Report

Turkey Wake up call: Macro, Political and Equity News, 11th March

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 ended 2.38% lower yesterday as the afternoon sell-off related to coronavirus worries erased morning gains and some more. Positive sentiment in global peers lifted BIST to a gap higher open yesterday and the BIST100 index flirted with 107k levels around mid-day. But the Minister of Health’s statements that the virus is most likely present in Turkey despite lack of confirmed cases led to a selling spree after 3PM, with further pressure in the last 30 minutes. Banks fared better with the 0.62% drop in their sector index as GARAN held up well following its underperformance for the previous day. EREGL, CCOLA, AYGAZ, and ANHYT were the only other gainers in the BIST100 space while ENKAI, THYAO, PGSUS, ASELS, KOZAL, KOZAA, KRDMD, ULKER, and EKGYO topped the decliners. Today, our local macro agenda involves January'20 Balance of Payments data due at 10AM local time. Bloomberg survey puts the monthly CA deficit at USD2.60bn vs the USD0.61bn deficit recorded for the same month of 2019. The Minister of Health announced late last night that a male Turkish citizen is diagnosed with coronavirus in the first confirmed case in the country. The minister noted the patient contracted the virus from Europe and that his family and people who had close contact with him are under monitoring. Lira is stronger vs the greenback with USDTRY at 6.1390 vs 6.1598 at yesterday’s close, but we still project a negative open for the BIST given the weakness in international equity markets. U.S. futures are down almost 3% in early trades but we note their 3.3-3.8% overnight gains from the hour we left while Asian indices are almost all trading in the red.
Macro and Political News:
(-) Turkey confirms first coronavirus patient, recently returned from Europe… Turkey confirmed on Tuesday its first coronavirus case and said the affected person was a Turkish man who had been put into isolation in hospital. Health Minister Fahrettin Koca said in a press conference late on Tuesday ministry that the person contracted the virus while traveling to Europe. He also urged Turkish citizens against traveling abroad and asked those returning to administer self-quarantine for 14 days. Family members of the patient are under observation, Koca said. Also, the minister urged people not to be alarmed by the diagnosis, saying the country had still steered clear of an outbreak. The minister said that the coronavirus is not strong enough to break through the measures taken by Turkey. Earlier on Tuesday, Koca said he would meet with the education minister in coming days and discuss temporally closing schools. He added that the Turkish presidency can publish a notice restricting civil servants’ international travel except in obligatory cases.
(=) Erdogan: EU and NATO must support Turkey to protect civilians, establish cease-fire in Idlib… President Erdogan spoke to journalists on his way back from Brussels where he met with high-level representatives of the EU and NATO on Monday. Erdogan said that the EU and NATO have to support the protection of civilians and the establishment of a cease-fire in Syria’s northwestern Idlib province. Also, President Erdogan stressed that letting people trying to reach Europe wait at the Turkish-Greek border and subjecting them to ill treatment was not sustainable. Erdogan stated that the Idlib and refugee crisis is a test of leadership and will matter for the EU more than for us. The president further added that the application of the cease-fire and finding a permanent solution to the refugee crisis is in everyone’s best interest. Erdogan highlighted that a new process can be started with the EU.
Erdogan said that Turkey will call Greece to account for its maltreatment of innocent refugees and will expose its actions during the U.N. General Assembly this year, pointing out that Greek security forces trying to hinder migrants from crossing the border recently have killed four or five people. The president stated that in the face of the Greek demand to keep the Turkish border shut, Turkey told them that it does not consider closing it.
When asked about Turkey’s S-400 missile defense system purchase, the president said that NATO Secretary-General Jens Stoltenberg’s view on the issue was clear and that he voiced that every member has the right to choose while NATO cannot put pressure on any country regarding the issue. Erdogan stated that the U.S. has softened on the issue of the S-400, reiterating the purchase of Patriots. Speaking of the situation on the field in northwestern Syria after the announcement of the cease-fire with Russia, Erdogan said that the process was going well as four days have passed since. The cease-fire deal came amid recent clashes between the Turkish military and Syrian regime forces that left many dead on both sides. As part of the agreement, all military activities will end in Idlib and a security corridor will be established 6 kilometres deep to the north and to the south of the M4 highway. Currently, Turkish soldiers are stationed in the region to protect the local population and moderate opposition groups.
(+) Erdogan announced new summit with Macron and Merkel… President Erdogan announced on Tuesday a new summit in Istanbul with French President Emmanuel Macron and German Chancellor Angela Merkel next week on Mar 17, with possible attendance of Britain's premier, Boris Johnson. The president hinted at a new phase in relations with the EU, saying that Turkey has taken many steps and will continue doing so. He said that Turkey has paid a great price for cease-fire and protecting civilians in Idlib, Syria, now EU must do its part.
