Ulker: money needs to be put to work (stays BUY)
We are revisiting the investment case for Ülker, maintaining our BUY recommendation with a new price target (PT) of TRY 33.0/share. Despite the ongoing pandemic, the Turkish confectionery market continues to grow at c.20% yoy (in 6M20). Ülker delivered c.20% revenue growth and 30bp EBITDA margin expansion in 1H20 and, in our view, could raise its 2020E guidance further. That said, it is still trading at all-time-low multiples of 4.8x EV/EBITDA and 7.9x P/E on our 2021E forecasts, and is one of the cheapest stories in our Turkish consumer coverage. We believe the main reasons for its valuation could be: its growing cash pile (73% of its market cap in 2Q20), net debt/EBITDA of only 0.4x, and a lack of shareholder distribution, while no M&A has been executed since 2018. If executed well, we believe a greater focus on capital allocation, through either M&A (i.e. a chocolate processing company from Yildiz Holding), or increased shareholder distributions once the external risks subside, could be reflected quickly in the share price and valuation multiples.Ulker Biskuvi Sanayi is a manufacturer and marketer of biscuit, chocolate coated biscuit, wafer, cake and chocolate. Co.'s brands include Potibor, Cizi, Krispi, Haylayf, Mavi YePil, HanYmeller, Bebe BiskUvisi, Biskrem, Krim Kraker, Probis, Cokoprens, As Kraker, Bathak, Ykram, Canpare, Rondo, Altinbasak, Kat Tat, Halley, Kat Kat Tat, Cubuk Kraker, Alpella Ring, Hasat, Bolero, Saklykoy, Dore and Haylayf.
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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