10 November 2014
Daily Bulletin
IN TODAY’S DAILY BIST 7/11/14 PERFORMANCE (TRY)
Turkstat will announce September industrial production figures Indices Close (TL) Daily YTD Akcansa announced TRY67mn net profit for 3Q14, fully in line with the estimates BIST-100 77,958 0.6% 15.0% Akenerji announced a net loss of TRY132mn in 3Q14, worse than the CNBC-e BIST-30 95,614 0.9% 16.0% consensus estimate of a TL99mn net loss BIST-30 Futures 96.675 0.3% Albaraka Turk posted a net Q3 net profit of TRY65mn, in line with consensus Anadolu Cam announced TRY8mn net profit in 3Q14, in line with the consensus EQUITY MARKET DATA estimate of TRY4mn yet better than our estimate for a TR11mn loss BIST Total MCap (TRYmn) 567,550 Aksa posted 3Q14 net profit of TRY34mn lower than our estimate of TRY44mn Banks MCAP (TRYmn) 165,511 Aygaz posted Q3 net profit of TRY68mn, above consensus estimate of TRY53mn BIST Volume (TRYmn -3m avg) 3,665 Bim posted TRY115mn net profit for 3Q14, parallel to the consensus estimate BIST Aggregate Free Float 29.7% Enka posted TL320mn net profit in 3Q14, below consensus estimate of TL363mn Hurriyet announced net loss of TRY16mn in 3Q14 lower than house and MONEY MARKET consensus estimates FX RATES (CBT Bid) 7/11/14 Daily YTD Kardemir announced 3Q14 net profit of TRY40mn lower than house and US$/TRY 2.2707 1.4% 6.6% €/TRY 2.8158 0.5% -4.0% consensus estimates 1W Repo Rate 8.25% Koc Holding announced Q3 net profit of TRY678mn better than consensus Sise Cam announced TL122mn net profit in its 3Q14 financials, below the 4.2 consensus estimate for TRY137mn and house call of TRY132mn net income BIST-100 Index (US¢) TAV Airports announced a net profit of EUR89mn in 3Q14, beating our own estimate of EUR83mn and the consensus estimate of EUR81mn 3.7 Trakya Cam posted a TRY48mn net profit in 3Q14, falling short of the TRY55mn consensus estimate but exceeding our own estimate of TRY40mn in net income.
New rules to ease fixed number portability – negative for Turk Telekom 3.2 Akfen, Alarko, Anel Elektrik, Aselsan, Banvit, Bank Asya and Pegasus Airlines, Royal Hali, Sabanci Holding, THY, Torunlar REIC to announce 3Q14 results today
MARKET SUMMARY 2.7
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Lower rates and plunging oil prices should continue to support the Turkish investment theme. The BIST-100 rebounded by 1% from an intra-day low of 77,183 (its lowest since October 21st) on Friday to close the day at 77,958. The index may BOND MARKET Comp. Ann. Yld. (TRY) Daily ∆ (bps) continue its consolidation effort and recovery attempt at the beginning of this week. Maturity 7/11/14
Q3 earnings releases will be completed today. So far, 26% of the companies that July 13, 2016* 8.60% 8.0 have released their results have beaten expectations at the bottom-line, while the February 14, 2018 8.61% 6.0 remainder were equally split between those falling short and those reporting results March 8, 2023 8.98% 10.0 which were “in-line” with expectations (those companies with a reported EPS within * Benchmark bond +/-5% of consensus estimates). Nonetheless, in terms of operational performance, 12.5% 32% of non-financials have beaten expectations, while only 14% fell short of Compounded Annual Yield (2-Year Benchmark Bond) estimates, with the remaining having results broadly in line with estimates. 11.5%
Brent crude recovered from a four-year low, gaining 53 cents to close at $83.39 a 10.5% barrel on Friday, but still down 28% from a mid-year peak of $115 a barrel. We suspect that Brent may head even further south from its four-year lows over the 9.5% coming weeks, as a production cut by OPEC in its November 27 meeting may be far 8.5% from taken for granted. In the meantime, the U.S. government’s oil and gas inventory data will be watched carefully on Wednesday as an interim driver. Falling 7.5% commodity prices are a blessing for Turkey, bringing necessary relief to its inflation 6.5% and external imbalances. Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14
In China, exports rose by more than estimated in October, while inflation data was mixed, as CPI stabilized but remained at a near five-year low, while PPI fell by a EUROBONDS Comp. Ann. Yld ($) Daily ∆ (bps) worse-than-expected 2.2% on year. Maturity 7/11/14 February 5, 2025 4.57% -1.8 The week ahead: What to watch… At home, we will have September industrial production data today and September current account figure on Thursday. The data March 17, 2036 5.31% -0.7 indicates that the economy is cooling and that more stimulus measures may be February 17, 2045 5.40% -1.0 needed. The September JOLTS report (Thursday), October retail sales and November consumer sentiment (Friday) are the main highlights of this week’s economic releases in the U.S. Across the pond, the flash estimate of EU and Euro Area Q3 GDP and October’s inflation for the Eurozone will be announced on Friday. It should be noted that if Germany cannot post the expected 0.1% GDP growth in Q3, it will have technically slipped into recession.
