The AFC Uzbekistan Fund Class F shares returned −1.7% in November with a NAV of USD 2,067.58, bringing the return since inception (29th March 2019) to +106.8%, while the year-to-date return stands at +54.1%. On an annualized basis, the fund returned +31.2% p.a. with a Sharpe ratio of 2.09.
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. The chop and relative range-bound trading in share prices is coming ahead of what should be an exciting 2022.
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:
|Estimated weighted portfolio dividend yield:
The Ministry of Finance is preparing to implement its ambitious privatization 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 of up to 5% of the company 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 kilometers 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.