Daily Market Watch 01/11/2013. Market Commentary. Corporate News & Trading Ideas. Calendar

Transcription

1 Daily Market Watch 08/11/2013 Market Commentary The rally in global markets following ECB rate cut short lived as better than expected US GDP readings raised speculation that FED may start tapering its asset purchases before March Emerging-market stocks extended their losses, with the MSCI index heading for the longest losing streak since March with FED tapering concerns. Turkish markets had a volatile day, fluctuating sharply with good news from Europe and bad news from US. Borsa Istanbul closed the day flat at 75,811 with a low trading volume of USD 1.3bn. Yields on the 2-yr benchmark note (TRT071015T12) ended the day 23bps up at 8.46% comp. Turkish lira was yesterday s best performer currency by staying flat against the dollar and rising 0.7% against the euro. We expect Borsa Istanbul to open with 0.5% lower tracking losses in Wall Street. Better than expected Q3 earnings (Petkim, Enka, Tupras, Is Bank) are likely to limit further losses in the market. Turkish lira is flat at against the euro-dollar basket in early morning trade. Investors will eye industrial production readings for September in the local market. Is Investment expect 4.5% increase in industrial production year-onyear vs a consensus growth of 3.8%. On the global front industrial production in Eurozone (0.4% YoY) and non-farm payroll in US (120k) will be followed. Corporate News & Trading Ideas PETKM TI: ENKAI TI: TKFEN TI: HURGZ TI: TUPRS TI: BOLUC TI: UNYEC TI: ADANA TI: CIMSA TI: VAKBN TI: SKBNK TI: AKSEN TI: Calendar Petkim 3Q13: Consensus beating operational results ENKAI 3Q13 results review: Another strong quarter TKFEN 3Q13: Much worse than expectations HURGZ 3Q13: Outperforms the downbeat estimates Tupras 3Q13: Saved by deferred tax income once more. Bolu Cement is going to invest ca EUR 75mn in its Ankara plant for 1mn ton clinker capacity furnace and cement mill Unye Cement 3Q13 financials: Saved by one-off revenues Adana Cement 3Q13 financials: Better than expectations Cimsa 3Q13 financials: In line with estimates Results were broadly in line with estimates. Bottom-line missed estimates by a wide margin. AKSEN 3Q13:Beating estimates Local Calendar 08/11/2013 Industrial Production YoY Index Is for Investment September %4.5, Market %3.8 08/11/2013 AKENR 3Q13 results release (Is Investment net income estimate: TL-78mn, Consensus estimate: TL-57mn) 08/11/2013 TAVHL 3Q13 Results Release (Is Investment NI Est: EUR 50mn, Consensus Est: EUR 62mn) 08/11/2013 AKCNS 3Q13 Results (IS Investment: TL48mn, Consensus: TL44mn) 08/11/2013 CCOLA Results Release - 3Q13 NI Estimate: IS Investment TL155mn, Market Consensus TL146mn 08/11/2013 BIMAS 3Q13 Results Release - NI Estimate: IS Investment TL100mn, Market Consensus TL102mn Please refer to important disclaimer at the end of this report. Market Figures Close Daily 1M BIST-100, TRY 75, % -0.1% Trading Vol., TRM mn 3,054 12% 26.3% MSCI EM Free % 0.6% MSCI Turkey % -2.9% TRLIBOR, 3M% bps 70 bps Benchmark Bond bps 18 bps Eurobond bps 8 bps US$/TRY % 1.7% EUR/TRY % 0.0% BIST 2013E P/E BIST 2014E P/E MSCI Emerging Market Indices, in US$ terms /09/ /10/ /10/2013 MSCI EM Turkey 18/10/ /10/ /11/2013 MSCI