Turkey Wake up call: Macro, Political and Equity News, 14th 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 climbed 0.55% yesterday on its continued momentum from Tuesday and despite the pressure on international peers. After an indecisive open, BIST100 index turned north and gradually climbed to 100.8k levels by mid-afternoon. Some of the gains fizzled out in last two hours of trading, but the benchmark still managed to close the day above the 100k mark. Banks were a drag on the broader market as their sector index was down 0.30% for the day. Strength in some industrial names like ASELS, TTKOM, TOASO, CCOLA, ULKER, VESTL, GUBRF, ALKIM, Koza Group stocks, and pharma/sanitary products companies underpinned the index while EKGYO, TUPRS, PETKM, MGROS, PGSUS, and KCHOL topped the decliners. Today, our local macro agenda highlight will be the March'20 Industrial Production numbers due at 10AM local time. Bloomberg consensus +1.6% yoy based on the estimates for calendar-adjusted series and -4.0% mom based on the seasonally & calendar-adjusted series. BIST is off to a slight negative open given the sour sentiment among global peers while continued gains in lira (USDTRY at 6.9665 vs 6.9787 at yesterday's closing bell) may provide some cushion. U.S. futures are down 0.15% in early trades on top of the 1.0-1.1% overnight losses from when we left and Asian markets are all trading in the red.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 3952... According to the Health Ministry, the number of deaths from coronavirus increased by 58 people yesterday and reached 3952. The total numbers of tested and infected people are 1.47mn and 143,114 in Turkey.

(-) Current account deficit for March... According to the data released by the Central Bank of Turkey, the current account deficit has been announced at USD4.92bn for March 2020, where the market consensus was USD3.6bn deficit. The March data brought the 1Q20 current account deficit to USD7.64bn.
Sector and Company News:

(=/+) VAKBN sold “Cubes Ankara Project” which consists of residents and commercial units to its subsidiary VKGYO for TRY252.5mn on Wednesday. The payment has been set 4 instalment periods to be paid every 6 months. This project corresponds to 14% of the REIC’s total assets.

(=) HALKB is to release its 1Q20 earnings today after markets close. The consensus estimate TRY845.0mn net income in 1Q20 vs. TRY923.0mn Global estimate.

(=) BIMAS is to announce its 1Q20 results today after market close. We expect TL11,573mn of revenues (+28% YoY), TL862mn of EBITDA (+32% YoY – 0.3pps increase in margin) and TL360mn of net profit (+67% YoY). Consensus’ revenue, EBITDA and net profit expectations are TL11,753mn, TL899mn and TL376mn, respectively.

(=) According to Yeni Safak daily newspaper, Ataturk shares on Is Bankasi (ISCTR) which corresponds to 28.09% of the bank will be transferred to the treasury from Republican People’s Party (CHP) after Ramadan holiday. To remind, CHP has privilege to assign 4 board members to the bank only and is not able to receive dividends from the bank according to the political parties law.

(+) TTKOM reported TL661mn net income in 1Q20, up by 113% YoY. TTKOM’s net income is also 18% above our estimate of TL562mn and 15% above the consensus. Higher than expected bottom line is mainly attributable to lower than expected financial expenses in 1Q20. TTKOM’s consolidated revenues advanced to TL 6.3bn, up by 16.6% YoY. Excluding IFRIC 12 accounting impact, TTKOM’s revenue growth was 13.4% YoY. On the other hand, its EBITDA climbed by 12.1% YoY to TL3.0bn with an EBITDA margin of 47.2%. Excluding
IFRIC 12 impact, EBITDA margin was 48.9%. During 1Q20, TTKOM generated TL1.6bn operating free cash flow (including CAPEX) compared to TL1.4bn a year ago. The improvement was mainly due to strong EBITDA growth and improvement in working capital. TTKOM’s net debt also declined to USD2.5bn from USD3bn in 1Q19, with a net debt to EBITDA multiple of 1.38x, which is the lowest level over the past five years.) TTKOM’s net FX exposure continued to decline as its net FX exposure declined to USD225mn from USD664mn in 1Q19.

