Turkey Wake up call: Macro, Political and Equity News, 24th April

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 added 0.57% on Wednesday after a day that was totally in the positive territory while bulk of earlier gains were given back. After a slight positive open, BIST100 climbed to its intraday peak around 99k by noontime, followed by some retreat, especially after 4:45PM. Banks again underperformed the broader market amid weakness in GARAN and ISCTR in particular. PGSUS, MGROS, EREGL, CCOLA, ISDMR, and MAVI were among the weaker non-financials while SOKM, ULKER, TCELL, TTKOM, ENJSA, SISE, GUBRF, and Koza Group names led the gainers. Coming to this morning, our local macro agenda involves April'20 Manufacturing Capacity Utilization Rate (which stood at an 11-month low of 75.3% in March'20 and was 75.0% back in April'19) and Real Sector Confidence index (was at a 6-month low of 99.7 in March'20 and had stood at 105.5 back in April'19) both to be released at 10AM local time. BIST seems off to a flattish start for the day given mixed moves from peer markets during Turkey's national holiday yesterday. U.S. futures are down 0.6% in early trades in reversal of their 0.5-0.6% gains since we left at Wednesday's closing bell while Asian markets are almost all trading in the red. Lira is a bit stronger with USDTRY at 6.9886 vs 6.9983 at latest BIST closing.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 2491... According to the Health Ministry, the number of deaths from coronavirus increased by 115 people yesterday and reached 2,491. The total number of tested and infected people are 791,906 and 101,790 in Turkey.

(=/+) TWF acquired State run insurance and pension companies... Turkish Wealth Fund announced that its affiliate Turkish Wealth Fund Financial Investments has acquired the State-run insurance (Gunes Sigorta , Halk Sigorta, Ziraat Sigorta) and pension companies (Vakif Emeklilik, Halk Emeklilik and Ziraat Emeklilik) in return for TL6.54bn. In a seperate announcement by GUSGR’s shareholders (Vakifbank , Vakifbank Personeli Ozel Sosyal Guvenlik Hizmetleri Vakfi and Türkiye Vakiflar Bankası TAO Memur ve Hizmetlileri Emekli ve Saglik Yardim Sandigi Vakfi) sold their 51.1% stake in GUSGR to Turkish Wealth Fund Financial Investments in return for TL613mn. This corresponds to TL2.22 per share, compared to GUSGR’s latest closing of TL2.82


Sector and Company News:

(=) ISCTR bought 4.25mn lots of SISE shares with TRY5.13 – 5.23 price range per share. Its share in SISE reached to 69.05% by this transaction.

(=) TTRAK is to announce its 1Q20 results today after market close. We expect TL1,221mn of revenues (49% YoY growth), TL154mn of EBITDA (200% YoY growth - 6.4pp margin growth) and TL64mn of net profit (744% YoY growth). Consensus’ revenue, EBITDA and net profit expectations are TL1,161mn, TL142mn and TL83mn, respectively.

(=) YATAS management decided not to distribute dividends from its 2019 Earnings. The proposal of the Board of Directors regarding distribution of dividends will be submitted to voting at the General Assembly Meeting to be held on May 15, 2020.

(=/+) Shopping malls to open up partially next month… According to the head of the council of shopping centers (AYD), shopping malls are planning to open partially by 8-15 May under strict hygienic controls. The plan is to start opening only the retail areas instead of movie, food and kids floors. However the talks between the council and Ministry of Health still continue.

PENGD decided to increase its capital from TL55.6mn to TL175mn through a right issue of 215%.

(-) TAVHL posted EUR56.1mn net loss in 1Q20, compared to EUR23.9mn net income in 1Q19. The bottom line was significantly below our estimate of EUR22mn and the consensus estimate of EUR43m. During this period, revenues (excluding Istanbul Ataturk) were down by 21% YoY, due to sharp contractions in major items, aviation income, ground handling and duty free commissions. In 1Q20, TAVHL’s total pax declined by 23% YoY to 10.6mn, with a combination of 18% and 26% YoY contractions in international and domestic pax. The lower number of passengers served was the key factor on lower YoY revenues in 1Q10. TAVHL’s consolidated EBITDA tumbled by 57% YoY to EUR16mn which was also 57% below our estimate. All in all we percieve the results as negative for TAVHL, as the results were below our estimates from the top to the bottom. Following the announcement of 1Q20 results, TAVHL announced that the recently shared guidance for 2020E is no longer valid and they are working on the revised guidance. (TAVHL management had guided 3-5% YoY pax growth, 9-11% YoY EBITDA growth in EUR terms and EUR70-75mn Capex for 2020) Recall that due to the negative impact of coronavirus pandemic, TAVHL recently announced some measurements taken by its BoD in order to reduce the costs and expenses. We believe that the TAVHL shares have lack of catalysts to invest in for the time being, as we are closely monitoring the timing of the the aviation sector to resume,, which may be the strong catalyst for TAVHL shares.


EURmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 119 118 113 1% 151 -21% 172 -31%
EBITDA 16 18 18 -12% 37 -57% 46 -65%
margin 13.6% 15.6% 15.5% 24.6% -11-pp 26.8% -13-pp
Net profit -56 -43 -22 n.m. 24 -335% 223 -125%
margin -47.3% -36.6% -19.5% 15.8% 129.6%

Revenue Breakdown 1Q20 1Q19 YoY 4Q19 QoQ
Airports 44 56 -22% 74 -41%
Ankara 9 11 -17% 16 -46%
Izmir 12 13 -8% 18 -34%
Gazipasa 0 0 -17% 1 -74%
Tunisia 2 3 -22% 6 -60%
Georgia 13 20 -37% 19 -32%
Macedonia 6 7 -13% 8 -27%
Bodrum 1 1 -6% 5 -74%
Services 87 113 -23% 122 -29%
Havas 28 27 3% 41 -31%
BTA 23 40 -42% 30 -23%
Others 36 46 -23% 51 -30%
Total 131 169 -23% 195 -33%
Eliminations -12 -18 -34% -23 -48%
Consolidated Revenue 118 151 -22% 172 -31%

# of passengers
Total 10,646,230 13,739,387 -23% 17,522,040 -39%
International 4,479,668 5,447,760 -18% 9,801,639 -54%
Domestic 6,166,562 8,291,627 -26% 7,720,401 -20%

# of Air Traffic Movements
Total 83,243 101,923 -18% 121,600 -32%
International 39,109 45,693 -14% 69,746 -44%
Domestic 44,134 56,230 -22% 51,854 -15%

EURmn
Net Debt 791 827
Total Assets 3,844 3,355
Total Liabilities 2,670 2,428
Total Equity 1,173 927