Turkey Wake up call: Macro and Political News, 28th February

This analysis by GLOBAL Securities is presented to you by Raiffeisen Centrobank AG. Raiffeisen Centrobank AG acts solely as a distributor of this analysis and has not introduced any material changes to the content of this analysis or any recommendation included herein.

Wake – up call

BIST took a 4.13% dive yesterday as the global sell-off along with rising tensions in Syria inflicted heavy losses on Turkish stocks . Banks were down 4.62% on average with HALKB, VAKBN, and YKBNK underperforming their peers. THYAO, PGSUS, TUPRS, EREGL, TKFEN, KCHOL, AKSEN, and IPEKE also felt the brunt of the slide while CCOLA and AEFES were the only two BIST100 constituents that managed to close higher for the day. We are waking up to a woeful morning with official reports that an air strike by Syrian regime forces at a Turkish observation post in Syria's Idlib region killed 33 Turkish troops and wounded 32 others last night. Turkey is responding in kind, hitting all known Syrian government targets by air and land forces. BIST is headed for a gap lower open amid rising regional tensions as well as the continued plunge in global equities. Lira is also weaker with the USDTRY pair at 6.2276 vs 6.1788 at yesterday’s close. U.S. futures are down almost 1.1% on top of some 2.0-2.1% overnight losses from the hour we left and declines in Asian indices are topping 3-4% levels due to the coronavirus panic.
Macro and Political News:
(-) Emergency meeting concludes after 33 Turkish soldiers killed by Assad regime airstrike in Idlib… 33 Turkish soldiers were killed and 32 others were injured (in stable condition) in a Russia-backed Assad regime airstrike in northwestern Syria’s Idlib Thursday. With the attack, the growing alarm in Ankara over the recent escalation of tensions reached a tipping point. Late Thursday, President Erdogan convened an emergency national security meeting on tensions in Idlib. Security sources told Daily Sabah that all ministers and senior officials, including the National Intelligence Organization (MIT) chief Hakan Fidan, were present in the meeting that started at 9:30 p.m. and lasted nearly six hours. Presidential Communications Director Fahrettin Altun said after the emergency meeting that the Turkish army is hitting, with land and air backup, all known regime targets, and will continue to do so. Altun stressed that Turkey will continue military operations in Syria until the hands that attacked Turkish flag is dealt with. In retaliation, Turkish artillery pounded Assad regime targets along the frontline in Idlib. Turkey also carried out missile attacks on targets in Syria’s central Hama, northwestern towns of Nubl and Zahraa, as well as in regime and Russian bastion, Latakia. The ruling Justice and Development (AK) Party spokesman Omer Celik said that all elements of the Syrian regime have now become targets and that Turkey now recognizes all Assad regime elements as hostile targets.
Meanwhile, Foreign Minister Mevlut Cavusoglu held a phone call with NATO Secretary-General Jens Stoltenberg following the attack. A statement released later on Friday said Stoltenberg condemns attacks carried out by the Syrian regime and its backer Russia in Idlib, calling for an immediate halt. Presidential Spokesman Ibrahim Kalin also held a phone call with U.S. National Security Adviser Robert C. O’Brien. Meanwhile, the Directorate of Communications released a statement on the Turkish offensive against Syrian regime forces. It said Turkish forces have neutralized at least 1,709 Assad regime soldiers, as well as 55 tanks, three helicopters, 18 armoured vehicles, 29 howitzers, 21 military vehicles, six ammunition depots, seven mortars, and four Soviet-made DShK heavy machine guns in the last 17 days of operations in southern Idlib.
(-) Turkey strikes Russian, Assad regime bastion Latakia, other targets in Syria with missiles… Turkey early Friday carried out missile attacks on targets in Syria’s central Hama, northwestern towns of Nubl and Zahraa, as well as in regime and Russian bastion, Latakia, in response to the Assad regime airstrike that killed 22 Turkish soldiers. The military also pounded Assad regime targets with artillery along the frontline in Idlib.
(-) Turkey will no longer stop Syrian migrant flow to Europe… Turkey has decided to no longer stop Syrian refugees from reaching Europe by land and sea, a senior Turkish official told Reuters on Thursday, in anticipation of the imminent arrival of refugees from Syria’s Idlib where nearly a million have been displaced. The Turkish official added that Turkish police, coast guard and border security officials have been ordered to stand down.
(=) Defense Minister Akar discusses tensions in Syria’s Idlib with US counterpart Esper… Turkish Defense Minister Hulusi Akar and his U.S. counterpart Mark Esper discussed the latest situation in Syria’s Idlib on Thursday, according to the Defense Ministry. In a statement, the ministry said Akar and Esper held a phone call. They exchanged views on finding a solution to the Idlib conflict, as well as bilateral and regional defense and security issues. Esper later added on Twitter that he and Akar discussed the Russia and Iran-backed Assad regime’s aggression in Idlib; the resulting humanitarian crisis and Libya. The U.S. defense secretary added that they are exploring ways the U.S. can work together with Turkey and the international community.
