EUR 91.20 For Business Accounts Only

BGC Partners: OZAK REIT - 4Q17: BROADLY IN LINE

Ozak REIT announced TL194mn consolidated net income in 4Q17, broadly in line… Note that there are two seasonalities in Ozak REIT’s figures, one being Ela Quality Resort Hotel’s strong 3Q revenues and the other being revaluation gains of assets in 4Q. As such, Ozak’s revenues and EBITDA dropped on a q/q comparison, while the bottom-line surged. Overall, we observe steady gross profit on the REIT segment but note that slightly higher operating expenses and increased FX losses on EUR appreciation have weighed on earnings. Whereas, Ela Quality’s contribution dropped to essentially zero in 4Q. On the other hand, some TL210mn revaluation gains on assets supported the consolidated earnings, while this figure rises to TL299mn in solo earnings as Ela Quality’s revaluation gain shows up in solo numbers. On the balance sheet side, Ozak REIT’s net debt remained stable at TL363mn as at end-2017. For full-year 2017, we assess that Ozak REIT’s operational results were broadly in line with our expectations, with Ela Quality’s stronger-than-expected revenues being offset by higher-than-expected FX losses. On the other hand, thanks to stronger-than-expected revaluations, Ozak’s NAV, which is based on solo equity, sharply increased to TL1,658mn at end-4Q17, from TL1,294mn in 3Q17, suggesting that OZKGY trades at a 61% discount to NAV. We expect the positive trading to continue in Ozak REIT’s shares, as the market should continue to price in the rise in NAV. We maintain our BUY rating and 12M TP of TL4.14 for Ozak REIT, offering a 60% upside potential