Enka Insaat (ENKAI TI) - Operationally modest quarter: Maintain Buy
3Q19 net income of TRY911m stood higher than our estimate of TRY736m and the RT consensus estimate of TRY675m. Strong bottom line came on higher than expected mark-to-market (MtM) gains of fixed-income investments and lower effective tax rate of 8% in 3Q19. Operationally, EBITDA of TRY572m stood 11% lower than our estimate of TRY646m (vs. RT consensus of TRY626m), marred by weaker profitability of the contracting and energy segments. In 3Q19, Enka booked net TRY598m income from its financial investments.
We maintain BUY due to solid cash flow amid challenging market dynamics. Also, at 2.2x 2019E EV/EBITDA, the stock trades at a deep 69% discount to its international peers. That said, we see the energy segment recording dismal earnings as at end of 2019, as operations at all the company’s plants have been suspended for now.
Enka Insaat ve Sanayi is an engineering and construction company. Co. operates in the following geographical areas: in Turkey, Co. is engaged in a range of construction activities including construction of industrial and social buildings, motorways and construction and operation of natural gas fired electrical energy generation facilities; in Russian Federation, Georgia, Turkmenistan and Kazakhstan, Co. is engaged in construction activities and also in investment and development of real estate properties and shopping malls in Moscow, Russia; and in Europe, Co. is engaged in construction and trading activities in Romania, the Netherlands, Switzerland, Germany and Kosovo.
TEB Investment equity research analysts and strategist team consists of 8 analysts with an average finance sector experience of 15 years and special focus on international investors.
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