(+) US’ NATO envoy hints at American support for Turkey against Assad regime… U.S. Permanent Representative to NATO Kay Bailey Hutchison said early Friday that everything is on the table regarding possible American support for Turkey after 33 Turkish soldiers were killed by the Assad regime in Syria’s war-ravaged Idlib. She said that this is a very critical development, and NATO alliance is with Turkey not with Russia. Hutchison added that Turkey and U.S. are on the same side in many areas, but in Syria especially, they are concerned about the whole – what Assad is doing, attacking Idlib, the people in Idlib again. When asked about the possibility of military, surveillance or intelligence support by the U.S., she said that the situation is complex and the issue is being discussed. She underscored that this is a very hard and a complicated situation, and added that the U.S. stands against Russia and Syria – the Syrian regime, Assad – and there’s been no decision that she is aware of about what exactly has been asked or what might be given.
(=) Erdogan and Trump likely to speak over phone… While local news wires circulate potential phone chat between President Erdogan and his U.S. counterpart Trump, this has not been confirmed yet.
(=) Erdogan: Idlib developments in Turkey’s favour… President Erdogan said the situation in northwestern Idlib province has evolved in Turkey’s favour, as he highlighted Turkey’s determination to achieve its goals in the region. Speaking at the opening ceremony of the ruling Justice and Development (AK) Party’s Politics Academy conference, Erdogan said Turkey has successfully turned the tide in Libya, where the situation was in favour of General Khalifa Haftar. The Turkey-backed opposition forces recaptured the strategic town of Saraqib in northwestern Syria’s Idlib province Thursday. Also, Erdogan noted that three Turkish soldiers have been killed in the Assad regime attack in Idlib, adding that the regime forces suffered heavy casualties after the Turkish military retaliated against them. The president criticized Russia once again for supporting the Assad regime, which is carrying out a ruthless campaign in Idlib, completely disregarding the lives of civilians.
(=/+) Turkey discussing opening Idlib airspace for Turkish drones… Turkey and Russia are discussing opening Russian-controlled air space in Syria’s Idlib region for armed and unarmed drones. Defence Minister Hulusi Akar quoted as saying on Thursday that problems over the issue persisted. Speaking to reporters in parliament, Akar said Ankara was hopeful about ongoing talks between Turkish and Russian officials in Ankara over the northwestern Idlib region, where Turkey’s military is backing the Syrian opposition against government forces backed by Russia. Recall, President Erdogan had previously mentioned that access to airspace over Idlib was crucial for the Turkish military. Akar also said he would speak with U.S. Secretary of Defense Mark Esper by telephone later on Thursday.
(=) Turkey-backed opposition advances in Syria’s Idlib province… After Turkish-backed opposition forces recaptured the strategic town of Saraqib in northwestern Syria’s Idlib province Thursday and cut off a highway linking the capital, the opposition is now eyeing to retake more territory in the region to halt the advance of the Bashar Assad regime and enable civilians’ return. Saraqib is on a strategic crossroad connecting the country’s two main highways, M4 and M5. The M4 motorway connects the port city of Latakia to the Iraqi border while the M5 forms the backbone of the country's highways, connecting economic hub Aleppo to the central cities of Hama and Homs, the capital Damascus and to the Jordanian border farther south. Opening major highways in the region to revive a shattered war economy has been a key goal of the Russian-led campaign. According to the military officials, regaining Saraqib was of high importance as it meant cutting off the M5 highway completely. This means also that tens of thousands of civilians will be able to return to the town.
(=/+) Turkey sees 2020 as investment year… Mustafa Varank, the industry and technology minister, said on Thursday that Turkey sees the year 2020 as an investment year. He noted that investment incentive data supports the country’s investment expectations, reminding that the latest industrial production data was also quite high, both capacity utilization rates and real sector confidence rose in February. Varank also said that in 2020, he will leave the performance of the last two years behind both in terms of growth and employment.
(+) Fitch: More confidence in Turkey's economic recovery… Fitch Ratings has greater confidence that Turkey’s economic growth is recovering in the near term. Winslow, director in Fitch Ratings’ sovereign team, told Anadolu Agency on Thursday that they expect a recovery, with GDP growth going from 0.4% last year to 3.9% this year. He added that that’s driven by private consumption and supported by the lower interest rate, as well as a pretty sharp pickup in private bank lending, which is growing around 25% currently. Pointing to Turkey’s recovering economic outlook, Winslow said that they also expect investment to return to growth this year of around 3%. He highlighted that they do see some near-term risks of greater volatility from geopolitical developments, and particularly from monetary policy if interest rates are cut too much, and that puts additional pressure on the lira. Asked about the possibility of upgrading Turkey’s sovereign credit rating in the future, Winslow said that in terms of opportunities from the ratings perspective, if they saw better reform progress against the government’s new economy program, this would be helpful for the ratings. Noting that Fitch upgraded Turkey’s 2020 GDP forecast by 0.8 percentage points to 3.9% and 2021 GDP is forecast to rise 0.4 percentage points to 4.0%. Also, Fitch maintained its assessment that the longer-term potential trend growth of the Turkish economy is around 4.3%. The composition and sustainability of GDP growth is particularly important for the rating. Some of the government’s planned reform measures are aimed at reducing the risk of greater imbalances building up.
