Turk Telekom - Not Properly Appreciated
We raise our target price for Turk Telekom to TRY8.50 per share following significant changes to our forecasts after a strong and sustainable performance in data revenues (both mobile and fixed broadband). As a result, we upgrade our recommendation to BUY. We think the market does not truly appreciate the company's solid fundamentals, as the stock is currently trading at respective discounts of 11% and 13% to the peer group averages for 2017E and 2018E on EV/EBITDA. Despite positive surprises in the 1H17 results and increased lira stability against the basket, the stock has underperformed the index by around 4% YTD. We also expect the company to become a high dividend payer again in 2018 (with a 7.8% dividend yield) thanks to the more stable lira in 2017. The potential bankruptcy of a major shareholder is casting a pall over the stock, but this should not have a material impact on the company's operations, in our view. Any significant lira depreciation remains an important risk to the dividend yield.Turk Telekomuniksayon is an integrated telecommunications company in Turkey. Co.'s principal activities include the provision of local, national, international and mobile telecommunication services, internet products and services, as well as call centre and customer relationship management, technology and information management. Co. has service network and product range in the fields of individual and corporate services. Co. provides services in all 81 cities of Turkey. Co. has two main segments; fixed line and mobile. As of Dec 31 2015, Co. had 12.9 million fixed access lines, 8.0 million broadband and 17.3 million mobile subscribers.
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