Turkey Wake up call: Macro, Political and Equity News, 13th May

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 jumped 1.86% yesterday, putting an end to its 7-day losing streak with a bang. After an indecisive start, index turned north and gradually climbed to 98.5k by 10:30AM. The benchmark found further strength in the afternoon on sustained gains in lira that dropped below the 7.00 mark vs greenback and managed to hop above 99.5k levels during the last 1.5 hours. Banks added 1.23% on average as YKBNK and recently-lagging GARAN caught some bids while AKBNK and HALKB underperformed. TCELL, TTKOM, EKGYO, SOKM, KOZAL, KCHOL, FROTO, MGROS, ALKIM, AKSEN, and pharma/sanitary goods producers topped the gainers while PETKM, PGSUS, and TAVHL were among the handful of decliners for the day. Today, our local macro agenda highlight will be the March'20 Balance of Payments data due at 10AM local time. Bloomberg survey predicts the monthly CA deficit at USD4.43bn vs the USD0.12bn deficit recorded for the same month of 2019. We foresee a slight negative open for the BIST given c.2% overnight losses in U.S. markets after the hour we left. U.S. futures are up about 0.15% in early trades while Asian markets are trading mixed.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 3894... According to the Health Ministry, the number of deaths from coronavirus increased by 53 people yesterday and reached 3894. The total numbers of tested and infected people are 1.41mn and 141,475 in Turkey.

(=/+) EBRD released the regional economic outlook report... Accordingly, EBRD expects Turkey to grow 6% in 2021 after a 3.5% contraction in 2020.

(=) MSCI index changes released... MSCI released the index changes which will be effective by May 29. Accordingly, YKBNK has been added to MSCI Turkey Index while ARCLK has been removed. GUBRF has been added to MSCI Global Small Cap Index while KORDS has been removed.

(=) Lump-sum tax for cigarette hiked... According to the Official Gazette, the lump-sum tax for cigarette has been hiked by 17%.

Sector and Company News:

(+) AKSEN signed an agreement with Uzbekistan Energy Ministry in order to establish 240MW natural gas fired power plant in Uzbekistan and sell the electricity within 25 years. The electricity will be sold under guaranteed price, while AKSEN will procure natural gas from Uztrangaz. AKSEN will move its an idle part of Antalya natural gas power plant to Uzbekistan, while the power plant will be online within 12 months.

(=) TAVHL bought 120k lots of its own shares with TRY16.89 price per share.

(=) INDES CEO Surek said that 1Q results will lead to YoY growth, while she added that it is not fair to share any guidance for 2020E for the time being. Surek underlined that they have a share buyback plan if it is necessary.

(=/+) The Council of Shopping Centers’ president Huseyin Altas stated that on the first day the shopping malls opened, there have been total of 1.26mn people visited and the revenues have been favourable. In regular times, the number of visitors used to be around 6mn people per day.

(=) TTKOM will release its 1Q20 results today after the market closes. Also TTKOM will hold a conference call tomorrow 3:00 pm Turkish Time. We expect TTKOM to post TL562mn net income in 1Q20 (consensus: TL577mn).


TL mn 1Q20-consensus 1Q20-Home Est. 1Q19 4Q19
Revenues 6,228 6,233 5,403 6,284
EBITDA 2,942 2,951 2,619 2,839
Net Income 577 562 310 545

EBITDA Margin 47.2% 47.3% 48.5% 45.2%
Net Margin 9.3% 9.0% 5.7% 8.7%


(+) VESBE posted TL135mn net income in 1Q20 with 62% YoY growth. Its revenues and EBITDA increased by 15% YoY and 48% YoY, respectively. VESBE’s production and sales volume grew by 6% YoY and 4% YoY in 1Q20, respectively. Its CUR grew slightly by 1pps to 68% in 1Q20. Note that, sales to European countries constitute 57% of VESBE’s total sales. (Domestic: 21% - Others: 22%) Share of domestic sales was 13% in 1Q19. As a result, VESBE increased its GP margin by 3.8pps to 14.4% which supported EBITDA margin despite of the slight increase in OpEx/Net Sales. Strong operational cash-flow thanks to the increase in operational profit coupled with strong NWC management supported net debt/EBITDA ratio, which declined to 0.56x from 0.74x.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 1.595 n.a n.a n.a 1.385 15% 1.972 -19%
EBITDA 239 n.a n.a n.a 162 48% 240 -1%
margin 15,0% n.a n.a n.a 11,7% 3,3 pps 12,2% 2,8 pps
Net profit 135 n.a n.a n.a 83 62% 123 10%
margin 8,5% n.a n.a n.a 6,0% 2,5 pps 6,2% 2,3 pps
Net Debt/EBITDA (x) 0,6 0,8 -24 bps 0,7 -18 bps
EV/EBITDA 4,2 4,3 5,2
P/E 5,9 5,2 7,2
ROE (%) 32% 33% -1 pps 31% 0 pps
Net debt 566 736 -23% 684 -17%
Working capital 141 25 455% 324 -56%
Δ in WC -183 -133 38% -83 120%
CapEx 100 83 20% 134 -26%
FCF to firm 326 210 56% 190 72%
Shareholders' Equity 1.942 1.897 2% 1.806 8%