Georgia Capital PLC (CGEO) Earnings Call Transcript & Summary

Hi, everybody. Welcome to Georgia Capital Q1 2021 Earnings Call. It's our pleasure to host you today. Let me give a brief overview about today's topics. I'll talk about the COVID situation, as always, macro. I will talk about operating performance of our portfolio companies. And then Giorgi will talk about -- our CFO will talk about the valuations of our portfolio companies. And in the end, I will do the wrap up. So let me give you statistics. Giorgi, if you can go to Slide 3, please. Statistics on our COVID situation. From our peak, we are down now, and it is -- good news is that the daily cases came down from high 6,000 to around 1,000 and 1,500. Also, good news is that curfew what we had at starting at -- between 5:00 p.m. and 5:00 a.m. was moved to 11 p.m. And also on the weekends, government allowed restaurants to be open. This is obviously very helpful for the tourist inflows, and we see some tourist pickups in April and May, and this easing of the curfew will help this pickup obviously. In terms of vaccination, vaccination is not going fast. Reason is that at the very beginning of the vaccination program, we had unfortunate days, and people got scared and didn't start taking up the vaccines. But now we have -- demand has grown significantly from 1,000 vaccination per day, we moved to 5,000 recently. And now we have overwhelming demand for vaccines, and we hope that the government will bring more to continue the vaccination. Actually, we are very pleased with take up, which was recently happened by the population. And we hope that vaccination program will go smoothly and around 4 million doses will be administered by the end of Q3, Q4, basically. Let's talk about the macro, and let's move on the next slide on Slide 4. Macro looks increasingly strong. Looking at remittances, we had a big pickup in remittances, 145% increase in April, 50% increase in March. So we had a very strong -- nearly $200 million monthly inflows of remittances, which is a record high in seasonally adjusted, it's record for sure. In terms of the real GDP growth, real GDP picked up in March from negative January, February of minus 11%, minus 5%, we had a 4% increase. VAT turnover also went up sharply up 22%. So we are seeing increased revenues and pickup in macro activity. Also, you see the exports growing 70% year-over-year in April. March was around 30%. Imports are also picking up at 57% growth year-over-year. Tourist revenues new were down nearly minus 95% plus in the recent months. March was minus 60%. And we hope for better numbers April and May as we see more tourists on the streets, which is a little bit surprising, but I guess that our neighbors are getting vaccinated and they are more willing to travel. To go on next slide, on Slide 5, we have a very nice pickup in the official reserves. It's highest ever at $4 billion. So the firepower of the National Bank is very strong. It is up 20% year-over-year. And as you see that lari is really significantly oversold on the real effective exchange rate. You see that it's way below the trend line. And we expect this to be adjusted as tourists picks up before National Bank and government are actually -- before the tourists pick up, NBG and the government are pretty conservative on how they are managing the finances basically. Now let me talk about -- that's kind of a brief overview on macro. Now let me talk about GCAP's Q1 results, and I'll start with our Eurobond tap, which we did recently. On Slide 7, you see we issued a tap of $65 million, of which basically $35 million is to be allocated for portfolio companies and $30 million is for general corporate purposes. It's -- we are pleased that there was quite good demand for the tap and we printed at par. So we have -- as a result, we have very strong liquidity, GEL 470 million of liquidity, which is up 64% year-over-year in Q1. So we are very well geared toward to tap some opportunities, especially in education and energy sectors, which as we said that's the sectors where we'll be allocating the capital going forward. In -- on Slide 8, you see the aggregate revenue of our portfolio -- private portfolio companies, which is up year-over-year, it's up 30% to GEL 426 million, and the last 12 months is up 4% at GEL 1.6 billion. So we had a strong turnaround. As you know, the Q1 last year, mostly, it was kind of free. It was not -- we didn't have a lockdown in Q1. So we are up 8% year-over-year in revenue in Q1. Actually, the April started very strong. So we expect a very strong Q2. And