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EVENTS CALENDAR
Date Period Data Last Exp. 10 Nov Sep Industrial Production (Sa,YoY %) 5.2 13 Nov Sep CAD (US$bn) -2.8 17Nov Aug Unemployment (Sa, %) 10.4
MACRO AND POLITICAL NEWS
Turkstat will announce September industrial production figures. According to CNBC-e survey, market expects non- seasonal industrial production at 3.7% YoY versus our expectation of 2.5% YoY growth. If our expectation comes true, industrial production growth would be 2.9%, up from 2.6% YoY growth recorded in 2Q14 but down from 5.3% YoY growth in 1Q14. There is close relation between industrial production growth and gross domestic product growth. The GDP grew 4.7% YoY in 1Q14 and 2.1% YoY in 2Q14.
COMPANY AND SECTOR NEWS
Akcansa (AKCNS – NEUTRAL; rating: Outperform; 12M TP: 16.50) announced a net profit of TRY67mn in 3Q14, in line with our own estimate (TRY65mn) and the consensus estimate (TRY69mn). Akcansa posted a top line of TRY367mn in 3Q14, marking a 12% YoY increase, in parallel with our own TRY360mn estimate and the consensus estimate of TRY369mn. Domestic revenues were up by 20% YoY to TRY341mn in 3Q14 on the back of better sales volume and improved pricing environment (thanks to a boost in demand with the 3rd Bridge and big ticket infrastructure projects), as well as strong demand from urban transformation projects in the greater Istanbul region. On the other hand, export revenues tumbled by 28% YoY to TRY34mn in 3Q14 as Akcansa strategically diverted most of its production to the lucrative domestic market. EBITDA was up by 21% YoY in 3Q14 to reach TRY110mn, while the Company’s EBITDA margin climbed by 2.4 pp YoY from 27.6% in 3Q13 to 30.1% in 3Q14 (in line with our in-house call of 30%). The EBITDA margin was supported by a higher CUR, an increased share of local cement sales in the total (driven by the construction of the 3rd Bridge and urban transformation), a better pricing environment in the Marmara region and rising use of alternative fuels. Net-net; Akcansa maintained its outstanding operating performance in 3Q14 with solid domestic operations and we believe it will sustain this robust operational performance in 4Q14 as well. The initial market reaction to the 3Q14 results is expected to be neutral today. We have a 12-month TP of 16.50 for Akcansa and we maintain our “Outperform” rating.
Akenerji (AKENR – NEGATIVE; rating: Underperform; 12M TP: TRY1.20) announced a net loss of TRY132mn in 3Q14, worse than the CNBC-e consensus estimate of a TL99mn net loss but in line with our estimate of TRY137mn net loss. The company’s operating performance was in line with our estimates. Although its net financial expense exceeded our estimates, the bottom line was in line with our expectations, mainly on the back of the deferred tax gain of TRY32mn in 3Q14. The company shares have outperformed BIST 100 index by 13% in the last 3 months. In our view, the worse-than- expected bottom line could have a negative impact on the shares in the short term. We maintain our 2014 and 2015 EBITDA forecasts of TRY97mn and TRY315mn, respectively. However, we have raised our forecasts for financial expenses (to reflect the change in exchange rate projections) and therefore revise down our bottom line forecasts from a TRY197mn net loss to a TRY213mn net loss for 2014 and from a TRY9mn net profit to a TRY58mn net loss for 2015. We maintain our “Underperform” rating and 12-month target price of TRY1.20 per share.
