Enka Insaat: Cash rich, but lacking momentum (HOLD - transfer of coverage)
Due to a change of analyst, we transfer coverage of Enka Insaat (Enka), with a HOLD rating and a 12M price target (PT) of TRY 6.40/share. In our view, the 20% ytd relative outperformance of the stock (vs. the BIST100) has been driven mainly by Enka’s defensive characteristics (its FX revenues, predominantly non-Turkish business portfolio and rich net cash position), and its recent share buybacks. Enka’s substantial net cash (1H19 USD 3.3bn, equivalent to 66% of its current Mcap) is a valuation buffer in volatile times, but is seldom a rerating driver (it also represents poor capital allocation: 2019E ROE at 10%). From a risk-reward perspective, we see the stock as fairly valued and lacking catalysts: contracting backlog continues to melt, and the future of Turkish power plants remains uncertain (shut down temporarily after the end of the take-or-pay (TOP) contract in March/August 2019).This leaves us with a cash-generative, but slowly growing Russian real estate unit, not enough to offset the power segment-driven slowdown (until production resumes, in 2H20E, with a lower CUR and margins).Enka Insaat ve Sanayi is an engineering and construction company. Co. operates in the following geographical areas: in Turkey, Co. is engaged in a range of construction activities including construction of industrial and social buildings, motorways and construction and operation of natural gas fired electrical energy generation facilities; in Russian Federation, Georgia, Turkmenistan and Kazakhstan, Co. is engaged in construction activities and also in investment and development of real estate properties and shopping malls in Moscow, Russia; and in Europe, Co. is engaged in construction and trading activities in Romania, the Netherlands, Switzerland, Germany and Kosovo.
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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