EM MSCI Sector Indices Best/Worst Performers Best 5 Daily Worst 5 Daily Tech Hard&Eqp 0.1% Retail Index -2.1% Softw r&srvcs 0.0% Banking -0.8% Real Estate -0.2% Airlines -0.8% Inf. Tech. -0.3% Financials -0.8% Industrial -0.3% Cons. Staples -0.7% BIST-100 Best / Worst Performers Best 5 Daily Worst 5 Daily PTOFS 8% AFYON -5% ALGYO 4% KOZAL -3% PGSUS 4% BRSAN -3% IHEVA 3% ENKAI -2% TTRAK 3% ALKIM -2% BIST-100 Top 5 by Trading Volume Ticker Close Daily Vol. (TRY mn) GARAN % 521 HALKB % 274 AKBNK % 233 VAKBN % 175 ISCTR % 159 1

2 Calendar Global Calendar Exp. Pri. 08/11/2013 CH:Trade Balance Time: $24,80B $15,21B JN:Japan Buying Foreign Bonds JN:Japan Buying Foreign Stocks JN:Foreign Buying Japan Bonds JN:Foreign Buying Japan Stocks GE:Trade Balance Time:09: ,1B GE:Current Account Balance Time:09: ,4B FR:Current Account Balance Time:09: ,1B FR:Trade Balance Time:09: M FR:Industrial Production YoY Time:09: ,9% UK:Visible Trade Balance GBP/Mn UK:Trade Balance Non EU GBP/Mn UK:Trade Balance Time:11: UK:Construction Output SA MoM -- -0,1% BZ:FGV CPI IPC-S Time:12: US:Change in Nonfarm Payrolls 125K 148K US:Change in Manufact. Payrolls 5K 2K US:Unemployment Rate Time:15:30 7,3% 7,2% US:Average Hourly Earnings MoM 0,2% 0,1% US:Average Hourly Earnings YoY -- 2,1% US:Personal Income Time:15:30 0,3% 0,4% US:Personal Spending Time:15:30 0,2% 0,3% The long-awaited consumer protection law has been approved by the general assembly of the parliament. The final version of the law is more or less in line with previous drafts but we see a limited step in favour of banks as early payment penalties for consumer loans, particularly housing loans, were not completely ruled out but capped with certain levels according to remaining time to maturity. The maximum amount is capped with 2% fee rate, which is the usual practice in the sector. Pair Trade Ideas Performance Ticker Date Opening Ratio Opening Price Target Ratio Stop / Loss Current Ratio Current Return Comment 1. BUY THYAO/ SELL PGSUS / % report link 2. BUY SAHOL/ SELL KCHOL / % report link Please use the follow ing report links to reach our coments; BUY THYAO/ SELL PGSUS: BUY SAHOL/ SELL KCHOL: 2

3 Petkim Petkim 3Q13: Consensus beating operational results Petkim reported TL43mn of net earnings in 3Q13 financial tables, much higher than our estimate of TL14mn and the market expectation of TL22mn. Although 3Q13 revenues of TL1,047mn came in line with the estimates (IS Investment TL1,023mn, MC TL1,035mn), adjusted 3Q13 EBITDA margin of 9.4% exceeded both our house estimate and the market consensus of 6.3% owing to much higher than expected product spreads leading to the gross margin to almost double from 5.7% in 2Q13 to 10.2% in 3Q13. Accordingly, 9M13 EBITDA reached TL183mn, close to Company s FY13 guidance of US$100mn (~TL200mn) and almost touched our estimate of TL188mn EBITDA for the whole year. Therefore, we will go over our FY13 estimates, which will bring an upward adjustment in the price target. The market reaction to the consensus beating results is expected to be positive. The Company will hold a teleconference to share detailed information on the operating performance and share guidance today at 16:00 Istanbul time. PETKM TI MP -2% Upside Price Mcap, mn 3,110 3,050 FF