Akfen Holding (AKFEN – NEUTRAL; rating: Outperform; 12M TP: TRY6.12) is scheduled to announce 3Q14 results today. We are expecting TRY20mn net loss compared to TRY23mn net loss in the CNBC-e consensus estimate.
Aksa (AKSA – NEGATIVE; rating: Neutral; 12M TP: TRY8.00) announced a net profit of TRY34mn down by 15% YoY and 10% QoQ. The 3Q14 net profit figure is lower than our estimate of TRY44mn. There is no consensus estimate. The deviation came entirely from below the operating line. Aksa recoreded TRY1mn net other income in 3Q14 compared to our estimate of TRY4mn and net financial expenses of TRY 10mn compared to our estimate of TRY1mn net financial income. Aksa recorded net FX losses higher than we had expected. Also, Aksa recorded 24% effective tax rate vs. our
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estimate of 20%. The EBITDA level is in line with our forecasts. We maintain our forecasts and valuation. 3Q14 revenues grew 15% YoY and 3% QoQ to TRY528mn slightly lower than our estimate of TRY574mn. The majority of sales are in US$. With TRY weakness in 3Q14 we were expecting a higher figure. 3Q14 EBITDA grew 1% YoY and 21% QoQ to TRY75mn and is in line with our estimate of TRY71mn. Lower ACN prices (thanks to lower oil prices) had a beneficial impact on costs. 3Q13 EBITDA margin contracted to 14.2% from 16.3% in 3Q13, but expanded from the 12.2% in 2Q14.
Alarko Holding (ALARK – NEUTRAL; rating: Outperform; 12M TP: TRY5.35) is scheduled to announce 3Q14 results today. We are expecting TRY29mn net profit compared to TRY30mn net profit in the CNBC-e consensus estimate.
Albaraka Turk (ALBRK TI – NEUTRAL; rating: Outperform; 12M target price: TRY1.90) recorded a net profit of TL65mn in 3Q14, up 15% QoQ and in line with our TL65mn estimate and the TL64mn consensus estimate. This brought the 9M14 net profit to TL183mn, up 20.4% YoY, with an RoE of 15.5% vs. 15.6% in 9M13. The 61bps QoQ erosion in the NIM during 3Q14 far exceeded our 20bps NIM erosion estimate and yet the 5.8% QoQ decline in net interest income in 3Q14 was offset by a lower-than-expected provisioning burden of just TL30.5mn (down 51% QoQ) vs. our estimate of TRY58mn. As such the bank’s overall gross CoR plummeted from 150bps in 2Q14 to 93bps in 3Q14. We have reservations regarding the sharp fall in the NIM. On the other hand, we welcome the bank’s strong loan growth and limited NPL inflows. We maintain our net profit forecasts of TRY250mn for 2014 and TRY285mn for 2015. Our target price for Albaraka Turk stands at TRY1.90 per share and we maintain our ‘Outperform’ rating for the stock.
Anadolu Cam (ANACM TI, SL.POSITIVE, rating: Neutral, 12M TP: TRY2.28) announced TRY8mn net profit in 3Q14, pretty much in line with the consensus estimate of TRY4mn yet better than our estimate for a TR11mn loss – the deviation fully stemmed from lower FX losses, TRY4mn deferred tax income and higher-than-expected minority interest. In brief, Anadolu Cam’s Q3 revenues were slightly lower than the consensus and house estimates (by 3%), however EBITDA was slightly better (TRY78mn actual vs. TRY73mn consensus and TRY76mn house calls). The Q3 EBITDA margin accordingly read a good 18.7% in Q3, above the 17.0% consensus and 17.8% house expectations. This realization points to c.2 pp increase both in YoY and QoQ terms and comes as a proof that the uptrend in profitability resumed after the short pause in Q2. Overall, Anadolu Cam’s slow top-line growth is disappointing (but is not a new development) whereas the uptrend in EBITDA margin is encouraging. We foresee a slight positive market reaction to the results, but for the investor sentiment to turn positive for the longer term, we think the company will have to find ways to generate higher revenues. We maintain our ‘Neutral’ rating on Anadolu Cam with a 12-mo. TP of TRY2.28.
