Tekfen Holding (TKFEN TI) - Solid near term outlook: Maintain Hold
We raise our SOTP-based TP by 17% to TRY27.03 on updated contracting forecasts and higher net cash. We raise our EBITDA/net income estimates for 2019 by 14%/8%. Even though we expect strong earnings momentum in the short term, we find Tekfen’s risk/reward profile less impressive due to the volatile nature of its core divisions. Thanks to its predominantly USD-based revenue stream and cash position, we expect the company to have resilient cash generation in the midst of a challenging macro outlook.
Tekfen Holding reported a net income of TRY435m in 4Q18, broadly in-line with our estimate of TRY397m but 27% higher than RT consensus of TRY343m. Operationally, 4Q18 EBITDA (excl. profit from affiliates) of TRY510m met our estimate of TRY509m (vs. the market consensus of TRY464mn) on solid operating performance of the contracting segment.
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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