I'll talk about that later on, I'll give you some outlook, and we'll talk about that April, May numbers, basically, which are developing very nicely. On Page -- on Slide 9, you see a resilient performance of our health care sector, health care asset. It has grown -- revenue has grown around 20% year-over-year and -- 23% year-over-year. And even compared to Q1 2019, it has grown 20% plus. So we are very pleased with the performance. This is due to increased activity of our clinics as well as hospitals and largely the economies opened up for the health care business basically. In the last 12 months, we had a 4% growth -- nearly 4% growth in revenue. In our pharmacy business, we had a slight decline in revenue year-over-year of minus 0.7%. And this is due to the very high base in Q1 2020. As you know, March started with the outbreak. So people started to buy up a lot of drugs for the -- in lieu of the COVID outbreak. Year-over-year, we had nearly 20% growth. Actually, compared to Q1 2019, we had around 20% growth in revenue. In the last 12 months, our growth in pharmacy business was 5% plus. Now moving on Slide 10. The revenue of our water business has grown 22% year-over-year when compared to Q1 2019,down 15%. As you know, we had a tariff revision, and this growth is due to the tariff revision as well as pickup -- some energy sales has been picked up. The last 12 months, we still have a decline because of the last -- due to the fact of the -- in previous quarters, we had less sale in water -- sorry, less sale in energy side of the business. In terms of the insurance, gross written premiums went up nearly 20% year-over-year compared to Q1 2019, which were down around 4%. And we had a nearly 11% increase year-over-year in gross premium returns for our P&C business, and medical insurance is also -- is performing also well, around 20% up year-over-year in medical insurance premiums. Looking at the energy business stand-alone, last 12 months, we had an 86% growth over -- year-over-year, and it's largely flat in Q1. The revenues for energy business and education last 12 months is around 35% growth year-over-year. And in Q1, we had a slight decline. This is due to the number of days, which were holidays was much greater in Q1 2021, basically. To move on the aggregate EBITDA for our operating companies, it's up 25% in Q1. Year-over-year, it's up nearly 46% compared to Q1 2019. And our EBITDA in the last 12 months is up 6% plus for our aggregate -- for our portfolio companies. Operating cash was down in Q1, and the result was mainly due to the increase in revenues and working capital use of the cash. And we will -- last year, we had a cash preservation strategy. This year, actually, we are moving -- shifting away from that, and we are more focusing on growth of the EBITDA and deploying the cash to secure the network -- to secure the working capital to grow our revenues and EBITDA. Aggregate operating cash flow still up year-over-year around 12%. And our cash balance is around -- of our portfolio companies is GEL 350 million. The liquidity at GCAP level, as I mentioned previously, is around GEL 470 million. It is -- so we are -- we sit on a nice pile of cash to tap the opportunities. On Slide 15, we see the NAV development -- NAV per share development, and you see that NAV per share was down 2.7% in Q1, and this is due to -- it was GEL 46.8 per share, NAV per share. This is mainly due to the fact that the Bank of Georgia share price declined in Q1, that's one; and second one, we had some devalue, weakness of Lari, which led to increase in net debt. And that's caused the -- these 2 factors mainly caused the decrease in NAV per share. Our controllable NAV was down at 1.6%, and this is -- what we call, the controllable NAV, it's our private portfolio companies, decline was mainly due to the interest expense, OpEx and the FX decline basically, which was more greater than the value creation on the private portfolio companies in Q1. On Slide 16, you see the NAV per share movement in Q1. And here it's very clear and you can see what caused the NAV to decline, around GEL 0.58 was due to BoG share price and GEL 1.33 was due to the FX basically and the liquidity management. You see that large portfolio companies, investment stage portfolio companies and other portfolio companies were positive. There were some small buybacks, which we did that also contributed positively to the NAV per share development. Let me stop here and ask Giorgi to talk about the valuations in our portfolio that will shed more light on NAV development basically. Giorgi?

