Georgia Capital Plc

Georgia Capital Plc (LON: CGEO) is a FTSE All-Share listed Company, which provides a platform for buying, building, and developing businesses in Georgia.

Investment Highlights - Georgia Capital Plc – Speculative Buy at GBX 492.50

• Despite the adverse impact of covid-19, the Company delivered solid underlying performance and NAV growth.
• In the last six months, the Company delivered a substantial return of ~31.94% and delivered higher returns compared to the benchmark Index (FTSE-All Share Index).
• As per valuation metrics, EV/EBITDA, Price/Earnings, Price/Cash Flow and Price/Book Value multiples of the Georgia Capital Plc is currently lower as compared to the corresponding multiples of the Consumer Goods Conglomerates industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, shares were trading above the support level of 200-day simple moving average prices (GBX 450.03), which reflects an uptrend in the stock and can move up further.

Key Risks

• The Georgian economy may be affected by adverse developments in the global economy arising from the outbreak of COVID-19.
• Some other risks - currency fluctuations with depreciation of the Georgian Lari, and macroeconomic risk; regulatory risk across a wide range of industries; investment risk and liquidity risk; regional instability; portfolio company strategic and execution risks.

Financial Highlights – FY2020 (31 December 2020) (released on 24 February 2021)

(Source: Annual Report, Company Website)

• In the fourth quarter of the financial year 2020, the Company delivered 27.2% growth in NAV per share, driven by strong value creation across private portfolio and increase in share price of BoG by 36.6%.
• Driven by valuation of investment stage businesses and GHG, the NAV per share increased by 2.7% for the financial year 2020.
• The aggravated revenue and EBITDA surged by 5.1% and 1%, respectively, in Q4 FY2020 and 6.4% and 4.1%, respectively, in FY2020.
• The Company has a solid liquidity position for the period and was up by 6.4%.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

Despite the impact of the covid-19, the Company has delivered a significant growth in business performance in the fourth quarter and financial year 2020. The Company delivered solid underlying operating performances in Q4 and FY2020 across private portfolio of the Company. Georgia Capital has demonstrated great resilience against pandemic and continue to deliver on strategic priorities. The Company has a healthy liquidity profile, with aggregated cash balances of GEL 392 million. The Company expects dividend income outlook to be very strong in FY2021 from private portfolio. Overall, the Group is well-placed to deliver continued NAV per share growth in the upcoming quarters. The stock made a 52-week low and high of GBX 343.50 and GBX 675.00, respectively.

Based on above-mentioned factors, we have given a “Speculative Buy” recommendation on Georgia Capital Plc at the current price of GBX 492.50 (as on 8 March 2021, before the market close at 12:23 PM GMT).

Manolete Partners Plc

Manolete Partners Plc (LON: MANO) is a FTSE AIM Index listed Insolvency Litigation Financing Company, which works with insolvency practitioners and their lawyers to maximise returns to creditors.

Investment Highlights - Manolete Partners Plc – Speculative Buy at GBX 240.10

• The Company has strong cash generation and delivers excellent performance in cash completions.
• In the last one month, the Company delivered a substantial return of ~24.62% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, EV/Sales, Price/Earnings and Price/Book Value multiples of the Manolete Partners Plc is currently lower as compared to the corresponding multiples of the Professional & Commercial Services industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is supporting an upside move (around 48 level), which means the stock price could increase in the short term.

Key Risks

• The ongoing UK government economic measures have significantly impacted the new cases and will continue to impact in the Q4 FY21.
• The performance can be impacted with delay in judgement and increase in average case duration due to closure of Courts and inability to work from the office amid Covid-19 crisis.

Trading Update For Q3 FY2021 (released on 26 January 2021)

• The Company expects UK Government economic support are planned to continue till April 2021, which will have negative impact on level of new cases. The Company expects new case enquiries to remained low in Q4 FY2021.
• In the third quarter and nine months of the financial year 2021, the Company completed 43 and 95, respectively, insolvency litigation claims.
• The gross cash collection in nine months period of the financial year 2021 increased by 60% from completed cases.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company witnessed a decrease in UK insolvencies, due to actions taken by the UK Government in response to covid-19 pandemic. Manolete Partners expects that economic dislocation caused by the pandemic is likely to generate a further increase in case referrals. Moreover, the long-term prospects seem bright once the UK economic support is phased out and there is an increased rate of corporate insolvencies. Despite the distortion in new cases and net profit in Q3 FY2021, the Company has delivered excellent performance in cash generation and case completions. Overall, the Company is well-positioned in the insolvency litigation financing market for long-term profitable growth. The stock made a 52-week low and high of GBX 174.77 and GBX 617.60,respectively.

Based on above rationale and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Manolete Partners Plc at the current market price of GBX 240.10 (as on 8 March 2021, before the market close at 8:05 AM GMT), with lower double-digit upside potential based on 16.36x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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