(+) Economic confidence up in February… Confidence in the Turkish economy increased on a monthly basis to 97.5 in February. The economic confidence index rose by 0.5% compared with the last month in February from 97.1 points in January. This increase in economic confidence index stemmed from the increases in real sector (manufacturing industry) and services confidence indices. The services and real sector confidence indices were up by 3.4% and 0.3%, respectively, month-on-month in February. Confidence indices for construction, consumer and retail trade dropped by 5.7%, 2.7% and 2%, respectively, in the month. The economic confidence index surveys consumers’ and producers’ evaluations, expectations and tendencies about the general economic situation.
(+) Coronavirus pushes global textile brands toward Turkey, fuelling orders… Global textile giants turned toward Turkish ready-to-wear and textile manufacturers, fuelling orders ahead of the upcoming summer season, due to the new coronavirus outbreak in China. The virus has already caused various large brands to withdraw from the Chinese market and halted local production in the East Asian country.
Several brands including large-scale global brands such as Superdry, Inditex, H&M, Hermes-Otto, Debenhams and Ralph Lauren have already diverted their orders to Turkey. The country will have to increase production by doubling the shifts, especially for summer collections. Brands like H&M, Superdry and Inditex Group, which embodies Zara, Massimo Dutti and Bershka, all of which have a high capacity in terms of importing from Turkey, fuelled the orders. With the additional orders, the sector is expected to work at full capacity. Many renowned brands initiated talks with Turkish manufacturers for the upcoming season.
On a separate note, cleaning products along with medical masks are also products that are needed by Chinese customers. Demands for those types of products from Turkey have increased up to 40%. China’s furniture importers are another sector where orders have been diverted to Turkey especially after the cancellation of two furniture fairs that were due to be held in China. The sector, which previously announced its export value as USD4.5bn for 2020, updated it to USD5bn due to additional orders coming from Europe.
(+) Turkey seen among safest travel destinations still free from coronavirus… Turkey is seen among the safest tourism hotspots as it remains free from the coronavirus. Flights to affected regions have been gradually cancelled and fears of the fatal virus have been a cause for concern for those with vacation plans. This has particularly been the case for many Britons who are gearing up for vacation as the Easter holiday approaches. In addition to the fact that it is already a popular destination for British tourists, Turkey remains unaffected by the virus. According to UK based travel experts, Turkey is among the short-haul and long-haul hot spots that remain free from the coronavirus. To remind, resort towns such as Antalya and Mugla have been among British tourists’ favourites in recent years. Just last year, some 2.5 million tourists from the U.K. arrived in Turkey.
(+) January marks increasing tourist arrivals in Istanbul… The number of foreign tourists visiting Istanbul in the first month of 2020 was recorded at 1.17 million, the governor said Thursday. Istanbul governor Ali Yerlikaya said in a statement that the number of the foreign visitors coming to Istanbul has surged 10.7% year-on-year in January this year. Some 72% of those tourists visiting the city used the new mega airport, Istanbul Airport on the city’s European side while 27% of them used Sabiha Gokcen on the city’s Anatolian side. During the first nine months of 2019, Istanbul welcomed 11.3 million foreign tourists, while the number of tourists visiting Istanbul soared to a five-year high in the first five months of 2019.
(+) Turkish 2019 GDP growth rate of 0.6% expected… The growth of the Turkish economy for 2019 is expected to come in at 0.6%, according to the state-run Anadolu Agency survey on Thursday. A panel of 17 economists projected the country's GDP rose 0.6% in 2019, varying between 0.2% and 0.9%. Economists’ forecast for the last quarter of 2019 was 5.1% on average, with the lowest figure at 4.2% and the highest at 6.1%. The Turkish economy grew by 7.4% in 2018, while it narrowed by 2.8% in the last quarter of 2018. It continued to shrink in the first two quarters of 2019 by 2.8% and 2.3%, respectively. After three weak quarters, the country’s GDP posted 0.9% growth rate in the third quarter of 2019. To remind, GDP figures for the last quarter and the whole year will be released next week by the country’s statistical authority. Meanwhile, Anadolu Agency’s survey also forecast that the country’s economy will grow by 3.9% in 2020, with predictions ranging between 2.5% and 5.2%. Turkey’s New Economic Program, announced last September, targets growth of 0.5% in 2019 and 5% in the following three years.
(=) Turkey appeals to EU envoys to upgrade customs union… Turkish Trade Minister Ruhsar Pekcan has told the ambassadors of EU countries in Ankara that Turkey is waiting for the European Commission to renew the 1996 Customs Union agreement. Ms Pekcan said at a meeting with the EU Delegation to Turkey that deepening and integrating the trade and economy relations between the EU and Turkey has utmost importance, and that would be necessary for the benefits of the both sides. She added that the current customs union agreement between Turkey and the EU is outdated and unfit to the potential the European bloc and the Turkish economy. Recall, Turkey has been pushing for upgrading the customs union deal which came into force on in December 1995. The deal covers all industrial goods but does not address agriculture (apart from processed agricultural products), services or public procurement. Bilateral trade concessions apply to agricultural goods as well as coal and steel products.