(=) Turkish FM Cavusoglu: New EU-Turkey migrant deal necessary to solve crisis… Foreign Minister Mevlut Cavusoglu highlighted the importance of upholding the migrant deal with European Union, saying that it is more than just receiving money for refugees, as he said Turkey hopes to reach a new migrant deal with the before the end of the month. Speaking on the live broadcast on the state-run Anadolu Agency’s FM Cavusoglu criticized the EU for failing to provide any support to Turkey amid the ongoing crisis in Syria’s Idlib. He said the EU wants to prevent a new migrant influx but does not give any assistance. Also, he noted that EU visa liberalization for Turkish citizens and update of customs union must be implemented to facilitate a solution for the migrant crisis. FM Cavusoglu said that the EU needs Turkey more than Turkey needs it in order to become a prominent global actor, as Europe’s borders start in Turkey's southern and eastern borders.
(=/+) Turkish and Russian defense ministers discussed Idlib ceasefire over phone call… Turkish and Russian defense ministers held a phone conversation on Tuesday to discuss the situation in the northwestern Syrian province of Idlib. Hulusi Akar and Sergey Shoygu exchanged views on ways to achieve a permanent cease-fire among conflict parties in Idlib, according to the Turkish National Defense Ministry. The fulfilment of obligations under the agreements and continuation of efforts to maintain peace and stability in the region was also emphasized during the conversation, according to the statement.
(=/+) Turkish and Russian military delegations start meetings in Ankara… The Turkish National Defense Ministry announced that under the agreement reached on March 5 in Moscow, a meeting between Turkish and Russian military delegations started on Tuesday in the capital Ankara. Under the agreement, all military activities are to end in Idlib with the establishment of a security corridor 6 kilometres to the north and south of the key M4 highway. Also, joint Turkish-Russian patrols will also begin on March 15 along the M4 highway from the settlement of Trumba - 2 km to the west of Saraqib - to the settlement of Ain al-Havr, according to the deal.
(=/-) Turkish unemployment rate rises to 13.7% in December… Turkey’s unemployment rate rose to 13.7% in December 2019 from 13.3% a month earlier. The figure was marginally up from the same month of the previous year, rising 0.2%, according to the Turkish Statistical Institute (TurkStat). The number of jobless aged 15 and over in the country reached 4.4 million by the end of last year – a rise of 94,000 from November 2018. On a monthly basis, December’s figure also rose 0.4%, when unemployment stood at 13.3% in November 2019. The unemployment rate in December was well above the government’s target of 12.9% for 2019 under its economic program announced last September. Turkey’s employment rate rose to 44.7% – almost 28.17 million people – in December last year, rising 0.7% from December 2018. The youth unemployment rate among people aged 15-24 years hit 25%, a rise of 0.5 percentage points during the same period. The rate of those neither in employment nor in education realized as 25.4% with 0.5 percentage points increase compared with the same period of the previous year. The labour force participation rate slipped 0.6 percentage points on an annual basis, falling to 51.8% in December last year. To remind, the new economic program estimates the unemployment rate will decrease gradually to hit 9.8% in 2022.
(+) Turkey breaks export record… The head of the Turkish Exporters’ Assembly said on Tuesday that Turkey has hit new export records, one after another. Turkey's exports totalled USD29.4bn, up 4.3% in the first two months of 2020, on a yearly basis, while in 2019 its exports rose 2.1% to reach USD171.5bn.
(=) Turkish Treasury borrows over TRY10bn domestic markets… The Turkish Treasury borrowed TRY10.6bn (USD1.72bn) from domestic markets this week. Some TRY2.88bn in five-year CPI indexed Treasury bills – reopen, semi-annually, second issue – were sold in an auction on Monday. The Treasury bills will be settled on Wednesday and mature on Jan. 29, 2025. The total tender amounted to TRY6.07bn with a 47.5% accepted/tendered rate. The Treasury said the term rate of the 1,785-day Treasury bills was accepted at 1.20%, while the annual simple and compound interest rates were 2.39% and 2.41%, respectively. In another auction on Tuesday, the Treasury issued 15-month zero coupon Treasury bills – first issue – totalling TRY4.89bn. The bonds will be settled on Wednesday with a maturity date of March, 11, 2020.
The total tender in the second auction amounted to TRY8.83bn with a 55.4% accepted/tendered rate. The term rate of 455-day government bonds was accepted at 14.12%, while the annual simple and compound interest rates were 11.30% and 11.14%, respectively. In the last auction on Tuesday, seven-year floating rate bonds (semi-annually, reopen, fifth issue) were sold, totalling TRY2.84bn. The bonds will also be settled on Wednesday with a maturity date of Nov. 14, 2026.
The third auction's total tender was TRY5.66bn with a 50.1% accepted/tendered rate. The 2,429-day government bonds were accepted at 7.21%, while the annual simple and compound interest rates were 14.41% and 14.93%, respectively.