Following its 1Q20 results, TTKOM management revised their 2020E guidance. Accordingly revenue growth guidance slighlty revised down to 13% from 14% but EBITDA guidance slightly increased to TL12.4bn – TL12.6bn from TL12.4bn. CAPEX guidance is revised up to TL6.4bn from TL5.8bn.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 6,303 6,228 6,233 1% 5,403 17% 6,284 0%
EBITDA 2,925 2,942 2,951 -1% 2,619 12% 2,839 3%
margin 46.4% 47.2% 47.3% -0.8 pps 48.5% -2.1 pps 45.2% 1.2 pps
Net profit 661 577 562 14% 310 113% 545 21%
margin 10.5% 9.3% 9.0% 1.2 pps 5.7% 4.7 pps 8.7% 1.8 pps

2020 Q1 2019 Q4 2019 Q1
Operational Data
Total Access Lines (mn) 14.8 14.6 14.5
Fixed Voice Subscribers¹ (mn) 10.1 10.0 9.9
Naked Broadband Subscribers (mn) 4.6 4.6 4.6
Fixed Voice ARPU (TL) 22.3 22.2 22.7

Broadband Total Subscribers (mn) 11.6 11.4 11.0
Fiber Subscribers (mn) 4.4 4.2 3.7
FTTH/B (mn) 1.7 1.6 1.4
FTTC (mn) 2.7 2.6 2.3
Broadband ARPU (TL) 53.5 52.0 47.1
Total TV Subscribers2 (thousand) 3,414.0 3,470.0 3,660.0
Tivibu Home Subscribers3 (thousand) 1,595.0 1,605.0 1,681.0
Home TV ARPU 18.2 18.0 15.1

Mobile Total Subscribers (mn) 23.2 22.9 22.1
Mobile Postpaid Subscribers (mn) 14.0 13.7 12.8
Mobile Prepaid Subscribers (mn) 9.2 9.3 9.3
Mobile Blended ARPU (TL) 32.5 33.4 30.6
Mobile Postpaid ARPU (TL) 40.1 42.7 38.4
Mobile Prepaid ARPU (TL) 20.6 18.9 19.6
Mobile MoU (min) 440.0 438.2 440.7

Revenue Breakdown
Fixed Voice 671.0 666.0 673.0
Broadband 1,839.0 1,776.0 1,550.0
Mobile 2,273.0 2,312.0 2,022.0
TV 92.0 93.0 83.0
Corporate Data 484.0 477.0 449.0
International Revenues 306.0 275.0 222.0
Other (a) 371.0 411.0 326.0
Eliminations -20.0 -20.0 -21.0
Sub - Total Revenue 6,016.0 5,990.0 5,304.0
Construction Revenue Adjustment (IFRIC-12) 286.0 294.0 99.0
Total Revenue 6,303.0 6,284.0 5,403.0

Cash Flow
Cash Flow from Operating Activities 2,597.0 4,018.0 2,172.0
Cash Flow from Investing Activities -1,012.0 -2,118.0 -729.0
CAPEX -918.0 -2,205.0 -608.0
Other Investing Activities -94.0 87.0 -121.0
Cash Flow from Financing Activities 133.0 -1,678.0 1,492.0
Net Change in Cash Position 1,718.0 222.0 2,936.0

Net Debt/EBITDA 1.38 1.41 1.86

Net FX Position (Incl. Hedge - USD equivalent) 225.0 370.0 664.0


Guidance Old New
Revenue Growth ~14% ~13%
EBITDA TL12.4bn TL12.4-12.6bn
CAPEX TL5.8bn TL6.4bn


TUKAS posted 26mn net profit in 1Q20, significantly higher than its TL12mn bottom-line in 1Q19. While revenues grew by 39% YoY to TL216mn, its EBITDA reached to TL48mn, which jumped 37% YoY.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 216 n.a n.a n.a 156 39% 155 40%
EBITDA 48 n.a n.a n.a 35 37% 49 -1%
margin 22,3% n.a n.a n.a 22,6% -0,3 pps 31,5% -9,2 pps
Net profit 26 n.a n.a n.a 12 119% 15 74%
margin 11,8% n.a n.a n.a 7,5% 4,3 pps 9,5% 2,3 pps
Net Debt/EBITDA (x) 2,22 3,6 -140 bps 2,5 -31 bps
EV/EBITDA 27,5 14,7 23,6
P/E 36,0 26,1 31,4
ROE (%) 40% 23% 16 pps 38% 1 pps
Net debt 383 369 4% 404 -5%
Working capital 317 238 33% 325 -3%
Δ in WC -8 23 -136% -17 -51%
CapEx 4 3 24% 47 -91%
FCF to firm 52 8 566% 21 147%
Shareholders' Equity 306 186 64% 280 9%