(Tbilisi,Georgia) Many of the large scale companies in Georgia have not profited from the positive sides of going public. Despite the fact that companies would not load their balance sheet with debt, they will increase their capital. Companies in their growth stage can no longer rely only on bank lending and therefore raising cash by issuing stocks is the perfect solution.
(Tbilisi,Georgia) Many of the large scale companies in Georgia have not profited from the positive sides of going public. Despite the fact that companies would not load their balance sheet with debt, they will increase their capital. Companies in their growth stage can no longer rely only on bank lending and therefore raising cash by issuing stocks is the perfect solution.
From 138 companies listed on the Georgian Stock Exchange, the stocks of five companies are traded the most, mainly Bank of Georgia, Liberty Bank, Teliani Valley, Caucasus Energy and Infrastructure, and United Telecomm. The majority of demand is for bank stocks.
“When it comes to Georgian names Bank of Georgia is probably the number one most traded entity, it’s probably 80% of the volume of the stock exchange, after that Liberty Bank is very popular, Teliani Valley, CEI, and United Telecomm are also traded. The problem with CEI and Teliani Valley is that they have very big institutional foreign shareholders and do not trade very often,” said Nick Piazza, CEO of BG Capital.
According to Tariel Chichua, CEO of TBC Broker, the most traded stocks on the Georgian Stock Exchange are BANK (Liberty Bank) and GEB (Bank of Georgia). Most of these stocks are traded by respective brokerage companies: Liberty Securities & BG Capital.
“We see a very big shift to US equities. Georgians can invest in stocks from London, the US, Africa, China, or wherever they want. So what we saw was a lot of people especially a year ago investing in US stocks like Google, McDonalds, all those kind of big names,” Piazza added.
The nominal value of stocks starts from 0.01 GEL and goes up to 60 USD.
Piazza believes the first steps for developing the stock market is to involve Georgians in trading with stocks. “If that happens and we have the local population to trade, foreign investors will see market movement, the ability of making money, consequently, they will come in to take part. So we need somehow to convince people that this is the place where people can make money again. To build that trust needs time,” Piazza said.
“We see GEB as only stock worth investing in (well, that was the case several months ago, now it has appreciated by quite a lot). The Georgian market lacks both the quantity of different stocks traded and the liquidity of these. We’re talking about publicly traded stocks, of course,” Chichua said.
“The recommendation to people looking at Georgian stocks depends on what they intend. If an individual wants quick returns and less risk I think one should look at Bank of Georgia or Liberty Bank stocks. They provide liquidity, which basically means there is enough volume of trades every day so that one could buy a couple of thousands worth of stock and if it starts to move up one could sell it, you would not be stuck with it,” Piazza advised.
“Whereas some of the other companies’ stocks one should have for a longer time to increase for investing. If you look at Teliani Valley for example. The company has a great chance for continuous growth and especially if the Russian borders opens, it’s going to explode. However, you cannot trade with it every day,” Piazza added.
“Dividends in CIS are very hard to find. Georgian companies, Ukrainian, Russian, and Kazakh companies are in the early stage of development. It’s only when the company matures and its growth slows down, than they start considering paying dividends. No one really invests in high risk markets, like Georgia, Kazakhstan, and Ukraine for dividends. If you want a slow growing company that paid regular dividends you buy Barclays Bank or a company like that, which does not provide a lot of growth namely 2-5%, but pays a dividend,” Piazza advised.
As Chichua declared the high ROI depends on the duration of investment. “We don’t currently see any stocks that would generate substantial short term return. Well, GEB perhaps is one of the best. Speaking of longer term (5-10 years), interesting ones are BANK and NRGY,” Chichua added.
Currently, BG Capital has a list of 10-15 companies which are of the right size and have the kind of option to raise cash. The company serves almost 2,000 clients and every week 3-4 new accounts are added.
There are several criterions Georgian companies should satisfy in order to go public and be listed on the stock exchange.
“The main thing is probably the size, a company should at least should be worth 50 million USD, otherwise this is not big enough for the bulk of investors to waste their time on. Secondly, you have to go through a certain process of being able to make your company public, which includes doing international financial reporting, audit,” Piazza said.
Piazza is hopeful that in the next 10-24 months there will be at least two Georgian IPOs. BG Capital is actively engaged in talking with Bloomberg to get Georgian stocks listed on Bloomberg which is virtually the biggest system. Everybody who works in investment banking has an account on Bloomberg and one can see there how all the stocks move.
“Until our stock market will operate with software written 11 years ago and is developing it won’t be one of the Government’s top priorities, it does not matter how many go public (it’s pretty easy to do that),” Chichua said.
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