Sector and Company News:

(=) THYAO announced that it has reduced flights to Israel due to coronavirus.

(=/-) YATAS posted TL19mn net income, down by 45% YoY, 25% below the consensus estimate of TL26mn. Revenues increased by 20% YoY to TL327mn in line with the consensus estimate of TL325mn. However, YATAS’ EBITDA was up by 81% YoY, 58% above the consensus estimate of TL52mn. YATAS reached 42.2% GP margin in this quarter, 50bps lower than the last year’s same quarter. Note that reason behind the significantly higher than expected EBITDA margin is IFRS16 implementation, which has not been implemented to its P&L statements in the first three quarters of the year. As a result we see a TL32mn decline in rent expenses, which is capitalized in the balance sheet under “right of use assets (TL62mn)”, resulted with a TL38mn increase in D&A expenses. Note that liabilities side of the “right of use assets” is short term and long term lease payables coming from the obligations of the rent agreements. In addition, we see a YoY double up in advertising expenses to TL24mn in 4Q19 coupled with the 70% YoY increase in consultancy expenses to TL2mn. Transportation expenses, TL19mn, was also 55% higher than the previous year’s same quarter. Increase in these OpEx items stem from YATAS’ recent initiations related to Divan Home concept and entering Russia and USA market. In 4Q19, YATAS added 12 new dealers (2 Enza Home, 10 Yatas Bedding). As of Dec19, the Company reached 444 total stores, (Owned stores: 73 – Dealers: 371) Opening 100 new Divan Home stores and 35 new Enza Home and Yatas Bedding stores in 2020 in Turkey will be the key catalysts to maintain YATAS’ strong top-line growth. 40 of 100 new franchise agreements target has already been signed and these stores are expected to be operational until Apr20. We have a “BUY” recommendation for YATAS with a 12M target price of TL12.20.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 327 325 326 1% 272 20% 283 16%
EBITDA 82 52 49 58% 46 81% 37 122%
margin 25,1% 16,0% 14,9% 9,1 pps 16,7% 8,4 pps 13,0% 12,1 pps
Net profit 19 26 24 -25% 35 -45% 25 -23%
margin 5,8% 7,9% 7,4% -2 pps 12,8% -6,9 pps 8,8% -2,9 pps
Net Debt/EBITDA (x) 0,9 1,0 -9 bps 1,3 -36 bps
EV/EBITDA 5,9 5,6 6,9
P/E 11,8 8,9 9,4
ROE (%) 22% 25% -2 pps 27% -5 pps
Net debt 183 143 28% 211 -13%
Working capital 226 141 61% 212 7%
Δ in WC 15 0 -54123% 46 -68%
CapEx -19 -36 -47% -23 -15%
FCF to firm 43 4 996% -38 -212%
Shareholders' Equity 390 307 27% 373 4%


ASUZU posted TL40mn net profit in 4Q19, indicating an increase of 309% YoY and higher than the TL2mn net loss in 3Q19. ASUZU’s revenues and EBITDA surged by 89% and 771% YoY respectively in 4Q19.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 605 n.a n.a n.a 320 89% 254 139%
EBITDA 63 n.a n.a n.a 7 771% 19 234%
margin 10.4% n.a n.a n.a 2.3% 8.2 pps 7.4% 3 pps
Net profit 40 n.a n.a n.a 10 309% -2 -1878%
margin 6.6% n.a n.a n.a 3.0% 3.5 pps -0.9% 7.5 pps
Net Debt/EBITDA (x) 2.55 6.08 -354 bps 5.12 -257 bps
EV/EBITDA 8.4 11.9 14.4
P/E 37.6 -6.4 -95.6
ROE (%) 3.9% -14.8% 19 pps -1.6% 5 pps
Net debt 359 546 -34% 436 -18%
Working capital 240 403 -41% 365 -34%
Δ in WC -125 -66 90% 1 -12270%
CapEx -26 -19 37% -18 45%
FCF to firm 168 52 225% 3 5383%
Shareholders' Equity 564 545 4% 525 7%