Sector and Company News:
According to the weekly banking data, total loans increased by 2.74% y-t-d to TRY2,719bn. Consumer loans grew by 5.18% while commercial loans and SME loans continued its lagging trend since the beginning of the year, up by only 2.43% and 2.79% respectively. FX indexed loans’ downward trend continued by -9.01%.
As for the NPL of the sector, the banks’ efforts to improve their NPL ratios are evident in the sectoral figures. NPL ratio of the sector declined by -1.65% y-t-d. While in yearly terms NPL ratio increased by 32.6%, there is a declining trend in all terms of time frames.
On the deposits front, total deposits increased by 3.37% y-t-d. While real persons’ deposits increased by 2.68%, the largest upward movement has been evident in official and other institutions segment by 9.09% from TRY154.3bn to TRY168bn. Total Fx deposits of residents inched up by 55 bps y-t-d while corporates contributed by 2.70%, the decline in real persons’ Fx deposits remained significantly limited by -2 bps m/m.

(TL, mn) 21/02/2020 14/02/2020 w/w m/m y/y y-t-d
Total Loans 2,719,476 2,707,225 0.45% 2.31% 13.07% 2.74%
Consumer Loans 491,592 488,959 0.54% 3.28% 24.39% 5.18%
Housing 205,749 205,072 0.33% 2.10% 11.78% 3.25%
Vehicle 6,964 6,976 -0.17% -0.10% 10.82% -1.23%
GPL 278,878 276,911 0.71% 4.25% 36.13% 6.82%
Consumer Credit Cards 115,007 118,196 -2.70% -0.43% 13.83% -1.53%
Commercial and Other Loans 2,112,877 2,100,070 0.61% 2.23% 10.69% 2.43%
Installment Commercial Loans and Corporate Credit Cards 447,015 443,089 0.89% 2.65% 12.31% 2.90%
SME Loans 628,793 624,817 0.64% 2.31% 2.65% 2.79%
Fx Indexed Loans 10,744 10,883 -1.28% -5.24% -63.51% -9.01%

