Turkey Wake up call: Macro, Political and Equity News, 29th 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 added 0.39% yesterday, extending its winning streak to the seventh day. After a gap higher start, index climbed further to 106.5k in early trades before turning south and paring back its gains. But almost all of the day was spent in the positive territory except for a brief incursion to red around noontime. Banks outperformed with the 1.22% gain in their sector index as the heavyweight GARAN finally caught some bids and was joined by VAKBN and ISCTR. KCHOL, THYAO, GUBRF, TOASO, TUPRS, MPARK, MAVI, and IPEKE led the non-bank gainers for the day while CCOLA, AEFES, BIMAS, MGROS, SELEC, ENJSA, and TTKOM topped the decliners. Coming to last trading day of the month, our local macro highlight will be the 1Q20 GDP numbers due at 10AM local time. Bloomberg survey puts 1Q20 growth at +4.9% yoy and +0.4% on a seasonality and workday-adjusted basis QoQ. Separately, April'20 Foreign Trade numbers are also due at 10AM. Bloomberg consensus for monthly deficit at USD3.96bn vs preliminary data released earlier by the Ministry of Customs & Trade indicating a USD3.96bn (+45.1% yoy) trade gap for the month. BIST is off to a negative start given the sour mood in global markets ahead of U.S. President Trump's news conference today on measures to punish China for Hong Kong as well as alleged human rights violations vs its Muslim minority. U.S. futures are down a few points on top of the 0.7-0.9% overnight losses after the time we closed while Asian equities are mostly trading lower. We also note that the MSCI semi-annual reshuffle going into effect at today's close may add to stock-based volatility.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 4661... According to the Health Ministry, the number of deaths from coronavirus increased by 30 people yesterday and reached 4661. The total numbers of tested and infected people are 1.92mn and 160,979 respectively.

(=/+) Economic Confidence Index, May 2020... According to TURKSTAT, the economic confidence index increased by 20.4% MoM to 61.7 in May. The improvement in economic confidence index was mainly supported by consumer, real sector (manufacturing industry), services, retail trade and construction confidence indices. Consumer confidence index increased by 8.5% MoM to 59.5, real sector confidence index increased by 18.0% MoM to 73.5, services confidence index increased by 10.8% MoM to 51.1, retail trade confidence index increased by 5.0% MoM to 79.0 and construction confidence index increased by 31.1% MoM to 58.5 in May.

(=) The 13th Turkish-Russian joint patrol launched along Idlib’s M4 highway… Joint Turkish-Russian patrols in the province of Idlib in northwestern Syria held yesterday as part of a recent cease-fire deal between the two guarantor countries working toward maintaining peace in the key border region have been completed. The Turkish Defense Ministry released a statement, stating that the patrol was successfully completed.


Sector and Company News:

(=) KOZAL posted TL394mn net income in 1Q20, up by 23% YoY. KOZAL’s net income was 9% below the consensus which was mainly due to higher tax rate (27%) in 1Q20. KOZAL’s revenues advanced by 49% YoY to TL696mn, which was also 9% above the consensus estimate of TL641mn. The company produced 71.9koz gold during 1Q, up by 5.3% YoY. KOZAL generated TL417mn EBITDA in 1Q20, up by 62% YoY, which came in almost in-line with the consensus of TL423mn. KOZAL’s net cash stayed almost flat QoQ at USD736mn at 1Q20-end, corresponding to minus 2.4x net debt / EBITDA.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 696 641 n.a 9% 468 49% 951 -27%
EBITDA 417 423 n.a -1% 258 62% 556 -25%
margin 60.0% 66.0% n.a -6 pps 55.2% 4.8 pps 58.5% 1.5 pps
Net profit 394 434 n.a -9% 320 23% 507 -22%
margin 56.6% 67.8% n.a -11.1 pps 68.3% -11.7 pps 53.3% 3.3 pps
Net Debt/EBITDA (x) -2.42 -2.71 29 bps -2.40 -2 bps
EV/EBITDA 3.3 3.3 3.8
P/E 6.2 4.7 6.4
ROE (%) 30.0% 31.3% -1 pps 30.7% -1 pps
Net debt -4,797 -2,870 67% -4,379 10%
Working capital 323 286 13% 314 3%
Δ in WC 9 30 -68% -25 -137%
CapEx 93 193 -52% -35 -368%
FCF to firm 357 336 6% 403 -12%
Shareholders' Equity 6,148 4,313 43% 5,758 7%