DGKLB posted TL45mn net loss in 4Q19. The company had TL2mn net profit in 4Q18. DGKLB’s revenues and EBITDA increased by 3% and 24% YoY respectively in 4Q19.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 160 n.a n.a n.a 155 3% 139 15%
EBITDA 11 n.a n.a n.a 9 24% 11 -5%
margin 6.6% n.a n.a n.a 5.5% 1.1 pps 8.0% -1.4 pps
Net profit -45 n.a n.a n.a 2 -2946% 0 12002%
margin -28.0% n.a n.a n.a 1.0% -29 pps -0.3% -27.8 pps
Net Debt/EBITDA (x) 6.56 11.60 -504 bps 6.28 28 bps
EV/EBITDA 12.7 19.5 10.7
P/E -6.3 -2.9 -15.7
ROE (%) -544.3% 2419.2% -2964 pps -42.2% -502 pps
Net debt 446 373 20% 414 8%
Working capital 229 168 36% 229 0%
Δ in WC 0 22 -100% 22 -100%
CapEx -9 -1 936% -3 187%
FCF to firm 9 -22 -140% -9 -197%
Shareholders' Equity 12 -4 -425% 44 -73%


TBORG posted TL145mn net profit in 4Q19, indicating an increase of 175% YoY, while bottom line was down by 28% QoQ. TBORG’s revenues and EBITDA rose by 15% and 19% YoY respectively in 4Q19.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 595 n.a n.a n.a 518 15% 723 -18%
EBITDA 201 n.a n.a n.a 169 19% 333 -40%
margin 33.8% n.a n.a n.a 32.6% 1.2 pps 46.1% -12.3 pps
Net profit 145 n.a n.a n.a 53 175% 200 -28%
margin 24.4% n.a n.a n.a 10.2% 14.2 pps 27.7% -3.3 pps
Net Debt/EBITDA (x) -0.17 -0.12 -5 bps 0.23 -40 bps
EV/EBITDA 5.8 5.4 3.9
P/E 10.6 7.1 7.9
ROE (%) 33.5% 30.4% 3 pps 29.7% 4 pps
Net debt -132 -66 101% 171 -177%
Working capital 912 783 17% 1,062 -14%
Δ in WC -150 139 -208% -47 218%
CapEx -96 -82 17% -77 25%
FCF to firm 221 -65 -441% 253 -12%
Shareholders' Equity 1,306 1,405 -7% 1,161 13%


TMSN posted TL12mn net loss in 4Q19. The company had TL9mn net loss in 4Q18. TMSN’s revenues rose by 52% YoY while its EBITDA was in negative territory at TL13mn in 4Q19.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 125 n.a n.a n.a 83 52% 64 95%
EBITDA 0 n.a n.a n.a -13 -97% -2 -79%
margin -0.4% n.a n.a n.a -16.3% 16 pps -3.2% 2.9 pps
Net profit -12 n.a n.a n.a -9 23% -5 141%
margin -9.2% n.a n.a n.a -11.4% 2.2 pps -7.4% -1.8 pps
Net Debt/EBITDA (x) -86.90 -91.65 475 bps -14.03 -7287 bps
EV/EBITDA -279.8 -383.9 -48.5
P/E -16.7 -23.3 -17.1
ROE (%) -4.7% -5.6% 1 pps -6.5% 2 pps
Net debt 259 162 59% 225 15%
Working capital 252 237 6% 220 15%
Δ in WC 32 37 -13% -28 -213%
CapEx -1 -1 -1% -2 -33%
FCF to firm -33 -49 -33% 27 -219%
Shareholders' Equity 732 400 83% 499 47%