Thank you, Irakli, and hello, everyone. Over the next few slides, I will walk you through our first quarter valuations as reflected on our NAV statement. Just as a reminder, as you know, every 6 months, semiannually, we use a third-party, Duff & Phelps, who does the valuations, that happens at year-end and half year. For the first quarter and for the third quarter, we perform these valuations internally within the Georgia Capital team. So starting with the overall portfolio movement, you will see on Slide 18 that our portfolio movement in the first quarter was around GEL 14 million. And then the major drivers were Bank of Georgia, where the reduction was about GEL 26 million in our 19.9% shareholding. That was because the Bank of Georgia's share price declined during the quarter by about 10%. We had a GEL 12 million value growth in our large portfolio companies, GEL 7 million in the investment stage companies and GEL 21 million in other portfolio companies. So overall, the portfolio value was over GEL 2.9 billion. On the next slide, we see the valuation metrics for our portfolio companies as well as the portfolio breakdown in terms of the different types of the assets. So listed shares, or Bank of Georgia, continues to make about 17% of the overall portfolio, 64% is our large portfolio companies. And in aggregate, large investment and other companies, which are our private portfolio companies, make up about 83% of the overall portfolio. In terms of the valuations, you can see here on this slide, and the methods remain the same. The work that we did, as a Georgia Capital team, was largely concentrated in the first quarter on looking at updating the DCF models that were deployed by the third-party at the end of the 2020. We performed similar work as what they did. And we also concentrated on updating forecast based on the actual performance in the first quarter by our large portfolio companies. No major changes were -- or no material changes in terms of the multiples, besides health care services, where the EBITDA multiple that was used in the valuations declined actually from at 13.2x to 12.5x in the first quarter. Other multiples changed slightly, which we'll walk through on the following slides, but no material changes were observed. We will start with the health care services valuation. So here, you'll see that the enterprise value increased by GEL 62 million, notwithstanding 2 things; one that the multiple declined to 12.5x; and the second that we continue to use the last 12 months earnings for the purposes of the valuation that have been impacted in the second quarter last year, as you know, due to the COVID-related restrictions. So -- but the outstanding performance in the first quarter EBITDA when the first quarter EBITDA grew by about 55%. We saw that the LTM EBITDA improved significantly from GEL 64 million at the end of last year to GEL 72 million in March, and that led to the GEL 62 million increase in the enterprise value. When we look at the net debt, net debt widened by about 12% or GEL 27 million. Minority interest increased by GEL 4 million. And as a result, we have GEL 605 million equity value attributable to Georgia Capital, which was up by about 6% versus last year. So health care services, as you saw on the previous slide, is currently in our private portfolio. It's the largest asset. Then when we -- if we move to the retail pharmacy business, so a similar valuation was performed here in the retail pharmacy business. We have a decline in the enterprise value by GEL 3 million, as you can see here, which was largely driven by the reduction in the LTM EBITDA during the first quarter that reduced by GEL 5 million on the LTM basis. We have a slight increase in the implied enterprise value multiple from 9.1x to 9.5x. The net debt widened by 8% during the quarter. And the minority interest increased slightly by 2.3% to GEL 156 million. So in aggregate, the equity value attributable to Georgia Capital, as you know, we own 67% of this business, decreased by 3% or GEL 17 million during the quarter. Next, we have the health care services business, so -- sorry, medical insurance business. So within the medical insurance business, the enterprise value increased by GEL 3 million, largely driven by the increase in the LTM net income, which was up by GEL 600,000 during the quarter on the LTM basis. And then the P/E multiple declined from 10.1x to 9.8x. So as a result of these developments, the equity value was up by almost GEL 4 million to GEL 68 million. Then we have P&C insurance business. In the P&C insurance business, we have the growth in the LTM net income that was up by GEL 800,000, which was largely driven by the strong first quarter performance when the net income was up on a quarterly net income on a year-over-year basis was up by 27%. That led to the operating performance increase by GEL 10 million. We have decreased due to the multiple that reduced from 11.6x to 11.4x. And as a result, we ended the first quarter with the equity value of GEL 205 million. Next, we have the water utility business. And so on the water utility, as you know, the new tariffs kicked in from January 1, 2021. That led to about 22% revenue growth in the first quarter. We -- the LTM EBITDA that we use for the valuation here remains the same because this is the adjusted number as you may recall from the full year. So the adjusted EBITDA number didn't change. What happened was the multiple increased slightly from 9.4x to 9.6x. So we have a GEL 17 million increase in enterprise value and then we have a widening of the net debt by about 7% that was largely driven by the large depreciation against dollar because of the U.S.-denominated bond that has been issued and is allocated to this business. So as a result, we have an equity value that reduced by GEL 14 million during the quarter. Next, we have the renewable energy business. So in renewable energy business, we deployed some of the parts valuation where we value the existing operating assets separately, and we value the new investments separately, most of which are actually carried at investment cost. So in this business, the increase in the enterprise value GEL 19 million was largely driven by the operating performance, where EBITDA was up by GEL 700,000. And we had net debt widening due to the same reasons as in water utility where the FX and lari's depreciation had an impact on net debt. So that was up by 8%. And we ended up with the equity value of GEL 207 million, which is broken out here, GEL 164 million relates to operational assets and GEL 43 million relates to the pipeline projects. Next, we have the education business. So in education business, we continue to deploy the EV/EBITDA approach for the valuation. The enterprise value had a small impact in increased share. It increased by GEL 4 million to GEL 123 million. During the quarter, we made about GEL 7 million investments, which was used to acquire a land and the building for the development of the new campus for the green school, which is expected to be launched September this year. So that also increased our equity value in this business. And overall, if we look at the developments, net debt was up by 2.4%, minority interest changed by 3%. And overall, our equity value was GEL 103 million. It was up by GEL 10 million during the quarter. So next, I'll talk about the leverage and the liquidity profile at Georgia capital level. So we had a pretty strong liquidity at the end of the first quarter. We hold $137 million of liquid funds, where about $100 million are pure cash and highly marketable liquid debt securities that trade on the international markets. And we have $38 million of loans that are issued to our portfolio companies. Our market value leverage widened by about 2% during the quarter from close to 29% to about 31%. That was largely driven by the lari's depreciation against U.S. dollar. But we do expect that the market value leverage will come down within our targeted 30% over the coming quarters. Our dividend income outlook continues to be the same for the year. We still expect to receive GEL 60 million to GEL 70 million dividends from our private investments. And in the first quarter, in fact, we received about GEL 5 million worth of dividends from our renewable business. I think last -- I mean, in terms of the valuations, as the second quarter numbers kick in when last year, the second quarter was almost on full lockdown, we expect the positive impact on valuations as the second quarter earnings get replaced from 2020 with the second quarter 2021 earnings. With that, back to you, Irakli.

