Bank of Georgia Group Plc - Serving Over 2.5 Million Clients, With Impressive Track Record
Bank of Georgia Group Plc (LON: BGEO) is a United Kingdom-based holding company, the new parent company of BGEO Group Plc. The company’s business is divided into geographic-based operations.

Financial Highlights – Solid Operating Income in Q1 of the Financial Year 2020

(Source: Quarterly Results, Company Website)
 
In the first quarter of the financial year 2020, the net interest income increased by 3.7 per cent to GEL 197,080 thousand as against GEL 189,981 thousand in Q1 FY2019. Despite the impact of covid-19 for the period, the operating income remained strong and increased by 6.1 per cent to GEL 274,480 thousand in the first quarter of the financial year 2020 versus an operating income of GEL 258,714 thousand in Q1 FY2019. The reported an LBT (loss before tax) and one-off costs of GEL 112,975 thousand in Q1 FY2020 versus a PBT (profit before tax) and one-off costs of GEL 122,748 thousand in Q1 FY2019. The Group’s loss stood at GEL 99,945 thousand in the first quarter of the financial year 2020 versus a profit of GEL 101,972 thousand in the Q1 FY2019. The cash balance surged by 29.7 per cent to GEL 1,507,142 thousand as on 31^st March 2020 from GEL 1,162,168 thousand as on 31^st March 2019. The loan book and client deposits increased by 37.3 per cent and 29.1 per cent, respectively, on a year-on-year basis.

Share Price Performance

Daily Chart as of June 15^th, 2020, after the market close (Source: Refinitiv,Thomson Reuters)

Bank of Georgia Group Plc shares were closed at GBX 1,082.00 on 15^th June 2020. Stock's 52 weeks High is GBX 1,845.00 and Low is GBX 690.00.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology


Growth Catalysts and Key Risks
The Company is seeking to gain benefit from the growth in the Georgian economy via its Corporate & Investment Banking and Retail Banking divisions. The Company achieved adjusted Return on Average Equity (ROAE) of 26.1% and 27% growth of its loan book, which is well above the company’s strategy. The Group is well-positioned with robust liquidity, capital, and funding resources. To meet the new regulations, the group needs to implement new processes, failing to do so would increase the compliance risk.

Conclusion
BGEO will continue to operate with the National Bank of Georgia and the Government of Georgia to take suitable measures for COVID-19. There had been significant growth in the financial year 2019. It is also expanding the footprint of the banking business in Georgia. The Company is looking forward to becoming a leading organisation in Georgia not only in terms of financial performance but also as an innovative company with digital leadership and regional wealth management.

Over the course of 3 years (FY16 - FY19), the Company’s net income surged from  GEL 398.5 million in FY2016 to GEL 497.70 million in FY2019. Compounded annual growth rate (CAGR) stood at 7.69 per cent.
Based on the decent prospects which are supported by valuation done using the above method, we have given a “Buy” recommendation at the closing price of GBX 1,082.00 (as on 15^th June 2020), with single-digit upside potential based 0.94x NTM Price/Book Value (approx.) on FY20E book value per share (approx.).

Litigation Capital Management Ltd – Assisting hundreds of Individuals and Companies

Litigation Capital Management Ltd (LON: LIT) is a litigation finance company, which was founded in 1998. It is an alternate asset manager with expertise in investments pertinent to the global disputes market. 

Financial Highlights - Decent Growth Trajectory in H1 FY2020 (ended 31 December 2019)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2020, driven by sustainable growth across the portfolio, the gross revenue increased to AUD 24.1 million as against AUD 11.7 million in H1 FY2019. The group’s gross profit increased to AUD 12.2 million in H1 FY2020 from AUD 5.7 million in H1 FY2019. The adjusted PBT (profit before tax) increased to AUD 6.9 million in H1 FY2020 from adjusted PBT (profit before tax) of AUD 2.7 million in the first half of the financial year 2019. The group’s statutory PBT (profit before tax) stood at AUD 6.7 million in H1 FY2020 versus statutory PBT (profit before tax) of AUD 1 million in H1 FY2019, driven by strong growth of revenue. The adjusted basic earnings per share stood at 6.61 cents in the first half of the financial year 2020 versus adjusted basic earnings per share of 4.31 cents in H1 FY2019 with net cash of AUD 34.7 million. The group’s litigation investment stood at AUD 34 million in the first half of the financial year 2020 versus AUD 20.7 million in H1 FY2019.

Share Price Performance

Daily Chart as of June 15^th, 2020, after the market close (Source: Refinitiv,Thomson Reuters)

Litigation Capital Management Ltd shares were closed at GBX 53.00 on 15^th June 2020. Stock's 52 weeks High is GBX 113.50 and Low is GBX 37.87.

From the technical standpoint, 14-day RSI is currently hovering in an oversold zone and carry the potential to trigger an upside bump in the stock price.

Valuation Methodology


Growth Catalysts and Key Risks
The Company has been focussed on its services and customer support, which has resulted in a higher level of customer satisfaction. The Company has a strong financial discipline, which helped the Group to have a robust and effective balance sheet with good infrastructure to support rapid growth.The Company operates in multiple geographies, and its profits can be impacted negatively due to foreign exchange rate fluctuations. 

Conclusion
The Group has shown decent financial performance in the first half of the financial year 2020. It has made a significant increase in both the quality and the number of applications received. The Company is looking forward to exploring opportunities in the untapped and vast corporate portfolio space and expects single-case funding growth. LIT based on its strong pipeline expects strong operational and financial performance in the coming years, with support coming from the litigation funding market. The Group operations are impacted by the covid-19 outbreak and have taken steps to tackle the uncertain situation.

Over the course of 5 years (FY14 - FY19), the Company’s revenue surged from  AUD 0.42 million in FY14 to AUD 34.71 million in FY2019. Compounded annual growth rate (CAGR) stood at 141.79 per cent.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 53.00 (as on 15^th June 2020), with lower-double digit upside potential, based on 12.30x Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and Peers information has been taken from Refinitiv, Thomson Reuters.
*The “Buy and Speculative Buy” recommendation is also valid for the current price as covered in the report (as on 16^th June 2020).

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