Turkey Wake up call: Macro, Political and Equity News, 13th 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 took a 7.26% dive yesterday as the meltdown in global markets weighed on Turkish stocks as well. Index moved mostly downwards from 99k touched in early trades down to 93k before staging a 600-point recovery in the last 1.5 hours. Banks were down 8.06% on average with GARAN taking a hit after two days of resilience. The two listed drug/sanitary-goods producers (ECILC and DEVA) and ALKIM were the only three names to close the day higher within the BIST100 space while THYAO, AEFES, TTKOM, SISE, ASELS, MPARK, GOZDE, VESTL, BIZIM, and MGROS were among the hardest hit non-financials. Turkey decided last night to close schools for 1 week (followed by online education for another week) and universities for 3 weeks from Monday, 16-March and all sports events will be held without spectators until end-April as the government stepped up its responses to the coronavirus outbreak. Separately, BIST altered the daily price limits as well as circuit breaker rules to stem the volatility in the listed stocks and derivatives effective today and until further announcements. Accordingly, the daily price margin for the shares classified in BIST Stars and BIST Main Market to 10% from 20% (was 15% for BIST Main-Group2) previously. Price change triggering circuit breaker in BIST Stars and BIST Main Market has been reduced to to 5% from 10% and the circuit-breaker call period is extended to 30 minutes (from 5 minutes for BIST Stars, 15 minutes for BIST Main-Group1, and 25 minutes for BIST Main-Group2). Similarly, daily margins for equity index futures are cut to 10% from 15%, and for single stock futures to 10% from 20%. Coming to this morning, there seems to be an attempt for recovery in peer markets after last night’s rout and we accordingly anticipate a flattish start for the BIST. Lira is also stable around the 6.30 mark vs greenback, up from early morning lows of 6.32 and in line with the levels at the time of yesterday’s BIST closing. U.S. futures are up 2.6% this morning, reversing the 2.2-2.9% overnight losses from when we left while Asian markets are mostly in the red despite their rebound from bigger losses earlier.
Macro and Political News:
(=) Turkey ramps up measures to prevent coronavirus spread… Presidential office spokesman Ibrahim Kalin told reporters at a news conference following a five-hour meeting at the presidential complex on the Covid-19. Kalin said that President Erdogan postponed foreign visits amid the global coronavirus outbreak Also, Kalin announced primary, middle and high schools would be closed for a week beginning March 16. The one-week break will be brought forward, he said, referring to the break originally scheduled for April. Then, as of March 23, students will continue their education through the Internet and television with the remote education system. Universities will also be closed for three weeks starting March 16. He added that necessary precautions will be taken not to pause university education. All sporting events in the country until the end of April will be without fans.
(+) Turkey and Russia reached agreement to a large extent… Turkey’s Defense Minister Hulusi Akar said that Turkish and Russian delegations, which have been holding talks for the past two days regarding the implementation of the fresh cease-fire in Idlib have reached an agreement “to a large extent”. Recall, a Russian military delegation arrived in the Turkish capital of Ankara on March 10 evening, for talks on the details of the ceasefire. Akar said that the delegations have mostly reached an agreement, yet if the ceasefire breaks down, Turkey is ready to “start from where it left off”. To remind, the ceasefire protocol stipulates the establishment of a secure corridor 6 kilometres north and 6 km south from the M4 highway in Idlib. The parameters of the security corridor were to be completed in seven days, which expire on March 12. According to the agreement, Turkish and Russian forces will begin patrols along the M4 highway on March 15. The patrolling will take place from the Trumba settlement, some 2 kilometres to the west of Saraqib, to the Ain-Al-Hawr settlement. Akar said that the joint patrols are set to start on March 15, yet details are currently being discussed between Turkish and Russian officials. The minister stressed that if something like this happens, Turkey is ready to start from where we left off. Also, he said that the withdrawal of Turkish troops from Idlib is not in question.
(+) Kremlin: Erdogan and Putin praise decrease in tensions in Idlib… Kremlin said that President Erdogan and his Russian President Vladimir Putin praised Thursday a significant decrease in tensions in the Idlib de-escalation zone in Syria. The Kremlin released a statement after the two leaders spoke by phone. It said that the two leaders, who last week agreed on a ceasefire in Syria’s northwestern Idlib region, also pledged to continue joint work to ensure a sustainable ceasefire regime and further stabilization of the situation.
(+) Turkish Treasury borrows USD1.4bn from domestic markets… Turkey’s Ministry of Treasury and Finance issued on Thursday Euro-dominated government debt securities and lease certificates to borrow EUR1.26bn (USD1.41 bn) from domestic markets. Both government debt securities (EUR1.005 bn) and lease certificates (EUR255mn) have 0.75% coupon rate semi-annually. Securities and certificates will be settled on Friday, and mature on March 12, 2021. This week, the Treasury also borrowed TRY10.6bn (USD1.72bn) in three auctions.
(=) Changes in price limits at Equity and Derivatives Markets… The price margin, circuit breaker triggering rate and the circuit breaker order collection period applied in the equities traded in BIST Stars and BIST Main Market and the daily price limits applied in the Single Stock and Equity Index Futures traded in the Derivatives Market have been changed as of 13/03/2020 (today) to be valid until a second announcement as decided by the General Directorate. In this regards, in the Equities Market,
• Price margin (for determining price limits) of the shares traded in BIST Stars and BIST Main Market has been reduced to 10%,
• Price change triggering circuit breaker in BIST Stars and BIST Main Market has been reduced to 5%,
• Circuit breaker call period will be 30 minutes in BIST Stars and BIST Main Markets,
• Circuit breaker uncross period time will remain as 2 minutes in BIST Stars and BIST Main Markets,
• Price margin (for determining price limits) in Exchange Traded Funds, Real Estate Certificates, Real Estate Investment Funds and Venture Capital Investment Funds has been reduced to 10% from 20%,
• Price margin in Rights Coupons will remain as 50%.
In the Derivatives Market, daily price limits of Single Stock and Equity Index (BIST30, BIST Bank, BIST Industrial, BIST Liquid Bank and BIST Liquid 10 Ex Banks) futures contracts have been decreased to 10%.