Anel Elektrik (ANELE – NEUTRAL; rating: Outperform; 12M TP: TRY1.66) is scheduled to announce 3Q14 results today. We are expecting TRY11mn net profit. There is no consensus estimate.
Aselsan (ASELS – NEUTRAL; rating: Outperform; 12M TP: TRY12.10) is expected to announce 3Q14 financials today. The CNBCe consensus is expecting net profit of TRY31mn compared to house estimate of TRY87mn. The consensus expects 3Q14 revenue and EBITDA of TRY569mn and TRY 124mn compared to our estimates of TRY677mn and TRY140mn.
Aygaz (AYGAZ TI, POSITIVE, rating: N/R) announced TRY68mn net profit in its 3Q14 financials (3Q13:TRY118mn), above the CNBC-e consensus of TRY53mn. The deviation in 3Q14 bottom-line stemmed from stronger-than-expected operational performance (3Q14 EBITDA: TRY72mn (3Q13:TRY79mn), Consensus: TL63mn) in addition to higher-than- expected contribution of Enerji Yatirimlari A.S. (EY) which is the 20% participation of Aygaz and consolidated through equity pick-up method. Note that EY is the main shareholder of Tupras (TUPRS TI) which posted a higher-than-expected bottom-line in its own 3Q14 financials. Aygaz shares have underperformed the BIST100 total index by 2% in the last 3 months. Stronger-than-expected 3Q14 results would be positive for the company shares in the short-term.
Bank Asya (ASYAB TI – NEUTRAL; rating: N/R; 12M TP: N.A.) is scheduled to announce 3Q14 results today. We are expecting TRY252mn net loss vs. a consensus net loss estimate of TL195mn.
Banvit (BANVT – NEUTRAL; rating: Under Review; 12M TP: 3.50) is scheduled to announce 3Q14 results today. Both ours and the CNBC-E consensus estimates stand at TRY4mn net profit for 3Q14E.
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Bim’s (BIMAS – NEUTRAL; rating: Neutral; 12M TP: 48.00) TL115mn net profit for 3Q14 in line with our own estimate (TL112mn) and the consensus call (TL115mn). Bim announced a 3Q14 top-line of TL3,753mn, up by 22% YoYand 5% QoQ, and in line with both our own estimate and the consensus estimate. Bim appears to have benefited from both LfL growth, thanks to the higher food CPI, and new store additions in 3Q14. Despite a slower pace of domestic store openings than in the previous quarters of 2014, as expected, Bim opened 62 new stores in Turkey in 3Q14 (189 in 2Q14 and 159 in 1Q14), comparing with the full year guidance of 500 stores (406 in 9M14). 3Q14 EBITDA rose by 6% YoY to TL177mn with an EBITDA margin of 4.7% (vs.our house call of 4.5%). The discrepancy between our estimate and the realization for the EBITDA margin mainly stemmed from better gross margin achieved in 3Q14. The gross margin came in at 15.7% in 3Q14 compared to our estimate of 15.5%. Overall, the bottom-line and operating profit met market expectations; thus, the initial market reaction to the 3Q14 results is expected to be neutral. We have not changed our forecasts following the release of the 3Q14 results and we maintain our “Neutral” rating for Bim. The Company will hold a teleconference to review its 3Q14 results at 4:30 PM (local time).
Enka (ENKAI – NEUTRAL; rating: Outperform; 12M TP: TRY7.10) announced a TL320mn net profit in 3Q14, below the consensus estimate of TL363mn while above our own estimate of TL291mn. The main reason for the deviation was the lower-than-expected financial expense, while the operating performance came in line with our estimates. The shares have outperformed the BIST 100 index by 3% in the last 3 months. The improvement in contracting margins (to 17.8% in 3Q14) in addition to the expansion in the backlog to US$3.4bn at the end of September 2014 (from US$3bn at the end of June 2014), mainly on the back of new projects in Iraq, were among the positive highlights of the 3Q14 results. Considering that the bottom-line fell below the consensus estimates, we think the 3Q results will have a neutral impact on the shares. We have revised up our 2014 EBITDA forecast from TRY2,055mn to TRY2,118mn and our net profit forecast from TRY1,453mn to TRY1,541mn. Furthermore, we have raised our 2015 EBITDA forecast from TRY2,365mn to TRY2,491mn, and our forecast for the net profit from TRY1,603mn to TRY1,689mn, mainly due to the change in our foreign exchange rate projections. While maintaining our “Outperform” rating, we have revised up our 12-month target price slightly from TL6.92to TL7.10 per share.
