Turkish Automotive: Green light for Tofas (DOAS stays BUY; FROTO stays HOLD; TOASO upgraded to BUY)
Now that the 4Q earnings season is behind us, we have updated our models with new assumptions, reshuffling our picks in the auto industry. In this report, we upgrade Tofas to BUY after its significant de-rating, as its 7.2x 2018E EV/EBITDA – at nearly a 25% discount to its 3Y average and below -2SD of its trading range – and its positive earnings upgrade momentum has become hard to ignore. Our multiples-driven 12M price target (PT) of TRY 34.40 offers 29% potential upside. On Ford Otosan, we retain our HOLD – our position since late-November 2017. We believe that its valuation is running rather ahead of itself, on our 12M PT of TRY 63.90 and an 2018E EV/EBITDA just shy of 9.0x, but its dividends/export outlooks deter us from taking a more negative stance. Our BUY on Dogus Otomotiv remains on risk/reward and better operating momentum, with a 12M PT of TRY 10.10, but Tofas becomes our industry top pick after our upgrade.Dogus Otomotiv Servis Ve Ticaret is an automotive importer and distributor in Turkey. Co. represents 14 international brands each of which is engaged in the following sectors: Passenger cars, Light commercial vehicles, Heavy commercial vehicles, Industrial and marine engines, and Cooling systems.Co. provides its individual and corporate customers with a portfolio of more than 80 models. Co. competes in the industrial and marine engines market by representing the brand Scania Engines and in the cooling systems market representing Thermo King brand. Co.'s sales and service network is comprised of over 500 contact points.
Ford Otomotiv Sanayi is an automobile manufacturing company based in Turkey. Co. operates as a joint venture between Ford Motor Company and the Koc Group of Companies. Co. is engaged in manufacturing, assembling and selling motor vehicles, primarily commercial vehicles, imports and sells passenger cars and manufactures and imports and sells spare parts of those vehicles. Co. has two plants located in Kocaeli and Eskisehir, has a spare part distribution warehouse in Kartal, Istanbul and a branch in Tubitak Marmara Research Centre, Gebze Campus Technological Free Zone (TEKSEB).
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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