London, UK, 26 May 2023

Edison issues update on Georgia Capital (GCAP)

Georgia Capital (GCAP) continued to make progress on its strategic priorities in Q123: reduction in the net capital commitment (NCC) ratio, deleveraging its portfolio companies, selling subscale businesses, executing tactical buybacks (a US$10m programme was announced in April 2023), further investments in the renewable energy and education businesses and moving to the LSE standard listing. GCAP operates against the backdrop of strong GDP growth in Georgia at 7.2% y-o-y in Q123 (after 10.1% in 2022), where inflation seems largely contained, with headline and core inflation rates of 2.7% and 4.7% in April 2023, respectively. GCAP's share price has been rising but is yet to catch up with the growing NAV and implies a 64% discount to the 'live' NAV estimate.

GCAP's Q123 NCC ratio was down by 1.4pp to 19.7% at end-March 2023 (vs an over-the-cycle target of c 15%) on the back of a 7.8% increase in portfolio value and broadly stable NCC. After accounting for post-period end developments to 5 May (BoG dividend and share price increase, further GCAP buybacks and FX), the NCC ratio stood at 19.1%. We note that GCAP currently holds US$79m of its US$300m Eurobonds (maturing in Q124) after buying US$28m ytd. In Q123, it sold two operational hotels and a vacant land plot in Tbilisi (in line with its strategy of selling down subscale businesses) for US$28m, which was used in full to deleverage the hospitality business. This helped reduce net debt to EBITDA across its private businesses to 3.0x at end-March 2023 from 3.3x at end-2022. GCAP also agreed to sell a hotel under construction in April 2023 for US$8.4m.

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