WOOD Flash – Emlak Konut: 4Q17 – strong quarter; NAV up to TRY 5.7/share, dividend reinstated (6.8% yield)

We continue to see Emlak as a valuation BUY. The stock trades at 45% P/NAV and a 6.8% dividend yield. The company is planning little to no land purchases in 2018E. Together with the expected inflows from off-balance sheet receivables and unit sales, this should improve Emlak’s operating cash flow. Also, during the conference call, management suggested that it may tender more projects than its official guidance suggests, which may enhance NAV growth. We expect the NAV to grow by around 5-6% in 2018E. The results were perceived positively by the market, but we note that the prerequisites for a tangible rerating will be either: a) land tenders carried out at a strong multiple; or b) a substantial pick-up in the unit sales dynamics; or a combination thereof.
Emlak has delivered a substantial beat vs. our 4Q17 forecasts, driven by: a stronger-than-expected gross profit margin (63% vs. our estimate of 52%); lower overhead expenses (we expected the overheads at around TRY 75m, while they amounted to a mere TRY 48m); and substantially higher other net income and expenses (we were looking for -TRY 12m, whereas Emlak reached TRY 245m). As such, despite the net financial expenses exceeding our forecast, the net profit amounted to TRY 708m for the quarter, exceeding both our and the consensus forecasts by 32 and 9%, respectively. As of the end of 2017, the NAV stood at TRY 21,055m, or TRY 5.72/share, up 4% qoq and spot on with our forecast. This values Emlak at 45% P/NAV.
In line with management’s earlier comments, Emlak will propose a dividend of TRY 0.17552/share, to be paid from the 2017 profit. The figure is some 3% above our forecast of TRY 17/share, and represents a 6.8% dividend yield.