Tekfen Holding (TKFEN TI) - Negatives priced in: Upgrading to Buy
Tekfen Holding’s 3Q19 net income of TRY258m was in-line with our estimate of TRY265m and RT consensus of TRY266m. Operationally, 3Q19 EBITDA (excluding profit from affiliates) of TRY401m met our estimate of TRY381m (vs. the RT consensus of TRY381m). In 3Q19, Tekfen Holding posted a healthy set of results as expected, backed by robust contracting operations.
In the last two months, the stock has declined by 16%, underperforming the BIST-100 by 18% due to the lack of a significant order intake. We believe that the risk/reward profile is now attractive and the negatives are almost priced in. Hence we upgrade the stock to a BUY from Hold despite cutting our earnings estimates to factor a weaker agri and contracting business performance and a lower TP of TRY25.41. Thanks to its predominantly USD-based revenue stream and cash position, we expect the company to have resilient cash generation even in a challenging macro-economic environment.
Tekfen Holding conducts its operations in four main business segments: Contracting, Agriculture, Real Estate and Other operations. Contracting group focuses on construction of petroleum and gas facilities, land and sea terminals, offshore platforms and tank farms. Agricultural group has operations in chemical fertilizer, ground and vegetable grain, production, distribution and trade of seedling and sapling. Real estate group operates in designing, constructing, renting, and sale of real estates such as residents, offices, shopping centers and hotels. Operations of other segment comprise of light-pulp trading, cotton yarn production and trading, insurance services and holding operations.
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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