FTSE 250 incumbent TBC Bank (LSE: TBCG) looks like a no-brainer buy to me on the surface of things.
However, fundamentals and accessible information we have about investments are only the tip of the iceberg.
Let me explain why I’m tempted to buy some shares — but also dissect a credible threat towards the business.
Too good to be true?
TBC is a UK-based banking business with a focus on operations in Georgia. It also possesses a presence in Uzbekistan. It provides a number of services including its most lucrative channel, retail banking.
I can see that the shares have been on a fantastic run in recent years. This is due to great growth in the region, as well as stellar performance.
TBC Bank shares have risen nearly 40% over a five year period, from 1,696p at this time five years ago, to current levels of 2,370p. Over a 12-month period, they’re down 6% from 2,545p at this point last year, to current levels.
A 31% drop from the beginning of May from 3,465p to current levels is a cause for concern for me.
Political issues
As an investor, political issues that directly impact my investments make me uncomfortable. The issue in Georgia at present is that general elections have begun, and there are some potentially huge ramifications.
To keep it simple, two rival parties are at loggerheads over the future geopolitical direction of the European nation.
On one hand, one party would like to be closer to Putin’s Russia. On the other hand, their rivals would like to be closer to the West. Without getting bogged down by the obvious issues on each side, the country has seen protests, markets react, and general unease about the whole situation.
I’m quite concerned as to how the election outcome could impact the stock, and future prospects for me if I were to buy some shares.
Bull case and what I’m doing now
Before the recent issues, Georgia has been earmarked as a region with exciting economic growth potential. I reckon this has been reflected in how well TBC has done in recent years.
Looking at TBC, this strong growth has led to a hike in profits, a growing loan book, and increased net interest income.
From a fundamental view, a dividend yield of close to 7% – albeit pushed up by a falling share price – looks tempting. Plus, it’s covered by more than 2x earnings. However, it’s important to remember that dividends are never guaranteed.
Plus, the shares look dirt-cheap to me right now on a price-to-earnings ratio of just 4.
Despite a good track record, and enticing fundamentals, I’m going to sit on the sidelines right now. Getting into the game and buying shares right now is too risky for my appetite. However, there’s still a part of me very interested in the shares that will be keeping an eye on developments.