Sector and Company News:
ENKAI bought 300k lots of its own shares with TL5.54-5.60 price range per share.

(+) TAVHL announced a share buyback program. Accordingly, TAVHL reserved TRY200mn for not exceeding 36.3mn lots of shares that correspond to 10% of the total equities of the firm.

Two of ODAS’s main shareholders sold some of their stakes in the company. Accordingly, Abdulkadir Bahattin Ozal sold 12.3mn lots of ODAS shares between TL1.29-1.50 and its shares declined to 6%. Hafize Aysegul Ozal sold 0.5mn lots of ODAS shares between TL1.29-1.50 and its shares declined to 0.38%.

(=) PGSUS announced its traffic results for Feb20. Accordingly its total pax increased by 7.9% YoY to 2.33mn, bringing 2M pax to 4.91mn (with 8.9% growth YoY)Domestic pax advanced by 2.5% YoY to 1.28mn while its international pax rose by 15.1% to 1.04mn. Overall load factor was down by 300bps YoY to 87.7%.

GUBRF announced that it will receive IRR670mn (~TL27.5mn) dividend from its subsidiary Razi Petrochemicals

MAVI posted TL8mn net profit in 4Q19 compared to TL2mn net loss in 4Q18. MAVI’s revenues and EBITDA increased by 24% and 116% YoY in 4Q19, respectively. IFRS16 implementation is the main reason of the significant increase in EBITDA level. According to the management’s 2020 guidance, MAVI expects a 23% (+-2%) top-line growth and LFL growth of 18% (+-1%). EBITDA margin expectation is 14%, same as 2019’s EBITDA margin. Management targets to open 15 new stores and sqm expansion in its 10 stores. In this regards, CapEx target is around 4% of net sales.

TRYmn 4Q19 Consensus Global Securities Dev. from consensus 4Q18 YoY 3Q19 QoQ
Revenue 715 697 n.a 3% 575 24% 808 -12%
EBITDA 133 71 n.a 88% 62 116% 210 -37%
margin 18,6% n.a n.a n.a 10,7% 7,9 pps 26,0% -7,3 pps
Net profit 8 13 n.a -35% -2 -439% 59 -86%
margin 1,2% n.a n.a n.a -0,4% 1,6 pps 7,3% -6,1 pps
Net Debt/EBITDA (x) 0,7 0,3 40 bps 0,8 -12 bps
EV/EBITDA 4,0 5,9 4,9
P/E 22,5 22,4 27,3
ROE (%) 21% 27% -7 pps 19% 2 pps
Net debt 448 109 309% 467 -4%
Working capital 130 116 12% 156 -17%
Δ in WC -27 -28 -5% 13 -311%
CapEx -27 -23 16% -21 28%
FCF to firm 131 64 103% 158 -17%
Shareholders' Equity 460 334 38% 444 4%

According to the weekly banking data, total loans last week remained flattish compared previous week; while consumer loans and SME loans increased by 76 and 47 bps w/w respectively, commercial loans indicated a slight contraction by 9 bps together with 1.32% decrease in consumer credit cards in the same time frame. GPL segment of the consumer loans grew by the largest percentage, 9.37% y-t-d. The regulation of CBRT regarding the reserve requirements to control the rapid growth in GPL will be effective by March 20, that is why it requires more time to be able to measure its probable effects.
NPL ratio of the total banking sector continues its declining trend, with the banks’ prudent and selective stance on loan growth. Since the beginning of the year, NPL ratio improved substantially by 340 bps, and the largest contribution for the declining trend sourced from mortgage loans.
As for the deposits, 40 bps of slight decline has been evident in total deposits w/w, while official and other institutions increased their deposits by 1.15%, commercial institutions’ deposits declined by 1.46% w/w.
Total FX deposits of residents continued its trend, up from USD107bn the week before to USD108bn by 70 bps last week for the real persons. Resident corporates’ FX deposit increased larger than the real persons, 2.04% w/w.

