Bank of Georgia Group PLC  

Bank of Georgia Group PLC (LSE: BGEO) is an FTSE 250 listed Company, which provides banking, leasing, brokerage, and investment management services to corporate and individual customers. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 4,615.00

• Resistance near Current levels: BGEO’s stock price has breached the Resistance (R1) which was stated in the previous report on 28 October 2024 therefore, there can be a possibility of a decline from resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.
• Higher Operational Costs and Pressure on Profit Margins: Despite solid growth in revenues, Bank of Georgia Group faced a notable increase in operational expenses during Q2 FY24. Operating expenses in Georgia surged by 21.1% year-on-year, driven by rising employee costs and administrative expenses, largely due to a tight labor market and business expansion. While wage growth in Georgia has moderated, the higher cost base could continue to pressure margins and profitability, especially if inflationary pressures persist.
• Geopolitical Risks and Currency Volatility: The political instability in Georgia during April-May 2024 and ongoing geopolitical tensions in the region remain a concern for the Bank of Georgia Group's future prospects. The volatility in the Georgian lari (GEL), exacerbated by domestic political events, highlights the vulnerability of the currency to external and internal shocks. Although the bank has shown resilience, these uncertainties present downside risks, particularly with the upcoming parliamentary elections in Georgia and potential regional instability.

  Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

BGEO is expected to trade at a premium considering the lowering of inflation, cutting of the interest rates, given outlook and guidance, etc. For conducting the valuation, the following peers have been considered: Close Brothers Group PLC (LSE: CBG), Secure Trust Bank PLC (LSE: STB) and others.

Given its current trading levels, the recent rally in the share price, relative valuation, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing market price of GBX 4,615.00, (as of 06 November 2024).

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 06 November 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.