Thank you, Giorgi. Thanks. Let me summarize now what we talked about, our main points basically is that we have very strong operating performance of our portfolio companies, and we had a strong EBITDA growth Q-over-Q, around 25%, and revenues was up around 8%. Liquidity of GCAP is very strong, up nearly 65%. And due to the tap of the bond, it stands at GEL 470 million, a decline of -- 2.7% decline in NAV in Q1 was due to the BoG share price decreased by nearly 10% and lari devaluation by 4%. In terms of the outlook, we continue to focus -- we will be focusing on revenue growth and EBITDA growth rather than the cash preservation strategy what we had last year as we see the growth opportunities in Georgia. April actually played out well when we had considerably eased the lockdown. We saw the 62% increase in revenue and 160% increase in EBITDA. I don't want to wrongly guide you for Q2, but in terms of -- probably we won't have 160% increase in EBITDA in Q2, but we may have close to triple-digit EBITDA growth in Q2 -- income in Q2. Now in terms of the vaccination, the government is very active and people have stepped up. Also the population steps up, and we hope that -- to see the progress on that front. And opening up the economy played out -- will play out a good role -- positive role in terms of the tourists coming into the country and opening the restaurants and other public places on the weekends and probably their opening till 11 p.m. will play a positive role. With this one, I would like to end our presentation and move on the Q&A session. I have -- Giorgi and I, we have here -- we are here plus we have Nick Gamkrelidze, CEO of our Georgia Healthcare Group. So if we have a question on GHG, please ask Nick. He is deeply knowledgeable in this business. So we asked Nick to be here. I guess we would prefer you instead of typing the questions, just raising your hand and asking we are -- at the bottom of the audio call. Thank you for listening, and let's hear the questions.