Hurriyet (HURGZ – NEGATIVE; rating: Underperform; 12M TP: TRY0.45) announced net loss of TRY16mn in 3Q14 which is worse than the CNBCe consensus estimate of TRY9mn and in-house estimate of TRY5 net loss. The lower than expected bottom-line stems from weak operating results and higher than expected financial expenses. 3Q14 revenue fell by 13% YoY and 23% QoQ to TRY164mn and is lower than consensus estimate of TRY189mn and house estimate of TRY191mn. Profitability was also very weak as EBITDA margin contracted to 2.2% in 3Q14 from 8.8% in 3Q13 and 14.7% in 2Q14. The consensus estimate was 9.1% while the house estimate was 10.1%. We have revised our forecasts for 2014 and 2015 downwards leading to a lower 12-month target price of TRY0.45 (previously TRY0.67). We maintain our Underperform rating.
Kardemir (KRDMD – NEGATIVE; rating: Outperform; 12M TP: TRY2.80) announced a net profit of TRY40mn in 3Q14, lower than the CNBCe consensus estimate of TRY61mn and our in-house estimate of TRY66mn. The 3Q14 net profit figure is up 25% YoY, but down by 60% QoQ. Lower than expected EBITDA margin and an unexpected provisions expense below the operating line led to the deviation in the bottom-line. 12M TP lowered from TL3.00 to TL2.80; maintain ‘Outperform’ rating. The lower than expected 3Q14 EBITDA margin of 23.4% leads us to revise down our 4Q14 EBITDA margin forecast of 24.0% to 20.0%. We have also lowered our 2015 EBITDA margin forecast to 19.8% from 22.2%. We maintain our 2016F EBITDA margin of 19.7% and then 19.4% in the rest of the forecast period. These revisions lead to our new 12-month target price of TL2.80 (previously TL3.00). We maintain our ‘Outperform’ rating.
Koc Holding (KCHOL – POSITIVE; rating: Neutral; 12M TP: TRY11.15) – announced 3Q14 net profit of TRY679mn better than the CNBCe consensus estimate of TRY529mn. 3Q14 net profit fell by 44% YoY and 22% QoQ. 3Q14 revenues grew 2% YoY and 16% QoQ to TRY19,126mn. 3Q14 EBITDA (adjusted to include other income/expenses, investment activities and profit/loss from subsidiaries) fell by 31% YoY, but grew 8% QoQ to TRY1,389mn. The 3Q14 EBITDA margin of 7.3% compares to 10.8% in 3Q13 and 7.8% in 2Q14. Net financial expenses were realized at TRY157mn in 3Q14 compared to
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TRY220mn in 3Q13 and TRY128mn in 2Q14. The 3Q14 effective tax rate is 17% compared to 21% in 3Q13 and 36% in 2Q14.
Pegasus Airlines (PGSUS– NEUTRAL; rating: Outperform; 12M TP: 35.00) is expected to announce its 3Q14 results today. CNBCe consensus estimate for the 3Q14 net income is TRY209mn, house estimate is TRY271mn.
Royal Hali (ROYAL – NEUTRAL; rating: Outperform; 12M TP: 5.05) is expected to announce its 3Q14 results today. House estimate for the 3Q14 net income is TRY7mn.
Sabanci Holding (SAHOL – NEUTRAL; rating: N/R; 12M TP: TRY12.60) is scheduled to announce 3Q14 results today. We are expecting TRY479mn net profit compared to TRY490mn net profit in the CNBC-e consensus estimate.
