Tekfen Holding (TKFEN TI) - Strong start to 2019: Maintain Hold
Tekfen Holding reported net income of TRY782m in 1Q19, 6% lower than our estimate of TRY829m but essentially in-line with RT consensus of TRY800m. Modest deviation at the bottom-line was attributable to the lower one-off income of TRY416m related to the compensation from ongoing construction projects, compared to our estimate of TRY450m. Operationally, 1Q19 EBITDA (excl. profit from affiliates) of TRY939m broadly met our estimate of TRY966m (vs. the market consensus of TRY948m).
With this report, we have reflected one-off compensation gain of contracting business into our 2019 forecasts. Hence, we raise our EBITDA and net income estimates for 2019 by 19%/18%. Even though we expect strong earnings momentum in the short term, we find risk-reward profile less impressive due to the volatile nature of 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 challenging macro outlook.
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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