the government allows Franklin Templeton the necessary authority. For instance, Uzmetkombinat (TSE: UZMK), Uzbekistan’s largest steel producer, underwent a corporate transformation starting in 2018 that resulted in a net income increase of 1,387% by 2022 when global steel prices peaked, and 349% growth through 2024. Earnings are expected to rise into 2026 as the company opens its new hot-rolled coil plant this year, which will double production.
It will be interesting to observe how Franklin Templeton manages the UzNIF and the extent of their influence on the portfolio companies, in addition to restructuring the board of directors.
Wrapping up the AFC Uzbekistan Tour, we concluded with a group photo after our meeting at URTS.
