Georgia Capital / Georgia Healthcare Group: Long-term value and near-term opportunity (GCAP and GHG stay BUY)
We reiterate our BUY recommendations for both Georgia Capital (GCAP), with an updated fair value NAV of GBp 1,547/share, and Georgia Healthcare Group (GHG), with an updated 12M price target (PT) of GBp 228/share. Our GCAP valuation is now based on a mix of 12M PTs for the listed businesses, and peer multiples or book value for the unlisted entities (i.e., the methodology that GCAP adopted for the private portfolio this spring). Applying the 25-30% fair value discount demanded these past 18 months by the market, this implies “just†c.20% upside for the holding as a whole, while the current levels still imply a c.45% discount to the fair value for the private portfolio, which is, ultimately, where most of the upside lies. The renewable energy (RES) portfolio still holds the greatest potential, in our view; the 6-12 months of lost output from the Mestiachala HPPs, which were flooded in late-July, and a c.18-month slip in the target launch of the first two windfarms represent a material delay in unlocking this, but do not change the long-term picture, we believe.Georgia Capital PLC. Georgia Capital PLC is a United Kingdom-based holding company. The Company is focused on investing in developing businesses in Georgia. Its portfolio companies include Georgian Global Utilities LLC (GGU), JSC m2 (m2), JSC Aldagi (Aldagi) and JSC Teliani Valley (Teliani). GGU carries on business in two areas: water utility and renewable energy generation. m2 is the Company's real estate business. m2 develops residential and commercial property in Georgia, outsourcing design while focusing on project and construction management, and sales. m2 also focuses on developing hotels with outsourced operations. Aldagi is a provider of property and casualty insurance products in Georgia. Aldagi primarily focuses on the Georgian motor vehicle, property, credit life, and liability insurance markets and also on other markets offering cargo and agricultural (Agro) insurance. Teliani is a wine and beer producer in Georgia and its sells its products across 15 countries.
Georgia Healthcare Group is a holding company. Through its subsidiaries, Co. operates in three segments: Healthcare Services, which is the inpatient and outpatient medical services delivered by the referral hospitals, community hospitals and polyclinics owned by Co. throughout Georgia; Medical Insurance, which comprises medical insurance products, including personal accident insurance, term life insurance products bundled with medical insurance and travel insurance policies, which are provided by Co.'s wholly owned subsidiary Imedi L; and Pharma, which comprises a range of medicines and para-pharmacy products which are provided through a chain of pharmacies by Co.'s subsidiary JSC GEPHA.
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