So we have 1 question. Do we plan to keep the PTI business or sell it? Actually, that's kind of question that 2 years down the road, as you see that most of our other businesses, we want to sell down next 2 to 3 years. However, auto business, which is auto service and PTI, which is part of our auto service business basically are progressing enough to grow at GEL 0.5 billion equity value, that's our target recently what we said in our strategy to target the GEL 0.5 billion asset value. And we think that auto services sector is well placed to be that big in terms of valuation. So we will observe next 2 to 3 years the performance of the management. And if we see that management is performing well, we may step up investment and grow the business or if we do -- are not happy with that, then we will probably sell it. So PTI business right now is not a top priority for us, for sure.

We have another question from Toby Baxendale.

So the question is that what we want to do with the float of our insurance business. Do we want to be more proactive or just buy bonds? At this stage, we want to be boring, and we just want to buy bonds. Let's see how it's developed. The float itself is not very big unfortunately. Hopefully, it will get bigger, and we can be more creative with that.

We have another question coming from Metin.

I have a very quick question on the health care side. Do you expect any kind of government support for your efforts against -- fight against COVID going forward in the health care side?

I'll let Nick to address that one. Nick, can you?

Metin, so what we have currently, our hospitals and clinics, which are engaged in the COVID fight, they are paid on kind of -- we are kind of a pro-bed -- per bed plus case reimbursement. That's what we have agreement with the government since the last year, and this agreement is still ongoing. So the one thing which was there the government has resumed also is the planned treatments. And that's pretty much it. We don't expect any significant changes this year, at least from the government in this regard.

Okay. What about the vaccination? Do you see any cross-sell opportunity while you are doing these vaccinations?

With -- that's what we are doing basically as the vaccination rollout was kind of rocky, as Irakli has mentioned, at the beginning, but now it's picking up. Around 40% of vaccinations currently is ongoing in our sites, is at our clinics or our hospitals. Government is also considering to expand it to the big conventional centers where it will be outsourced to the companies like us. Obviously, when the client is coming in, so we are kind of upselling some other services. Pre-vaccination and post-vaccination, sometimes this kind of analysis and lab tests are not very much needed, but people for the peace of their minds are buying it. So it's a good opportunity for us.

We have another question coming from Milosz.

Firstly, I just wonder, I mean, given the decline in COVID cases in the present, Q4, what's -- do you have any visibility in terms of some of the beds you currently have earmarked for COVID patients being released for your regular business? And my second question would be, can you give us any update on the process of loan restructuring of your hospitality business?

Nick, please go ahead with this.

I mean, it's a kind of a business as usual process for us kind of. Initially, what we had, so government has kind of booked some beds for us. Then when the cases started to kind of decrease, we turned into the hybrid mode just to kind of bring the regular patients to the hospitals. That's where we are in now. If the cases will go down further, we are kind of giving 1-month notice either from our side or from the government side that we don't need these beds in the next months. And that's what we have. So we are gradually releasing the COVID beds. I mean, 6 months ago, we had almost 1,500 beds engaged. Now we have, as we speak now, it's around 900 or so. And we are gradually releasing as the cases are going down and basically, gradually also filling up these beds with the regular patients.

On hospitality, can you please repeat the question, please?

Yes, sure. Because I understand that at least some time ago, you had some of the loans in the process of restructuring, right? So you were in negotiations with banks to restructure the loans to postpone the payment until the hotels are reopened, right? So I just wonder if you have any update on this?

Yes. I mean, we did successfully restructure all the loans. And basically, we are in standby mode on opening the hotels. I won't exclude that some of the hotels may open in next month or 3 months depending on the development of tourists. Yes, we are actually seeing tourists in different cities of Georgia, which please us a lot. So but the restructurings are done very successfully. So we are in a good place.

We have another question.

This is Dave Shapiro. Just a quick question -- or 2 quick questions. One, on the liquidity from the capital raise, are you keeping the available liquidity primarily in U.S. dollars to match the debt? It's my first question.

Yes, we are.

Okay. And then next question. Can you please talk about the large buckets of restructurings? You just referred to them a little bit basically. Can you talk about a bit more specifically on which business units are -- need to undergo significant debt restructurings at this point? And how the negotiations are progressing?

As I said, it's mainly hospitality. Again, go -- I don't have here, like $2 million, $3 million, what was restructured, but have been successfully restructured. I mean banks are waiting for the pickup of the tourists, and it's been a very constructive work for banks to restructure it. And so -- I mean, we are not complaining, to be honest. And at the same time, the rest of the businesses are doing well, and cash flows are increasing, EBITDAs are increasing. So net leverage is actually decreasing on operating level companies, so...

Okay. And then another follow-up, if you don't mind. Regarding the, I guess, overall firm level restructuring strategy. Obviously, you're still focused on your 2 core investment units, as you mentioned. Is it still management's opinion of wanting to try to narrow the portfolio scope at this point? And then especially is it still management's intent to test the market for one of the larger assets that may not meet your criteria of where -- of how you want to invest for the longer term?