Sise Cam (SISE TI, SL.NEGATIVE, rating: Neutral, 12M TP: TRY3.60) announced TL122mn net profit in its 3Q14 financials, below the consensus estimate for TRY137mn and house call of TRY132mn net income – had it not been for the TRY14mn deferred tax income recorded in the quarter, the deviation at the actual bottom-line compared to our estimate would have been more significant. The negative deviation owes primarily to a weaker-than-expected top-line generation which missed the consensus estimate by 5% and house call by 9%. The EBITDA margin implied over 1pp YoY increase both in YoY and QoQ terms, worse than the 5 pp and 2 pp YoY increases recorded in Q1 and Q2. We would expect a slight negative reaction in the market to Sise Cam’s 3Q14 performance, potentially leading to a profit taking activity in the stock after the recent strength in share performance (14% nominal gain and 7% outperformance vs. the index in 1M). We maintain our “Neutral” rating on Sise Cam with a revised 12-mo TP of TL3.60.
TAV Airports (TAVHL TI, NEGATIVE, rating: Neutral, 12M TP: TRY18.30) announced a net profit of EUR89mn in 3Q14, beating our own estimate of EUR83mn and the consensus estimate of EUR81mn. The deviation between the estimates and the result appears to have stemmed from higher net non-operating income, which compensated for the slightly lower-than-expected EBITDA figure (TAV recorded only EUR2mn of financial expenses in 3Q14 compared to our estimate of EUR10mn). The Q3 EBITDA margin of 50.6% fell significantly short of the consensus estimate, and disappointingly marked a slide in YoY terms as the reigning downtrend in profitability further deteriorated in Q3. We think the weakness of the EUR against the US$ had a more negative effect on profitability than our initial expectations. We expect a negative market reaction to TAV’s weak 3Q14 operating profitability, regardless of the beat at the bottom-line. Taking the 9M realizations into account and revising our model with new macro assumptions, while including the Bodrum airport in our SoTP valuation, we find a new 12-month TP of TRY18.30 for TAV. We maintain our “Neutral” rating.
Torunlar REIC (TRGYO – NEUTRAL; rating: Neutral; 12M TP: TL4.00) is scheduled to announce 3Q14 results today. We estimate TRY-70mn net loss in 3Q14E compared to the CNBC-E consensus estimate of TRY-51mn.
Trakya Cam (TRKCM TI, SL.NEGATIVE, rating: Outperform, 12M TP: TRY3.41) posted a TRY48mn net profit in 3Q14, falling short of the TRY55mn consensus estimate but exceeding our own estimate of TRY40mn in net income. The deviation was down to the TRY6mn in deferred tax income - adjusted for that figure, the bottom-line is actually in line with our estimate. In brief, a weaker-than-expected top-line performance (there was a QoQ contraction despite the fact that the Q2 figures were depressed by the one week strike and the new capacities contributed to the financials for a full quarter in Q3) was offset by stronger-than-expected operating profitability (the EBITDA margin jumped by 1.5 pps QoQ to beat the consensus estimate by 1 pp). All in all, we are disappointed by the Trakya Cam’s Q3 revenue performance, but we welcome the trend in the EBITDA margin. We expect a mixed market reaction to the results, but some profit taking bias may kick in after the 16% nominal gain and 9% outperformance vs. the index in the last month. We maintain our 12- month TP of TRY3.41 for Trakya Cam. We currently have an “Outperform” rating for the stock, but we exclude it from our Most Preferred Stocks list.
Turkish Airlines (THYAO – NEUTRAL; rating: Neutral; 12M TP: 7.70) is expected to announce its 3Q14 results today. CNBCe consensus estimate for the 3Q14 net income is TRY1,114mn, house estimate is TRY1,281mn.
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According to news in Milliyet, the Telecoms Regulatory Authority made some changes in regulations to allow easier fixed number portability. This will have a negative impact on the incumbent Turk Telekom (TTKOM – NEGATIVE; rating: Neutral; 12M TP: TRY7.65). The new regulations will allow fixed voice subscribers to retain their current telephone numbers and avoid a period of no line connection as was the case. The number of subscribers porting their numbers should accelerate with the easing in the regulations especially if alternative fixed voice operators increase their promotional campaigns. This should also lead to lower fixed voice tariffs. TTKOM’s fixed voice line subscribers is at 11.7mn at end September down from 12.5mn at end December 2013. We were expecting a slower net loss going forward with increased bundling with ADSL, TV, mobile, etc., but the new regulation leads us to believe there will be increased competition in this segment that could lead to accelerated net subscriber loss and increased costs for Turk Telekom.
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