FTSE 250 incumbent TBC Bank (LSE: TBCG) has been on a great run recently and flying under the radar a bit, if you ask me.
Have I missed a prime opportunity to buy cheap shares or is there still a way to join the parade with a view to returns and growth? Let’s dig deeper!
Banking in Georgia
TBC is a banking business with roots stretching back to the early 90s. It provides banking services to retail, corporate, and small and mid-sized enterprises in Georgia, and has a presence in Uzbekistan too.
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Over a 12-month period, the shares are up 24%, from 2,435p at this time last year to current levels of 3,020p.
I was a bit surprised by this rise. This is especially the case considering most financial services stocks have struggled due to volatility in recent months.
Excellent fundamentals and prospects
So what’s caused the shares to spike? Well, a burgeoning and rapidly expanding economy in Georgia has contributed to this, in my view. It looks like global volatility isn’t hurting TBC Bank, at least not at the level compared to larger, more developed economies such as the UK and US.
In December 2023, The World Bank reported that the Georgian economy is growing at a rate of 8.3%, which is impressive. A lot of this has been driven by construction and manufacturing sectors in the European country. This is good news for TBC Bank. It can help by providing its services including loans, and in turn, grow its performance and returns.
Next, Fitch, known as one of global leaders in ratings, upgraded TBC’s credit rating last year from ‘BB-‘ to ‘BB.’ In simpler terms, this means it can get better rates on its own credit, which could help drive performance and investor sentiment.
Moving on to returns, a dividend yield of 7.7% is seriously enticing and looks well covered at present. However, I’m conscious dividend are never guaranteed.
Finally, the shares trade on a price-to-earnings growth (PEG) ratio of just 0.4. A reading of under one can indicate the shares are undervalued.
Risks and my verdict
As with all investments, there are risks that could derail the business and TBC shares.
My first concern is continued and sustained economic growth, which is never guaranteed. Plus, Georgia is classed as a middle income country. It has less economic room to manoeuvre and flexibility compared to higher GDP nations.
Next, geopolitical issues could derail Georgia, its economy, and TBC Bank’s performance and returns. It shares a border with Russia, and has previously been involved in conflict with the superpower, as recently as 2008. Furthermore, recent conflicts in the area may spill over into other territories. This could have a damaging impact on performance and investor sentiment in the region.
Weighing up the pros and cons, I think there’s still an opportunity to buy shares with an enticing valuation. This is despite TBC’s recent excellent share price rise recently, and potential risks mentioned.
With great growth potential, and a good passive income opportunity at present, I’d be willing to buy some shares when I next have some cash to invest.
