Turkey Wake up call: Macro, Political and Equity News, 3rd June

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 0.77% in the 10th consecutive day of gains as Turkish stocks found strength from ongoing optimism in global markets as well as the rebound in lira. Index opened gap higher around the 107.8k mark, climbed further to 108.4k resistance which was tested a couple of times during the morning hours. A profit taking in early afternoon erased the gains and briefly pushed the BIST100 to small negative territory, but a quick rebound followed for the rest of the afternoon. Banks fell back with the 0.38% gain in their sector index with YKBNK and GARAN leading vs AKBNK and VAKBN lagging. Strength in non-bank heavy weights like SAHOL, KCHOL, EKGYO, ASELS as well as TKFEN, FROTO, AKCNS, CIMSA, GUBRF, and Koza Group names boosted the headline index while aviation stocks, BIMAS, KRDMD, TCELL, MAVI, and ULKER were among the decliners. Today, our key macro highlight will be the May'20 inflation numbers due at 10AM local time. Bloomberg consensus CPI at 0.83% and PPI at 1.81%. We anticipate another positive open for the BIST given ongoing rally in global peers and further recovery in lira (USDTRY now at 6.7240 vs 6.7303 at yesterday's closing bell). U.S. futures are up 0.3% in early trades on top of the 0.6-0.7% overnight gains from the time we left and Asian benchmarks are all trading in the green.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 4585... According to the Health Ministry, the number of deaths from coronavirus increased by 25 people yesterday and reached 4585. The total numbers of tested and infected people are 2.10mn and 165,555 respectively.

(=) CPI for May will be announced today... TURKSTAT will announce CPI for May today at 10.00 Istanbul time. Market consensus is 0.83% MoM.

Sector and Company News:

(=) According to the latest presidential decree, 15% of withholding tax has been levied on the foreign exchange fund returns which will be effective by June 2, 2020.

(=) TTKOM announced a new loan agreement with EBRD amounting USD100.0mn. The cost of the credit has been Libor + 2.85% and 6 years maturity. The whole principal will be paid at the end of the maturity.

(=/+) Auto sales for May2020... According to the Auto Distributor Assocation, the passanger car sales contracted by 7.6% but light vehicle sales improved by 21.6% in May 2020. Thus total auto market edged down by 2.4% YoY in May. On cumulative basis, passenger car and light vehicle sales increased by 21.7% and 13.9% YoY, which brought the total auto sales by 20.1% YoY.

(=/+) MGROS announced that the company opened 12 new stores all around Turkey in May. By the new openings, the number of total Migros stores reached to 2.205 in Turkey and 42 abroad by its subsidiaries.

(=/+) PGSUS CEO Mehmet Nane stated that the load factor for its resuming flights hovered 50%-70% and they have been receiving tens of thousands forward reservations from now on. They may kick off the international flights in June 10-15. He also underlined that PGSUS may share guidance by July.

(=) THYAO management announced that THYAO will start flying from 16 European cities to 14 cities in Anatolia.

(+) Turkey’s auto plant received the EAI report... According to a press release from TOGG, Turkey’s local auto car plant has received the Environmental Assessment Impact Report for the plant. The investment amount will be at TL17bn for the project and the plant will have 175k annual production capacity.

(=/+) ASELS posted TL920mn net income in 1Q20, higher than the consensus estimate of TL729mn. While its revenues were 3% above the consensus, its EBOTDA margin of 23.9% came in 0.9-pp above the consensus estimate. ASELS’s revenues advanced by 30% YoY in 1Q20 and EBITDA increased by 57% YoY, mainly boosted the huge amount of orders. Recall that ASELS added USD350mn fresh backlog during 1Q20, which brought the cumulative backlog to USD9.7bn. ASELS’s net cash contracted to TL48mn from TL1.3bn a quarter ago.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 2,595 2,530 n.a 3% 1,998 30% 5,365 -52%
EBITDA 621 583 n.a 6% 395 57% 1,296 -52%
margin 23.9% 23.1% n.a 0.9 pps 19.8% 4.2 pps 24.2% -0.2 pps
Net profit 920 729 n.a 26% 629 46% 1,365 -33%
margin 35.5% 28.8% n.a 6.6 pps 31.5% 4 pps 25.5% 10 pps
Net Debt/EBITDA (x) -0.02 -0.75 73 bps -0.45 43 bps
EV/EBITDA 12.1 11.3 7.9
P/E 10.2 9.3 7.1
ROE (%) 25.2% 24.1% 1 pps 24.7% 0 pps
Net debt -48 -1,498 -97% -1,281 -96%
Working capital 5,910 4,901 21% 4,751 24%
Δ in WC 1,159 801 45% -340 -441%
CapEx 1,253 1,363 -8% -1,159 -208%
FCF to firm 659 930 -29% 399 65%
Shareholders' Equity 14,419 10,763 34% 13,498 7%