Turkey Wake up call: Macro, Political and Equity News, 28th 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 jumped 2.54% yesterday as the better mood in global markets and stability in lira propped up Turkish stocks. Index had a small positive start that marked the lowest point of the day and climbed gradually to 101.3k levels by 4PM. There was a 750-point retreat in the next hour but the market found the strength to return to its daily highs by the close. Banks led by AKBNK outperformed with the 3.79% jump in their sector index. Aviation stocks, ASELS, SAHOL, TTKOM, MPARK, and Koza Group names topped the non-financial gainers while BIMAS, ULKER, BIZIM, TKFEN, and SISE were among the rare decliners. Today, our local macro agenda involves Treasury's reissue of 2-year fixed-coupon bonds and separate sale of 6-month fixed-rate and 3.5-year CPI-indexed sukuk papers via direct placements today, wrapping up this month's heavy borrowing programme. Domestic redemption is only TL0.42bn for the week while the total for the month stands at TL20.57bn vs a domestic borrowing target of TL30.0bn while Treasury has already raised TL42.35bn in the seven auctions/placements held so far. BIST is headed for a slight positive open given sustained gains in peer markets while the small weakness in lira (USDTRY at 6.9929 vs 6.9866 at yesterday's closing bell) may create some headwinds. U.S. futures are down about 0.1% in early trades in partial reversal of the c.0.5% overnight gains after we left while Asian indices present a mixed picture.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 2900... According to the Health Ministry, the number of deaths from coronavirus increased by 95 people yesterday and reached 2,900. The total number of tested and infected people are 918,885 and 112,261 in Turkey.

(=) Erdogan announced 3-day weekend curfew... Following the cabinet meeting, President Erdogan announced that the weekend curfew has been extended to three day, starting from May 1, Friday.

(=/+) 176 metro vehicles purchased for new airport metro... The Transportation Ministry announced that buying 176 metro vehicles for the metro lines to the Istanbul New Airport. Those vehicles cost at TL1.5bn (~215mn USD), while deliveries will take place until 2022.

(=/-) Fuel consumption statistics for March... According to the Turkish Oil Industry Association data, the gasoline consumption was down by 2.26% YoY in March to 240k cubic meters, while the diesel consumption stayed almost flat at 2.4mn cubic meters. The LPG consumption in the same period contracted by 11% in March to 220k cubic meters. With March data, the gasoline, diesel and gasoline consumptions inched up by 4.2%, 4% and 2.4% YoY respectively.

(=/+) TL6bn loan to the companies... The Union of Chambers and Commodity Exchanges of Turkey head Hisarciklioglu announced that the union will provide TL6bn loan to the companies.


Sector and Company News:

(=/+) ASELS signed an agreement with Defence Industry Presidency worth TL179mn and USD22mn regarding the numeric communication network. The deliveries are expected to take place between 2021-2023 years.

(=) In a statement given to press on Monday, SAHOL CEO Cenk Alper extended some points regarding the future strategies of the group. Accordingly, he said that the group pulled the digitalization strategy 10 years earlier, focusing on the continuation of digitalization. Regarding the energy distribution side, the group will continue the new investments. In order to get over the slowing pace of cement industry, the group is planning to focus on international direct investments and exporting. As for the cord fabric arm (Kordsa), the group is seeking for some opportunities in Europe these days. The CEO also took attention to the need of restructuring of the supply chains after the pandemic and emphasized the advantage of Turkey for the near future.

(=) AKBNK will release its 1Q20 earnings today after markets close. The consensus estimates TRY1.338bn vs Global estimates is TRY1.386bn.

(=) BIZIM is to announce its 1Q20 results today after market close. We expect TL1,164mn of revenues (14% YoY growth), TL66mn of EBITDA (14% YoY growth – flat margin) and TL3.9mn of net profit (1% YoY growth). Consensus’ revenue, EBITDA and net profit expectations are TL1,197mn, TL61mn and TL4.6mn, respectively.

(=/+) SISE applied CMB to merge its subsidiaries, ANACM, TRKCM, SODA, DENCM and Pasabahce. The Company also announced exit right prices. In this respect, investors who have SISE – ANACM – SODA – TRKCM and DENCM shares could use their exit right with a price of 5.27 – 4.46 – 6.39 – 3.47 and 8.85, respectively. Swap ratios are 1.00 – 0.88 – 1.16 – 0.68 and 0.33, respectively. According to the last closing prices, there is 2.1% - 16.1% - 2.2% - 0.6% and 20.9% upside potential according to the exit right prices, respectively. We understand that from the announcements, investors which had owned the shares of these companies before February 25, 2020 can benefit from the exit right. However, this situation may vary if the last draft communique issued by the CMB does not come into force or if CMB announces a new approach regarding the merge.

According to the exit prices and swap ratios, we recommend BUY ANACM / SELL SISE for the short-term defensive investors. For the long term investor, we maintain our recommendation of BUY SISE. We recommend TRKCM and SODA investors to join merge process with the announced swap ratios. On the other hand, we recommend ANACM investors to use their exit rights followed by buying SISE from the market to benefit from the new synergy.


Weight Approach SISE ANACM SODA TRKCM DENCM PBAHCE
30,0% DCF 21.009 6.850 12.074 8.178 11 405
30,0% Multiple 22.006 8.245 11.158 7.764 23 1.175
20,0% Net Asset Value 14.480 2.684 5.497 6.275 65 2.193
20,0% Market 11.461 2.382 6.294 3.794 83 262
Valuation 18.093 5.542 9.328 6.796 40 965
Paid in capital 2.250 750 1.000 1.250 15

Last closing 5,16 3,84 6,25 3,45 7,32
Valuation price 8,04 7,39 9,33 5,44 2,65
Swap ratio 1,00 0,88 1,16 0,68 0,33
Upside/Downside 56% 92% 49% 58% -64%

Exit right price 5,27 4,46 6,39 3,47 8,85
Upside/Downside 2,1% 16,1% 2,2% 0,6% 20,9%




(=) Acording to the BloombergHT news, the members of Turkish Banks Association extended the request for an update on the asset ratio that was announced by Turkish banking authority BRSA two weeks ago. The banks would like BRSA to change the parts of the formula that cannot be converted into loans such as reserve requirements, cash requirements and the non-cash loans that are not recognized in the nominator of the formula as well as the NPLs. Additionally, they asked for an extension of time to prepare for the new conditions.

Recall, the asset ratio that aims to boost loans, increase the volume of swap transactions with CBRT and increasing the banks’ government bond holding was announced as follows:


Asset Ratio = Loans + (Securities*0.75) + (Swap with CBRT * 0.5)
TRY Deposits + (FX Deposits*1.25)