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It’s certainly challenging to calculate how much FTSE 250 stock Bank of Georgia (LSE:BGEO) should be worth.
It’s an amazing company and I had previously invested in the bank as its stock surged from around £10 a share to £50.
However, I sold far before the peak because the environment in which the company operates is changing. Here’s why.
Politics matters
As we’ve been reminded in the UK, politics can have a major impact on stocks.
But in the UK, the election is being fought among parties with, in reality, lots in common, especially economic policy.
However, that’s not the case elsewhere in the world, including in Georgia.
Georgia has been ruled by the Georgian Dream party — founded by the once-illusive billionaire Bidzina Ivanishvili — for over a decade, but the upcoming election could be closely fought.
Opinion polls are quite frankly all over the place, but the political environment is more polarised and fractured than it has been for some time.
On the one side, there’s the Georgian Dream, which hasn’t adopted the hard-liner Western stance on war-mongering Moscow.
And, on the other, there’s the United National Movement (UNM), which under Mikheil Saakashvili played its part in starting the 2008 Russo-Georgian war.
More of Ivanishvili’s Georgian Dream could damage EU accession hopes and long-term development goals.
And, while more seats for the West-leaning UNM could bolster Georgia’s EU accession credentials, it’s unlikely to be positive for Russo-Georgian trade.
As such, and very basically put, October’s election will see Georgian voters dictate whether they want to move closer to Russia, or the West.
Why is the share price falling?
While the election is something for later in the year, Georgians are currently protesting the ‘foreign agents’ bill which was signed into law by Georgia’s parliamentary speaker on Monday, 3 June.
The controversial legislation requires organisations receiving more than 20% of their funding from abroad to register as “foreign agents“.
Critics argue it mimics a similar Russian law used to stifle dissent, sparking fears of eroding democratic freedoms and aligning Georgia more closely with Moscow’s authoritarian regime.
While Bank of Georgia reported very strong Q1 profits in May, clearly it wasn’t enough to reverse the general share price trajectory with the stock down 31% over the last 30 days.
In a note to shareholders, chief executive Archil Gachechiladze pointed to the country’s strong economic growth and the business’s health but acknowledged uncertainties relating to the election.
“Unfortunately, uncertainty has increased recently as we have seen political turmoil during the last few weeks. I have mentioned previously that the majority of the Georgian population aspires to EU membership. Some volatility in the economic and geo-political environment, while not helpful, is likely to be our backdrop until the upcoming parliamentary elections in October 2024. We monitor the situation as it unfolds.”
When would I buy?
Bank of Georgia trades with exceptionally attractive valuation metrics. The stock is trading at 3.23 times expected earnings for 2024, 3.03 times earnings for 2025, and 2.67 earnings for 2026.
Moreover, with the stock down, the dividend yield has been pushed up to 7.2%.
The problem is, that we can’t always invest based on data alone. It’s a situation which I need to keep an eye on.
It’s certainly a stock worth paying close attention to. It could be snapped up for a bargain!