Mcap, mn 1,074 1,053 P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % TL (mn) 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues 1046,7 1066,0-1,8% 930,3 13% 2967,0 3411,2-13% Gross Margin 10,2% 3,0% 5,7% 7,2% 1,4% EBIT (*) 78,1 4,7 n.m. 26,4 196% 124,8-51,7-341% EBIT Margin 7,5% 0,4% 2,8% 4,2% -1,5% Reported EBITDA (**) 71,1 32,1 121,5% 28,0 154% 121,3 20,3 498% Reported EBITDA Margin 6,8% 3,0% 3,0% 4,1% 0,6% Adjusted EBITDA (***) 98,6 22,9 331,0% 45,9 115% 183,3 1,7 n.m. Adjusted EBITDA Margin 9,4% 2,1% 4,9% 6,2% 0,0% Financial Income-net (****) -28,5 14,2 n.m. -18,0 n.m. -54,3 22,8 n.m. Net Profit 43,1 14,0 207,3% 1,1 n.m. 48,6-26,6 n.m. Net Margin 4,1% 1,3% 0,1% 1,6% -0,8% Enka Insaat nkarabacak@isyatirim.com.tr ENKAI 3Q13 results review: Another strong quarter Better than the market call of TL283mn and our above consensus call of TL306mn, Enka Insaat disclosed TL326mn net profit for 3Q13, up 3% YoY, falling short of the top-line growth due to higher effective tax rate (25% in 3Q13 vis-a-vis 19% in 3Q12) and net financial expenses. Spurred by 82% growth in contracting segment consolidated revenues surged 25% YoY to reach at TL3,291mn, beating both our and consensus estimates of TL3bn. New project awards coupled with TL depreciation led to the rise in contracting revenues. Appreciation of hard currencies benefited to real estate business, whose revenues are wholly US$-denominated, too. Beating both our bull estimate of TL481mn and the market call of TL450mn, Enka generated TL541mn EBITDA in 3Q13, up 44% YoY, along with 16.4% margin versus 14.2% in 3Q12. The company had US$3,494mn backlog as of end of 3Q13. Considering US$654mn revenues generated in contracting business throughout 3Q13, new project awards (mainly in Iraq) totaled c.us$460mn throughout the third quarter. Better than expected results necessitate an upward revision on our estimates for 2013FY. Market s reaction to the results may be positive. ENKAI TI MP -7% Upside Price Mcap, mn 20,032 18,693 FF Mcap, mn 2,452 2,288 P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % ENKAI TLmn 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues 3,291 2,642 25% 3,142 5% 9,228 7,075 30% Gross Margin 17% 15% 19% 17% 15% EBIT % 524-8% 1, % EBIT Margin 15% 12% 17% 15% 12% Reported EBITDA (*) % 585-7% 1,537 1,017 51% Reported EBITDA Margin 17% 14% 19% 17% 14% Adjusted EBITDA (**) % 581-7% 1, % Adjusted EBITDA Margin 16.4% 14.2% 18.5% 16.7% 14.0% Financial Income-net n.m. -25 n.m n.m. Net Profit % 317 3% % Net Margin 10% 12% n.m. 10% 10% 12% (*) Reported EBITDA= Gross Profit - M&S Expenses - G&A Expenses - R&D Expenses +Other Income+Other Expense+ Depreciation+Amortization (**) Adjusted EBITDA= EBIT+ Depreciation+Amortization 3

4 Revenues, TLmn 3Q13 3Q12 YOY 2Q13 QoQ 9M13 9M12 YOY Contracting 1, % 1,064 21% 3,185 1, % Real Estate % % % Manufacturing and Trade % % % Energy 1,573 1,542 2% 1,545 2% 4,732 4,345 9% TOTAL 3,291 2,642 25% 3,142 5% 9,228 7,075 30% Gross Profit, TLmn 3Q13 3Q12 2Q13 9M13 9M12 Contracting % % % Real Estate % % % Manufacturing and Trade % 59-31% % Energy % % % TOTAL % 612-9% 1,611 1,074 50% EBIT, TLmn 3Q13 3Q12 2Q13 9M13 9M12 Contracting % 221 n.m % Real Estate % % % Manufacturing and Trade % 38-45% % Energy % % % TOTAL % 