Sabanci Holding (SAHOL TI) - Strong operational performance: Maintain Buy
We expect Sabanci’s 2019-21E revenue/operating EBITDA to grow at a CAGR of 18%/11%, with more contribution from the energy segment. Sabanci trades at a 35% discount to its current NAV – in-line with its 5Y average. We expect Sabanci’s NAV discount to fall to 25-30% levels on 1) a potential IPO of EnerjiSa Generation and reduced indebtedness at the energy segment, 2) better profitability at Akbank as funding costs should drop with the Central Bank’s rate cuts, 3) higher technical margins in its insurance subsidiaries backed by potentially higher macro growth in Turkey going forward, 4) continued deleveraging of unprofitable businesses, and 5) a potential revival of domestic demand in electronic retail and tire businesses.
We cut our holding company discount for Sabanci’s overall business portfolio to 25% from 35%. The value of listed subsidiaries in our NAV estimate for Sabanci rose to 84% from 74% post EnerjiSa Energy’s IPO in Feb, 2018. We expect EnerjiSa Generation’s IPO to happen in 2020, which will add 2ppt to the NAV share of listed subsidiaries. Hence, we raise our target price for Sabanci and reiterate BUY given 27% upside potential from current levels.
Hace Omer Sabanci Holding is the holding company of Sabanci Group. Co. is organized under seven strategic business units: Banking, Tire, Tire Reinforcement Materials and Automotive, Retail, Cement, Energy, and Insurance. Co.'s other activities consists of tourism facilities management, information technology and telecommunication services, and tobacco production and distribution. Co. operates in 18 countries and exports products to Europe, the Middle East, Asia, North Africa, North and South America. Co. has partnerships with international companies such as Ageas, Aviva, Bridgestone, Carrefour, Citigroup, Dia, Heidelberg Cement, International Paper, Philip Morris and Verbund.
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.
With our 6 equity research analysts we cover 93 companies across 21 sectors, reflecting 80% of the total market capitalization of all BIST companies and 86% of the BIST100 companies. Our strategy team provides in depth top-down and bottom-up market views with insight on FX and bond markets by publishing sectoral and strategic reports both in English and Turkish.
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