Sure. So let me reiterate the strategy, which we have announced last year in November on our Investor Day that we'll be focusing on large opportunities, GEL 0.5 billion plus in equity value because we think that it attracts the international strategic buyers to these assets. And we will be focusing on investing only on large opportunities. Right now, we have identified 2; renewable energy and education. The rest of the portfolio companies who are classified basically other or basically for sale over the next 2 to 3 years. So nothing has changed there. We will be -- if you see the capital allocation, it will be happening on energy business and education business. Primarily and obviously, our large portfolio companies, if we see opportunity to bolt-ons, we will be funding those if need be. So no changes to our strategy of focusing on large opportunities and divesting for the subscale businesses, so that's...

And then do you still plan on trying to test the market, meaning sell one of your existing larger assets? Or has that been sort of tabled now with the bond raise and increased liquidity? Are you still very interested in testing the market assuming the values are robust?

No, I mean we were not planning to sell our liquidity. We were planning to put the value on our portfolio companies. As you know, we are trading at a significant discount to our NAV. And this exercise still continues. I mean we are planning to realize the value of one large asset. And we will do so in the time frame we have indicated in November last year. And hopefully, we will realize at attractive valuation so that investors will see the value of our portfolio company is more clear basically.

We have another question from Brad.

So inferring from what you're saying, it seems like the share buybacks wouldn't be a priority until after you make a large asset sale. Is that correct?

Yes. Most likely, yes, but I won't exclude the other avenues, but most likely, yes. I mean that's where we will be heading.

And have you changed at all your CapEx plans for the year in terms of how much you want to spend on energy and education?

No. I mean it's same. I mean we are -- we have the projects, which we are doing in contractual with new schools and development of our wind project on the energy side. If we will have some opportunities in the schools to do a bolt-on, operating schools, obviously, it's part of our strategy, and we will be deploying the cash to tap these opportunities. So I think that market is opening up for the -- for more business as we see the Georgia opening up.

And how much -- what will your interest expense be now that you -- with the additional capital raise, your sort of yearly interest expense?

Giorgi?

Yes, it will be about $22 million, Brad?

U.S. dollars?

Yes.

And what will the offsetting interest income be?

It will depend how we place this account. As you know, in current environment, the yields are pretty low. So I think it will depend, but at least $100 million that we have right now in cash and deposits, you can assume that we'll make between 2% to 3% on that.

And you have interest income coming from your portfolio companies, too?

That's the loans, yes. So that's the $38 million loans that we have issued to portfolio companies, yes. But the interest there is higher.

So dividends are mainly offsetting that interest expense plus some of the interest income from the loans and the liquid portfolio what we have.

Our target, Brad, is to have a 2x coverage, interest expense coverage.

Thank you. We don't have any open questions for now.

Let's wait for a couple of seconds, maybe we'll have more. Seems like no more questions. Thank you for your...

We got 2 more, I think.

Very good. Okay.

I'm from the United Kingdom. I'm just a recent investor to your company. I don't know whether this is general observation or if this is any help to you, but I'll give it to you anyway. For your pharmacy business, I would -- what we're seeing here is we're seeing here that post-COVID, I detect that there will be an ongoing testing regime in place for flu, influenza and COVID, certainly in the schools, if not in the workplaces. It seems to be that this is going to stick for the foreseeable future after COVID has gone from our shores. So I would have thought it might be an entrepreneurial opportunity if you feel Georgia might go the same way of making sure you're all equipped in your pharmacies and hospitals to do regular testing. It's just an observation. It's nothing to do with your...

We are just launching 20 -- at one go, 20 small health hubs within the pharmacies, just for testing purposes plus also some diagnostic tests. So I totally agree with you that, that will be trending for a while in the...

I feel it is. And I also feel that the tests to go for are the ones that can distinguish between COVID and influenza and common cold.

Yes. We actually have -- those tests, we are selling in the pharmacy. So I absolutely agree, it could be a new opportunity. Testing will be the kind of new norm.

Yes, new norm, yes.

Metin, you can ask a question.

So just 1 quick follow-up on the noncore assets that you mentioned you look to sell over the next 2 to 3 years. What's the environment like in terms of being able to sell those assets? Are you having proper conversations around that? Or is that still some time away getting away -- first getting through first to COVID. Just trying to get a sense of how easy it will be to sell those noncore assets?