(TL, mn) 21/02/2020 14/02/2020 w/w m/m y/y y-t-d
Non Performing Loans 152,335 152,273 0.04% 0.96% 50.01% 1.05%
Consumer Loans 13,665 13,643 0.16% 1.31% 12.26% 2.33%
Housing 1,243 1,250 -0.60% -1.08% 20.15% -2.08%
Vehicle 200 203 -1.24% -2.35% -7.48% -0.23%
GPL 12,222 12,190 0.26% 1.63% 11.91% 2.84%
Consumer Credit Cards 6,486 6,468 0.28% 1.39% -0.41% 2.59%
Commercial and Other Loans 132,183 132,161 0.02% 0.91% 59.51% 0.84%
NPL Ratio 5.60% 5.62% -0.41% -1.31% 32.66% -1.65%

(TL, mn) 21/02/2020 14/02/2020 w/w m/m y/y y-t-d
Total Deposits 2,653,769 2,650,543 0.12% 2.45% 27.25% 3.37%
Natural Person 1,637,952 1,618,996 1.17% 2.43% 26.47% 2.68%
Demand 393,761 379,558 3.74% 6.24% 63.03% 9.33%
Time 1,244,191 1,239,438 0.38% 1.29% 18.10% 0.74%
Commercial Institutions 847,454 846,556 0.11% 1.28% 29.41% 3.65%
Demand 244,081 242,569 0.62% 4.30% 44.80% 10.53%
Time 603,374 603,987 -0.10% 0.11% 24.08% 1.11%
Official and Other Institutions 168,363 184,991 -8.99% 8.93% 24.28% 8.95%
Demand 38,310 51,845 -26.11% -3.58% 14.55% 12.96%
Time 130,053 133,146 -2.32% 13.27% 27.47% 7.82%
Deposits Subject to Insurance 719,832 713,355 0.91% 2.17% 46.63% 2.98%

Total Fx Deposits with Banks (USD, mn) 217,521 216,177 0.62% 0.48% 15.15% 1.41%


(USD, mn) 21/02/2020 14/02/2020 w/w m/m y/y y-t-d
Total FX Deposits of Residents 185,098 184,132 0.53% 0.23% 11.33% 0.55%
Real Persons 106,644 106,665 -0.02% -0.75% 12.27% -1.18%
Dolar ($) 71,732 71,960 -0.32% -1.92% 10.97% -2.79%
USD Eqv. of Euro 32,544 32,327 0.67% 1.97% 14.75% 2.64%
Corporates 74,308 73,554 1.02% 0.61% 11.58% 2.69%
Dolar ($) 35,150 34,537 1.78% -3.06% -5.94% -5.93%
USD Eqv. of Euro 38,051 37,944 0.28% 4.08% 33.51% 11.32%

