WOOD Flash – Emlak Konut: sells 983 units in 1Q18, sales value a slight miss vs. guidance

Emlak sold 983 units (152k sqm), worth TRY 1,054m, in 1Q18. The area sold was 5% higher than the company’s 1Q18 guidance, while the total sales value fell short of the guidance by 8%. The results represent a tangible drop yoy (in 1Q17, Emlak sold 2,833 units); however, as the 1Q17 results were supported by a sales campaign, the yoy drop was expected, in our view.
We view the results as broadly neutral; the miss on the sales value seems hardly big enough to move the needle at the current depressed levels – at a 7.2% dividend yield and a 57% discount to NAV (vs. the 3Y average discount of 44%), we believe it would take more than a slight miss relative to the guidance to push the stock lower. That said, we would advise to monitor the evolution of the prices per sqm. For 2018E, Emlak’s guidance suggests an average price of c.TRY 8.7k per sqm, c.24% above the average sqm price achieved in 2017, and a whopping 63% above the average sqm price achieved in 2016. The 1Q18 result translates into an average price of c.TRY 6.9k per sqm, some 12% below the TRY 7.9k per sqm implied by Emlak’s 1Q18 guidance. While this may well be the result of Emlak having sold different type of units than it expected originally, it could also indicate that Emlak’s original expectations were too bullish, in our view. Presently, mortgage rates in Turkey are swiftly approaching 15%, and Gyoder’s new apartment index suggests that the decline in the real prices of new apartments is continuing. Unless the situation improves, reaching the full-year guidance (which points to a very ambitious performance towards the year-end) could prove challenging.