(=) KRDMD posted TL162mn net loss in 1Q20, slightly better than the consensus net loss estimate of TL181mn. KRDMD’s revenues of TL1.5bn was in-line with the consensus, while its EBITDA of TL133mn came in line with the estimates.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 1,515 1,504 n.a 1% 1,636 -7% 1,491 2%
EBITDA 133 132 n.a 1% 203 -35% 79 69%
margin 8.8% 8.8% n.a 0 pps 12.4% -3.6 pps 5.3% 3.5 pps
Net profit -162 -181 n.a -10% 68 -339% -129 26%
margin -10.7% -12.0% n.a 1.3 pps 4.1% -14.8 pps -8.6% -2 pps
Net Debt/EBITDA (x) 3.21 0.99 222 bps 2.68 54 bps
EV/EBITDA 6.6 3.2 8.6
P/E -13.3 4.2 37.6
ROE (%) -4.0% 15.6% -20 pps 2.1% -6 pps
Net debt 1,865 1,581 18% 1,741 7%
Working capital 151 1,105 -86% 451 -66%
Δ in WC -299 31 -1057% 355 -184%
CapEx 489 207 136% -191 -356%
FCF to firm 965 478 102% -446 -316%
Shareholders' Equity 3,719 4,155 -10% 3,881 -4%


(=) DOHOL posted TL321mn net income in 1Q20, up by 39% YoY. While its revenues were down by 21% YoY, DOHOL’s consolidated EBITDA was flat YoY at TL154mn.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 2,405 n.a n.a n.a 3,057 -21% 3,526 -32%
EBITDA 154 n.a n.a n.a 151 2% 119 29%
margin 6.4% n.a n.a n.a 4.9% 1.5 pps 3.4% 3 pps
Net profit 321 n.a n.a n.a 230 39% 168 91%
margin 13.3% n.a n.a n.a 7.5% 5.8 pps 4.8% 8.6 pps
Net Debt/EBITDA (x) -0.85 -1.63 78 bps -1.22 37 bps
EV/EBITDA 6.4 2.9 5.9
P/E 7.0 0.8 7.8
ROE (%) 9.7% 59.4% -50 pps 8.6% 1 pps
Net debt -579 -1,071 -46% -827 -30%
Working capital 1,492 1,529 -2% 1,584 -6%
Δ in WC -92 -122 -24% -183 -49%
CapEx 114 508 -77% -44 -359%
FCF to firm 257 706 -64% 214 20%
Shareholders' Equity 7,294 6,670 9% 7,137 2%


EGGUB printed TL29mn net profit in 1Q20, much higher than 1Q19’s TL8mn. Its EBITDA reached TL43mn, up by 57% YoY, with 16.2% margin indicating 2.1pps higher EBITDA margin compared to last year’s same quarter.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 265 n.a n.a n.a 194 37% 132 101%
EBITDA 43 n.a n.a n.a 27 57% 10 334%
margin 16,2% n.a n.a n.a 14,1% 2,1 pps 7,5% 8,7 pps
Net profit 29 n.a n.a n.a 8 258% 4 732%
margin 11,1% n.a n.a n.a 4,2% 6,9 pps 2,7% 8,4 pps
Net Debt/EBITDA (x) 0,0 0,0 -4 bps 1,2 -120 bps
EV/EBITDA 5,5 2,3 6,5
P/E 9,1 8,3 11,0
ROE (%) 26% 15% 12 pps 20% 6 pps
Net debt 0 4 -104% 112 -100%
Working capital -80 2 -3579% 44 -279%
Δ in WC -124 -13 863% -52 136%
CapEx 11 18 -41% -12 -189%
FCF to firm 163 20 710% 81 102%
Shareholders' Equity 252 197 28% 222 14%


YUNSA announced TL6.0mn bottom-line in 1Q20, much higher than 1Q19’s TL0.8mn. Its EBITDA reached TL13.5mn, up by 94% YoY, with 11.1% margin which is 4.3pps higher than last year’s same quarter.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 122 n.a n.a n.a 103 19% 138 -11%
EBITDA 13,5 n.a n.a n.a 7,0 94% 11,5 18%
margin 11,1% n.a n.a n.a 6,8% +4,3 pps 8,3% +2,8 pps
Net profit 6,0 n.a n.a n.a 0,8 648% 4,1 49%
margin 5,0% n.a n.a n.a 0,8% 4,2 pps 2,9% +2,1 pps