(=/+) AEFES posted TL183mn net income in 4Q19, derived by one-off gain from the sale of Istanbul Brewery land in Turkey, higher than expected fx income coupled with lower finance cost compared to last year, significantly above the consensus of TL100mn and our estimate of TL24mn. Revenues grew by 17% YoY to TRY5,082mn, in line with the consensus of TRY 4,917mn and our estimate of TL4,974mn. AEFES increased its EBITDA by 60% YoY to TL614mn, but below the consensus of TL687mn and our estimate of TL768mn. AEFES’ EBITDA margin of 12.1% in 4Q19 was lower than the consensus average of 14.0% and our estimate of 15.4%.

Consolidated sales volume printed 2.4% YoY growth to 21.7mhl in 4Q19, mainly led by the robust performance in international beer operations, which posted a YoY growth of 7.2% in 4Q19 as well as solid volume growth of 4.9% YoY delivered in Turkey soft drink operations. However, Turkey beer operations continued to remain weak with a 7.1% YoY decline. International soft drink operations also fell by 3.6% YoY in 4Q19. In the year-end figures, Turkey beer operations resulted the year with a YoY decline of 5.2% while we see a strong, 8.1% YoY growth in international beer operations. While Turkey soft drink volume grew by 1.8% YoY, international soft drink volume down by 1.5% YoY. Accordingly, in FY19, Anadolu Efes’ consolidated sales volume reached 110.9 mhl with 1.9% YoY increase, in line with the company guidance of low-to-mid single digit growth.

Improvement in indebtedness ratio continues as net debt / EBITDA declined to 1.2x at YE19, from 2.0x at YE18. Strong cash generation led by margin growth in beverage group (CCI) (effective supply chain management and economies of scale in beverage) and international beer segment (favourable brand mix coupled with synergy generation in Russia and Ukraine) supported net debt/EBITDA level, positively.

In 2020, management expects low single-digit consolidated volume growth with a flat domestic beer operations and a low single digit volume growth in international beer operations. In soft drink segment, management expects 3-4% consolidated volume growth with a flat domestic operations and a single digit volume growth in international operations. FX adjusted soft drink segment revenue growth is estimated as 15-18% with a flat/slight decline outlook in EBITDA margin. All in all, management expects around 15% consolidated revenue growth in 2020.

AEFES BoD will propose TL1.77 DPS to its AGM. This corresponds to 103% pay-out ratio with 7.3% dividend yield. The proposed dividend pay-out ratio is significantly higher than our estimate of 35%. Expected dividend date is May 28, 2020.
TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 5.082 4.917 4.974 3% 4.326 17% 7.098 -28%
EBITDA 614 687 768 -11% 384 60% 1.399 -56%
margin 12,1% 14,0% 15,4% -1,9 pps 8,9% 3,2 pps 19,7% -7,6 pps
Net profit 183 100 24 83% 117 56% 585 -69%
margin 3,6% 2,0% 0,5% 1,6 pps 2,7% 0,9 pps 8,2% -4,6 pps
Net Debt/EBITDA (x) 1,24 1,64 -40 bps 1,28 -4 bps
EV/EBITDA 5,0 6,1 4,9
P/E 14,1 -1.043,9 13,6
ROE (%) 7,9% -0,1% 8 pps 7,9% 0 pps
Net debt 4.735 4.459 6% 4.600 3%
Working capital -309 756 -141% 245 -226%
Δ in WC -554 61 -1004% -818 -32%
CapEx -462 -537 -14% -422 9%
FCF to firm 536 -288 -286% 1.602 -67%
Shareholders' Equity 12.970 11.175 16% 12.031 8%