(TL, mn) 06/03/2020 28/02/2020 07/02/2020 08/03/2019 03/01/2020 w/w y-t-d
Total Loans 2,769,049 2,768,777 2,691,714 2,433,100 2,646,894 0.01% 4.62%
Consumer Loans 500,955 497,183 483,950 396,566 467,381 0.76% 7.18%
Housing 208,417 207,102 203,858 183,336 199,268 0.64% 4.59%
Vehicle 7,016 7,014 6,958 6,262 7,051 0.04% -0.49%
GPL 285,522 283,068 273,133 206,968 261,062 0.87% 9.37%
Consumer Credit Cards 115,017 116,551 116,872 100,447 116,791 -1.32% -1.52%
Commercial and Other Loans 2,153,077 2,155,043 2,090,892 1,936,087 2,062,722 -0.09% 4.38%
Installment Commercial Loans and Corporate Credit Cards 458,612 456,169 440,635 403,107 434,411 0.54% 5.57%
SME Loans 640,995 638,014 621,739 616,131 611,735 0.47% 4.78%
Fx Indexed Loans 10,521 10,647 11,021 28,474 11,808 -1.18% -10.90%

(TL, mn) 06/03/2020 28/02/2020 07/02/2020 08/03/2019 03/01/2020 w/w y-t-d
Non Performing Loans 152,360 152,581 152,080 105,051 150,758 -0.14% 1.06%
Consumer Loans 13,736 13,705 13,576 12,558 13,355 0.23% 2.86%
Housing 1,223 1,231 1,251 1,075 1,269 -0.67% -3.63%
Vehicle 198 199 204 222 201 -0.65% -1.58%
GPL 12,316 12,275 12,121 11,261 11,885 0.34% 3.63%
Consumer Credit Cards 6,544 6,510 6,441 6,602 6,323 0.52% 3.49%
Commercial and Other Loans 132,080 132,366 132,062 85,891 131,081 -0.22% 0.76%
NPL Ratio 5.50% 5.51% 5.65% 4.32% 5.70% -0.15% -3.40%

(TL, mn) 06/03/2020 28/02/2020 07/02/2020 08/03/2019 03/01/2020 w/w y-t-d
Total Deposits 2,674,176 2,684,844 2,605,501 2,106,845 2,567,331 -0.40% 4.16%
Natural Person 1,661,914 1,662,173 1,615,923 1,311,345 1,595,204 -0.02% 4.18%
Demand 411,854 407,149 381,105 250,366 360,147 1.16% 14.36%
Time 1,250,061 1,255,024 1,234,818 1,060,979 1,235,056 -0.40% 1.21%
Commercial Institutions 837,513 849,912 830,787 657,877 817,594 -1.46% 2.44%
Demand 247,965 252,948 235,612 164,246 220,838 -1.97% 12.28%
Time 589,548 596,964 595,175 493,631 596,757 -1.24% -1.21%
Official and Other Institutions 174,749 172,760 158,790 137,623 154,533 1.15% 13.08%
Demand 32,789 41,466 32,436 29,068 33,914 -20.93% -3.32%
Time 141,960 131,293 126,355 108,555 120,619 8.12% 17.69%
Deposits Subject to Insurance 728,763 724,552 710,844 507,208 698,978 0.58% 4.26%

Total Fx Deposits with Banks (USD, mn) 217,521 216,177 216,490 188,907 214,542 0.62% 1.39%


(USD, mn) 06/03/2020 28/02/2020 07/02/2020 08/03/2019 03/01/2020 w/w y-t-d
Total FX Deposits of Residents 187,175 185,381 183,857 168,279 184,087 0.97% 1.68%
Real Persons 107,596 106,844 106,923 95,979 107,919 0.70% -0.30%
Dolar ($) 71,918 71,393 72,308 65,324 73,788 0.74% -2.53%
USD Eqv. of Euro 33,170 33,026 32,228 28,647 31,705 0.44% 4.62%
Corporates 75,989 74,473 73,419 67,225 72,360 2.04% 5.02%
Dolar ($) 36,269 35,009 35,107 37,707 37,364 3.60% -2.93%
USD Eqv. of Euro 38,672 38,475 37,229 28,813 34,181 0.51% 13.14%

According to the CBRT weekly securities data, non-residents sold USD270mn of equities and USD380mn of GDDS for the week of Feb 28 – Mar 06. Since the beginning of the year, total outflow from equities has been USD1.31bn and USD2.71bn from GDDS.