Turkey Wake up call: Macro, Political and Equity News, 8th June

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Wake – up call

BIST added 0.44% on Friday, extending its winning streak to the thirteenth consecutive day in the longest uninterrupted rally in the market's history. Benchmark BIST100 gradually reversed its losses until mid-day after a positive start, only to find renewed momentum in the afternoon, especially after the U.S. payrolls data. Banks fared better with the 1.21% gain in their sector index as GARAN led the pack. TUPRS, TCELL, EREGL, KCHOL, MPARK, and AYGAZ were among the better performing non-financials while some losses in BIMAS, AKCNS, PETKM, GUBRF, EKGYO, and SOKM kept a lid on the headline index. Today, our local macro agenda is muted except for the Treasury's reissue of 2-year fixed-coupon bonds in the single domestic borrowing auction. Will hold two more auctions tomorrow ahead of its hefty TL10.71bn redemption this week. We foresee an uptick open for the BIST as the risk appetite prevails in global markets and lira is a bit stronger vs the greenback (USDTRY at 6.7647 vs 6.7858 at Friday's closing bell). U.S. futures are up a few points in early trades and bourses in Asia are mostly trading in the green.
Macro and Political News:
Number of deaths from coronavirus reached 4692... According to the Health Ministry, the number of deaths from coronavirus increased by 23 people yesterday and reached 4692. The total numbers of tested and infected people are 2.34mn and 170,132 respectively.

Advance Loans against Investment Commitment... The Central Bank of Turkey announced reallocating the TL20bn of loan limit of Turkish lira rediscount credit facility as advance loans against investment commitment for more effective utilization in order to support investments in selected sectors that are critical to Turkey. The remaining TRY 40 billion limit of Turkish lira rediscount credits will continue to be extented through Turk Eximbank with an allocation of TL20bn, as well as through state-owned banks and other banks, with allocations of TL10bn each. Recall that at the end of March 2020, the Central Bank of Turkey announced that Turkish lira rediscount credits for export and FX earning services up to TL60bn would be extended to contain adverse effects of the global uncertainty caused by the coronavirus (COVID-19) pandemic on the Turkish economy.

Moody’s kept Turkey’s sovereign rating... Moody’s announced that it kept Turkey’s sovereign rating at B1.

Sector and Company News:

(=) YKBNK imposes limits on FX accountsAccording to the latest announcement by YKBNK, the bank will open FX accounts between 10-25k of USD, Euros or pounds with minimum 3 months maturity and will not renew the FX deposit accounts lower than 10k USD, Euros or pounds as June 13. This implementation is considered to be related with the asset ratio rule that was implemented by BRSA; instead of expanding the loans, the bank prefers to reduce the FX amounts as long as it keeps sufficient amount of FX liquidity.

(=) TRGYO is expected to release its 1Q20 financials today. The consensus estimate is TL102mn net loss vs. Global estimate is TL50mn net loss in 1Q20.

KOZAL agreed with GUBRF in order to dispose off its know-how information in Sogut Maden (owned by GUBRF) in return for TL33mn.

(=/+) INDES posted TL26mn net income in 1Q20, up by 43% YoY. INDES’ net income is also above our estimate of TL24mn. INDES managed to improve its revenues by 90% YoY to TL2bn. Looking at the sub-segments, its IT segment revenues grew by 93% YoY to TL1.7bn, corresponding to 88% of consolidated revenues. Its telecom revenues increased by 73% YoY. The company’s EBITDA margin eased to 2.8% in 1Q20, from 3% a year ago, mainly due to the contraction in gross margins both in IT and telecom segments. Its net debt to EBITDA improved to 1.01x from 1.33x a quarter ago.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 1,979 n.a 1,902 n.a 1,040 90% 1,960 1%
EBITDA 55 n.a 51 n.a 32 74% 62 -12%
margin 2.8% n.a 2.7% n.a 3.0% -0.3 pps 3.2% -0.4 pps
Net profit 26 n.a 24 n.a 18 43% 39 -34%
margin 1.3% n.a 1.3% n.a 1.7% -0.4 pps 2.0% -0.7 pps
Net Debt/EBITDA (x) 1.01 -1.30 231 bps 1.33 -32 bps
EV/EBITDA 4.6 2.6 4.8
P/E 6.4 3.2 5.9
ROE (%) 22.0% 31.2% -9 pps 21.0% 1 pps
Net debt 182 -131 -239% 208 -13%
Working capital 634 265 139% 772 -18%
Δ in WC -137 -40 242% 352 -139%
CapEx 6 21 -70% -2 -516%
FCF to firm 188 85 121% -303 -162%
Shareholders' Equity 457 395 16% 440 4%


AKSGY posted TL108mn net loss in 1Q20, down from TL132mn net income in 4Q19 and increased the net loss from TL-26mn in 1Q19.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 99 n.a n.a n.a 101 -2% 105 -6%
EBITDA 65 n.a n.a n.a 73 -12% 77 -16%
margin 65.5% n.a n.a n.a 72.7% -7.2 pps 73.3% -7.8 pps
Net profit -108 n.a n.a n.a -26 315% 132 -182%
margin -108.8% n.a n.a n.a -25.7% -83.1 pps 125.4% -234.1 pps
Net Debt/EBITDA (x) 7.0 6.7 34 bps 6.5 57 bps
EV/EBITDA 12.6 10.7 12.3
P/E 3.4 1.1 3.2
ROE (%) 12% 28% -16 pps 14% -2 pps
Net debt 2,041 1,882 8% 1,933 6%
Working capital 424 489 -13% 445 -5%
Δ in WC -21 23 -190% -44 -53%
CapEx 1 2 -23% -1 -217%
FCF to firm 87 52 66% 119 -27%
Shareholders' Equity 3,933 3,608 9% 4,020 -2%