CCI Volume (mn uc) 4Q18 3Q19 4Q19 YoY Δ QoQ Δ 2018 2019 YoY Δ
Turkey 120 206 126 5,0% -39% 650 662 1,8%
International 108 207 104 -3,7% -50% 664 654 -1,5%
Total 228 413 230 0,9% -44% 1.314 1.316 0,2%
Avg. price per uc 8,8 9,5 9,7 10,0% 2% 8,1 9,3 15,1%
YoY Volume Δ 4Q18 3Q19 4Q19 2018 2019
Sparkling -2,2% -4,5% 4,9% 6,8% 0,3%
Stills -4,9% 1,5% 14,5% 11,6% 5,1%
Water 7,0% 0,1% -13,0% 6,0% -0,1%
Tea (NRTD) 11,5% 46,3% -9,2% -1,2% -4,9%
Total 0,6% -1,0% 0,8% 6,3% 0,1%

Beer volume (mhl) 4Q18 3Q19 4Q19 YoY Δ QoQ Δ 2018 2019 YoY Δ
Turkey 1,4 1,7 1,3 -7,1% -24% 5,7 5,4 -5,3%
International 6,8 8,4 7,3 7,4% -13% 28,5 30,8 8,1%
Total 8,2 10,1 8,6 4,9% -15% 34,2 36,2 5,8%
Avg. price per mhl 283,4 315,8 332,9 17,5% 5% 249,7 305,8 22,4%

(=) BIZIM posted 11.3mn net income in 4Q19, better than the consensus estimate of TL10.3mn and in line with our estimate of TL11.0mn. While BIZIM’s EBITDA came in-line with the consensus estimate 5.3% of EBITDA margin was lower than our estimate. Product mix improvement derived by the change in customer mix is the main reason behind main category improvement. Tobacco sales and main category sales increased by 1.7% YoY and 21.2% YoY, respectively. Sugar sales maintained its weak outlook in this quarter. Main category growth excluding the sugar sales 23.4% YoY. In 2019, total sales revenue increased by 21.3% YoY and reached to TL 4,521mn. Tobacco sales and main category sales increased by 13.2% YoY and 24.3% YoY, respectively. Pressure in main category growth led by low growth of sugar sales during 2019. Last but not least, growth in wholesale customers also impacted the top-line growth, negatively. Management indicated that total revenue growth without wholesale customers would jump by 28.4% YoY. Note that excluding IFRS16 implementation EBITDA margin is 4.4%, with a 34% YoY growth in EBITDA, which is the all-time high EBITDA and EBITDA margin of BIZIM. Recall that, Bizim Toptan opened 5 new stores and relocated 1 store during 2019 and it has closed 4 of the existing stores. BIZIM is operating in 69 cities in Turkey with its 175 stores. Higher CapEx coupled with the increase in NWC requirement deteriorated free cash flow in this quarter

TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 1.156 1.185 1.157 -2% 996 16% 1.216 -5%
EBITDA 61,7 61,7 67,5 0% 49,2 25% 69,4 -11%
margin 5,3% 5,2% 5,8% 0,1 pps 4,9% 0,4 pps 5,7% -0,4 pps
Net profit 11,3 10,3 11,0 9% 6,9 63% 11,3 0%
margin 1,0% 0,9% 1,0% 0,1 pps 0,7% 0,3 pps 0,9% 0 pps
Net Debt/EBITDA (x) -0,89 -1,77 88 bps -1,15 27 bps
EV/EBITDA 1,21 0,99 0,94
P/E 16,4 18,9 18,0
ROE (%) 23,4% 17,5% 6 pps 21,8% 2 pps
Net debt -230 -262 -12% -285 -19%
Working capital -393 -320 23% -405 -3%
Δ in WC 12,6 -13 -197% -51 -125%
CapEx -38 -12 215% -19 103%
FCF to firm 9,2 49 -81% 98 -91%
Shareholders' Equity 141 124 14% 132 7%

KOZAL posted TL507mn net income in 4Q19, up by 165% YoY. But its net income came in 10% below the consensus estimate of TL564mn.

TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 951 n.a n.a n.a 505 88% 822 16%
EBITDA 556 n.a n.a n.a 256 117% 594 -6%
margin 58.5% n.a n.a n.a 50.7% 7.8 pps 72.3% -13.8 pps
Net profit 507 n.a n.a n.a 191 165% 526 -4%
margin 53.3% n.a n.a n.a 37.8% 15.5 pps 64.0% -10.7 pps
Net Debt/EBITDA (x) -2.44 -2.84 40 bps -2.48 4 bps
EV/EBITDA 4.2 5.8 4.1
P/E 6.9 6.7 6.9
ROE (%) 30.7% 29.4% 1 pps 27.6% 3 pps
Net debt -4,451 -2,559 74% -3,775 18%
Working capital 314 256 23% 339 -7%
Δ in WC -25 4 -750% 17 -253%
CapEx -35 -60 -42% -39 -12%
FCF to firm 403 136 196% 392 3%
Shareholders' Equity 5,758 3,988 44% 5,253 10%

DOHOL posted TL168mn net income in 4Q19, vs. TL554mn net loss recorded in 4Q18.

TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 3,526 n.a n.a n.a 3,307 7% 3,522 0%
EBITDA 119 n.a n.a n.a 70 70% 226 -47%
margin 3.4% n.a n.a n.a 2.1% 1.3 pps 6.4% -3 pps
Net profit 168 n.a n.a n.a -554 -130% -2 -6933%
margin 4.8% n.a n.a n.a -16.7% 21.5 pps -0.1% 4.8 pps
Net Debt/EBITDA (x) -1.22 -1.84 62 bps -0.94 -28 bps
EV/EBITDA 5.8 1.9 5.4
P/E 7.7 0.7 -38.4
ROE (%) 8.6% 54.5% -46 pps -1.5% 10 pps
Net debt -827 -1,329 -38% -591 40%
Working capital 1,591 1,652 -4% 1,767 -10%
Δ in WC -176 -497 -65% 101 -274%
CapEx -44 -122 -64% -40 9%
FCF to firm 207 393 -47% 82 153%
Shareholders' Equity 7,137 6,662 7% 6,936 3%

AKSEN posted TL155mn net income in 4Q19, vs. TL1mn net loss recorded in 4Q18.

TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 1,779 n.a n.a n.a 1,183 50% 1,487 20%
EBITDA 318 n.a n.a n.a 293 9% 340 -6%
margin 17.9% n.a n.a n.a 24.8% -6.9 pps 22.9% -5 pps
Net profit 155 n.a n.a n.a 10 1376% 67 131%
margin 8.7% n.a n.a n.a 0.9% 7.8 pps 4.5% 4.2 pps
Net Debt/EBITDA (x) 2.18 3.24 -106 bps 2.49 -31 bps
EV/EBITDA 3.7 4.8 3.7
P/E 6.5 63.0 9.1
ROE (%) 9.4% 1.6% 8 pps 9.4% 0 pps
Net debt 3,054 3,432 -11% 3,433 -11%
Working capital 1,617 1,316 23% 1,861 -13%
Δ in WC -243 -555 -56% 31 -889%
CapEx -79 -102 -22% -7 1083%
FCF to firm 421 735 -43% 288 46%
Shareholders' Equity 3,490 1,636 113% 1,971 77%

GOODY posted TL208mn net income in 4Q19, vs. TL11mn net loss recorded in 4Q18.

TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 770 n.a n.a n.a 699 10% 796 -3%
EBITDA 96 n.a n.a n.a 25 281% 85 12%
margin 12.4% n.a n.a n.a 3.6% 8.8 pps 10.7% 1.7 pps
Net profit 208 n.a n.a n.a -11 -2068% 32 544%
margin 27.0% n.a n.a n.a -1.5% 28.5 pps 4.1% 23 pps
Net Debt/EBITDA (x) 0.13 1.45 -132 bps 2.24 -210 bps
EV/EBITDA 4.3 6.2 5.7
P/E 4.6 7.4 15.3
ROE (%) 29.9% 19.2% 11 pps 7.3% 23 pps
Net debt 40 284 -86% 502 -92%
Working capital 483 510 -5% 722 -33%
Δ in WC -239 2 -12106% 86 -377%
CapEx -29 -55 -47% -19 57%
FCF to firm 269 -30 -998% -30 -1008%
Shareholders' Equity 901 656 37% 693 30%