SNGYO posted TL169mn net profit in 4Q19, indicating a decline of 50% YoY, while bottom line was up by 107% QoQ. SNGYO’s revenues and EBITDA rose by 402% and 401% YoY respectively in 4Q19.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 929 n.a n.a n.a 185 402% 186 401%
EBITDA 198 n.a n.a n.a 29 591% -13 -1616%
margin 21.3% n.a n.a n.a 15.4% 5.8 pps -7.0% 28.3 pps
Net profit 169 n.a n.a n.a 337 -50% 81 107%
margin 18.1% n.a n.a n.a 182.1% -164 pps 43.8% -25.7 pps
Net Debt/EBITDA (x) 8.49 -67.65 7614 bps 13.41 -492 bps
EV/EBITDA 10.7 -74.4 16.4
P/E 4.4 -1.6 2.0
ROE (%) 38.5% -56.1% 95 pps 97.6% -59 pps
Net debt 3,629 3,246 12% 3,464 5%
Working capital 1,997 2,145 -7% 2,307 -13%
Δ in WC -310 62 -600% 17 -1880%
CapEx 0 0 n.a. -1 -112%
FCF to firm 508 -33 -1619% -31 -1725%
Shareholders' Equity 563 350 61% 395 42%


TRCAS posted TRY58mn net loss in 4Q19 vs. the TRY45mn net income in 3Q19. The company’s revenue was up by 48% QoQ from TRY8mn to TRY12mn and EBITDA posted TRY4mn in 3Q19.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 12 n.a n.a n.a 13 -14% 8 48%
EBITDA 4 n.a n.a n.a 5 -29% 0 -1029%
margin 32.5% n.a n.a n.a 39.6% -7 pps -5.2% 37.7 pps
Net profit -58 n.a n.a n.a 51 -214% 45 -228%
margin -499.9% n.a n.a n.a 377.9% -877.8 pps 579.9% -1079.8 pps
Net Debt/EBITDA (x) 51.5 39.6 1190 bps 42.2 930 bps
EV/EBITDA 103.8 61.1 78.5
P/E -21.7 -2.8 6.1
ROE (%) -6% -23% 17 pps 14% -19 pps
Net debt 612 664 -8% 567 8%
Working capital -28 -22 27% -26 7%
Δ in WC -2 10 -120% -3 -28%
CapEx -6 -4 48% -4 49%
FCF to firm 3 -14 -123% -3 -208%
Shareholders' Equity 520 561 -7% 581 -10%

ODAS posted TRY126mn net loss in 4Q19, down by -381% QoQ from TRY45mn in 3Q19. The revenue has been TRY206mn, down by 21% QoQ and the company’s EBITDA has been TRY59mn, down by 15% QoQ.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 206 n.a n.a n.a 211 -3% 261 -21%
EBITDA 59 n.a n.a n.a 37 60% 69 -15%
margin 28.7% n.a n.a n.a 17.5% 11.3 pps 26.6% 2.1 pps
Net profit -126 n.a n.a n.a 20 -745% 45 -381%
margin -61.0% n.a n.a n.a 9.2% -70.2 pps 17.1% -78.2 pps
Net Debt/EBITDA (x) 7.7 23.1 -1539 bps 7.9 -16 bps
EV/EBITDA 12.3 27.0 10.3
P/E -5.5 -1.0 -12.1
ROE (%) -23% -30% 7 pps -4% -19 pps
Net debt 1,765 1,551 14% 1,626 9%
Working capital -13 -115 -89% -73 -82%
Δ in WC 60 -24 -354% -22 -368%
CapEx -5 -1,246 -100% -17 -69%
FCF to firm 2 -1,452 -100% 76 -97%
Shareholders' Equity 806 829 -3% 942 -14%


GUBRF posted TRY87mn net loss in 4Q19, 93% more than TRY45mn net loss in 3Q19. The revenue has been TRY956mn, up by 16% QoQ and the company’s EBITDA has been -100k in 3Q19.


TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 956 n.a n.a n.a 1,345 -29% 821 16%
EBITDA 0 n.a n.a n.a 350 -100% 144 -100%
margin 0.0% n.a n.a n.a 26.0% -26 pps 17.5% -17.5 pps
Net profit -87 n.a n.a n.a 73 -219% -45 92%
margin -9.1% n.a n.a n.a 5.4% -14.5 pps -5.5% -3.6 pps
Net Debt/EBITDA (x) 3.6 1.5 215 bps 1.5 209 bps
EV/EBITDA 16.4 2.6 4.0
P/E -34.7 -11.7 182.8
ROE (%) -27% -10% -17 pps 2% -29 pps
Net debt 1,465 1,241 18% 1,145 28%
Working capital 755 977 -23% 544 39%
Δ in WC 211 312 -32% 257 -18%
CapEx -30 -13 138% -33 -9%
FCF to firm -234 -92 154% -142 64%
Shareholders' Equity 555 851 -35% 665 -17%
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Raiffeisen Bank International AG - Institutional Equity

The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.

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