EUR 103.10 For Business Accounts Only

BGC Partners: Aselsan <ASELS TI> reported a net profit of TL583mn in 4Q18, lower (cons: TL681mn, BGC: TL706mn), operationally better…

The company posted TL3,795mn revenues in 4Q18 (up by 93.5% y/y) above consensus estimate of TL3,566mn (BGC: TL3,466mn) fueled by higher FX rates (45% higher y/y US$/TL rate in the quarter on the average), stronger seasonality, and some delivery shifts from 3Q18 to 4Q18. Note that it is difficult to forecast quarterly financials of Aselsan as the performance may vary significantly based on the accounting method (also tax gains and FX gains/losses make the bottom line even more volatile) and contracted deliveries. On the profitability side, weaker TL against hard currencies and delivery of higher margin products in 4Q18 supported margins and Aselsan posted TL813mn EBITDA in the quarter at 21.4% margin (consensus: TL716mn at 20.1% margin, BGC: TL771mn at 22.2% margin). Opex was at 4.5% of revenues in 4Q18 vs. 6.0% in 3Q18 and 9.1% in 4Q17, thanks to higher revenues which supported operational profitability. Aselsan recorded TL116.7mn tax “income” in the quarter (3Q18: TL74.9mn tax expense, 4Q17: TL74.9mn tax income), supporting the net income; however TL's strength against hard currencies had a negative impact on the bottom line as the company is long in FX in its balance sheet. All in all, Aselsan reported a net profit of TL583mn in 4Q18, lower than estimates (cons: TL681mn, BGC: TL706mn). As a side note, Aselsan’s revenues are 48% in US$, 29% in EUR, 23% in TL while expenses are 25% in US$, 15% in EUR, and 60% in TL. In addition, Aselsan has TL955mn long FX position in 4Q18 at US$118mn and EUR65mn (3Q18: TL960mn long FX position in 3Q18 at US$68mn and EUR88mn, 4Q17: TL1.5bn long FX position at US$303mn and EUR70mn); so the company is a net beneficiary of weak TL.