Basically, we are having proper conversations on a number of assets actually. So I'm not saying it's going to be very easy, but it's not going to be -- it's nothing impossible. We obviously want to maximize the value, and we are trying to record the higher value creation. You see that actually, the other portfolio companies have been performing well, and they've been generating the good cash flows and good revenues, et cetera. So it's a very well-run and managed company. So we expect to get a good value for -- out of that. So yes, it's not -- let's put it that way. It's not a slam dunk. It's not easy kind of thing to realize the value of that, but it's not something unbelievable or something which is not happening as we speak. People are having a genuine interest. And actually, when we announced that strategy, we had a number of investors from the region and within the country actually talking on our doors.

You can ask the question.

Sorry, my question has been answered.

We have another question in the Q&A. The question is what are your priorities in terms of capital deployment at this point, share buyback, bolt-ons, bigger M&A, CapEx?

I mean if we look at the kind of large scale, it's probably the -- share buybacks would be the most biggest priority. As soon as we would get kind of a NAV discount fixed, bolt-ons would be the next priority, for sure. Bigger M&As will not be a priority in other sectors other than where we are. Actually, big M&As probably will be lesser priority even within our kind of portfolio companies, depending on opportunity, but we do not want to venture the new sectors at this moment because our hands are full. And in terms of the CapEx, basically, we have -- for our large portfolio companies, that's not a big CapEx program, we don't have there. Larger CapEx programs are within the energy sector and the education sector, and that will be kind of deploying as we go. So I hope that answers your question. Okay. Are there any more questions?

We probably have a question. Toby, you can...

Sorry, Irakli to take up the airwaves here, but do I understand, in the ideal world, and I know, of course, nothing is certain, et cetera, you would do share buybacks, then bolt-ons, then sell one of the core businesses? Or have I misunderstood what you've been saying?

No. It was about capital deployment. In terms of the kind of divestment, the sale of our large portfolio business is probably the number one priority, if you look at kind of the capital allocation.

Okay. And then it follows raising NAV, share buybacks and then bolt-on acquisitions?

Exactly, yes. So that -- the priorities would be that sale of one of the large businesses to fix the -- or try to fix the NAV discount, do some buybacks to help the NAV discount to be fixed and then basically do some bolt-ons and grow the business as we go. That would be kind of a priority.

Yes. And the time line, I mean I don't know if you can ever be very specific, but it's still within 18 months is it or...

Sure. That's kind of our target. 18, 24 months, we said in November 2020. So basically, it's not a moving target. So we are -- we want to play within that target, basically.

And just with regard to share buybacks, do you have the constitutional mechanisms to do that within your incorporation documents?

Yes, we do.

Yes. And is it set to any specific limit because sometimes they say, you can buy up to 5% or...

It is, I think, 10%. Giorgi?

Yes, it is 15%, so it's, 1-5, for the on market buybacks, if you buy on the market. And then on -- I mean you can do the tender offers as well separately, but 15% applies to the on market purchases.

And you're trading at about 70% to book value. Is that correct, 70% to NAV?

No, it's 65%.

Yes, discount is 36%.

Okay. Right. So there's a lot to do.

It is, yes. It is very boring.

There's another question in the Q&A. In your opinion, why do you think there is a big discount to NAV?

I mean I don't know. I don't think that I'm a big expert in that, but I guess that I guess people do not believe in NAV what we have, right? So otherwise, why would there be a discount. So I think that one of our job is to fix it by realizing the value at NAV plus, hopefully, of our portfolio companies, and that would give us probably more confidence to the investors. And we -- that's kind of our very simple approach. Maybe there are a lot of complicated stuff, liquidity, I don't know, a lot of stuff. But I think that primary one is the value we need to demonstrate to our investors. And to be fair to our investors, we have not had much of the exits in our short history. So we are still young. We need to go through the cycle, complete the cycle of buying, growing, developing and exiting basically.

Thank you. There are no open questions for now.

Thank you, everybody, for attending our Q1. Well, I think we have another one, no? We don't have. Thank you. We appreciate your engagement, your time. And please stay tuned. We are looking at good activities in Q2, and we hope we're going to again come again with stronger numbers for our private operating companies in Q2 and beyond. So very much looking forward to our first half results announcements, which will be somewhere in August this year. Thank you, and goodbye.