524-8% 1, % EBITDA, TLmn 3Q13 3Q12 2Q13 9M13 9M12 Contracting % % % Real Estate % % % Manufacturing and Trade % 41-41% % Energy % % % TOTAL % 581-7% 1, % Gross Margin 3Q13 3Q12 2Q13 9M13 9M12 Contracting 18% 18% 25% 20% 18% Real Estate 75% 79% 78% 76% 75% Manufacturing and Trade 22% 13% 18% 19% 14% Energy 6% 6% 7% 7% 6% TOTAL 17% 15% 19% 17% 15% EBIT Margin 3Q13 3Q12 2Q13 9M13 9M12 Contracting 15% 12% 21% 16% 11% Real Estate 70% 72% 72% 70% 66% Manufacturing and Trade 11% 4% 12% 10% 6% Energy 6% 5% 7% 7% 6% TOTAL 15% 12% 17% 15% 12% EBITDA Margin 3Q13 3Q12 2Q13 9M13 9M12 Contracting 17% 15% 23% 19% 14% Real Estate 71% 73% 74% 72% 67% Manufacturing and Trade 13% 5% 13% 10% 7% Energy 7% 7% 9% 8% 7% TOTAL 16% 14% 18% 17% 14% Backlog, US$mn 3Q13- end % Iraq 1,137 33% US Embassies % Russia % Oman % Gabon 238 7% Turkey 230 7% US 228 7% Libya 171 5% Kazakhstan 74 2% Australia 67 2% Saudi Arabia 19 1% Other 98 3% TOTAL 3, % 4

5 Tekfen Holding TKFEN 3Q13 results review Much worse than the market s estimate of TL18mn and our lower call of TL10mn, Tekfen Insaat recorded TL0.04mn net loss for 3Q13, comparing unfavorably with TL49mn net profit in 3Q12. Yearly deterioration at the bottom-line stemmed from significantly lower operating margin in contracting segment. Although operational lines are perfectly in-line with our forecasts, much higher than expected effective tax rate led to the deviation from the actual reading. Contracting revenues decreased by 3% YoY in 3Q13. Despite 13% lower average fertilizer prices, supported by higher sales volume agri-industry segment s revenues rose by 6% YoY. Accordingly consolidated top-line of the holding dropped by 5% annually to TL906mn in 3Q13. Just in-line with our TL39mn estimate but lower than the consensus estimate of TL43mn, EBITDA came in at TL38mn in 3Q13, along with 4.2% margin 3pps lower YoY. After a very poor performance in 2Q13 due to projects in Morocco and Turkmenistan, contracting segment s margin improved in 3Q13. As the said two projects are at completion phase the company does not foresee further losses instead expects improvement in margins in 4Q13. Unfavorable pricing dynamics between raw materials and product prices prompted to 0.3ppt erosion at agri-industry EBITDA margin in 3Q13. As the results came below market estimates both at bottom-line and operating profit the stock may open negatively tomorrow. However we do not expect a sizable sell-off as i) improvement is expected in 4Q13 and ii) the stock already underperformed the market by a large 29% y-t-d and NAV discount widened to 32%. TKFEN TI OP 35% Upside Price Mcap, mn 1,750 2,361 FF Mcap, mn P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % TKFEN TLmn 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues % 906 0% 2,871 2,924-2% Gross Margin 6% 9% -8% 5% 11% EBIT (***) % (119) n.m. (1) 193 n.m. EBIT Margin 2% 5% -13% 0% 7% Reported EBITDA (*) % (136) n.m n.m. Reported EBITDA Margin 5% 7% -15% 2% 9% Adjusted EBITDA (**) % (94) n.m % Adjusted EBITDA Margin 4.2% 7.2% -10.4% 2.1% 9.0% Financial Income-net % 17 nm % Net Profit (0.0) 49 n.m. (141) n.m % Net Margin 0% 5% -16% 0% 7% (*) Reported EBITDA= Gross Profit - M&S Expenses - G&A Expenses - R&D Expenses +Other Income+Other Expense+ Depreciation+Amortization (**) Adjusted EBITDA= EBIT+ Depreciation+Amortization (***) includes participation income from Azfen Revenues (TLmn) 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Contracting % 594 1% 1,747 1,740 0% Agriculture % 287 0% 1,050 1,067-2% Real Estate % 7-14% % Other % 18-22% % TOTAL % 905 0% 2,871 2,924-2% EBITDA (TLmn) 3Q13 3Q12 2Q13 9M13 9M12 Contracting % -102 n.m % Agriculture % 11 45% % Real Estate 0 2 n.m. -1 n.m. 0 1 n.m. Other -2 2 n.m. -3 n.m n.m. TOTAL % % % Net Profit (TLmn) 3Q13 3Q12 2Q13 9M13 9M12 Contracting % -136 n.m % Agriculture % % % Real Estate 0 2 n.m. -2 n.m n.m. Other % 15 n.m % TOTAL % % % EBITDA Margin 3Q13 3Q12 2Q13 9M13 9M12 Contracting 4.0% 7.9% -17.2% -1.5% 8.4% Agriculture 5.6% 5.9% 3.8% 8.6% 10.0% Real Estate 0.0% 4.2% -14.3% 0.0% 1.7% Other -14.3% 10.5% -16.7% -10.0% 12.1% TOTAL 4.2% 7.2% -10.4% 2.1% 9.0% Net Margin 3Q13 3Q12 2Q13 9M13 9M12 Contracting -1.8% 4.5% -22.9% -6.6% 4.3% Agriculture 0.0% 4.1% -6.6% 3.1% 8.6% Real Estate 0.0% 4.2% -28.6% -4.3% 3.4% Other 85.7% 36.8% 83.3% 178.0% 50.0% TOTAL 0.0% 5.1% -15.6% 0.2% 6.8% 5

6 Hurriyet HURGZ 3Q13 results review Better than our net loss estimate of TL19mn and market estimate of TL14mn, Hurriyet reported TL9mn net loss in 3Q13, comparing unfavorably with the TL9mn net profit in 3Q12. Lower margins and net financial expenses of TL12mn as opposed to net financial income of TL8mn recorded in 3Q12 were the main reasons of the deterioration in bottom-line. Although EBITDA was way below both our and consensus calls lower than expected net financial expenses led to lower than expected net loss. Revenues of the company decreased 2% YoY to TL192mn, on the back of 8% lower print ad revenues and 6% lower circulation revenues due to long holidays in the quarter. Online ad revenues surged by 26% however to TL27.2mn in 3Q13. Hurriyet-only online ad revenues inflated by 43% YoY in 3Q13. Depreciation of local currency on top of increase in newsprint prices in the quarter resulted in drop in EBITDA. Accordingly much worse than our TL29mn estimate and the market call of TL27mn, Hurriyet disclosed TL17mn EBITDA in 3Q13, down 41% YoY, along with 8.8% margin versus 14.6% a year ago. Hurriyet s results came lower than expected at operational front, which was mitigated by better than expected net income. HURGZ TI OP 33% Upside Price Mcap, mn FF Mcap, mn P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % HURGZ TLmn 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues % % % Gross Margin 34% 38% 44% 38% 38% EBIT (4) 7 n.m. 26 n.m % EBIT Margin -2% 4% 11% 3% 4% Reported EBITDA (*) % 44-70% % Reported EBITDA Margin 7% 15% 19% 12% 36% Adjusted EBITDA (**) % 47-64% % Adjusted EBITDA Margin 8.8% 14.6% 20.3% 13.2% 14.4% Financial Income-net n.m. -23 n.m n.m. Net Profit -9 9 n.m. 1 n.m n.m. Net Margin -5% 5% 1% -3% 25% (*) Reported EBITDA= Gross Profit - M&S Expenses - G&A Expenses - R&D Expenses +Other Income+Other Expense+ Depreciation+Amortization (**) Adjusted EBITDA= EBIT+ Depreciation+Amortization Bolu Cimento esezan@isyatirim.com.tr Bolu Cement is going to invest ca EUR 75mn in its Ankara plant for 1mn ton clinker capacity furnace and cement mill. Additional capacity is expected to be operation in Company s current clinker capacity is 1.5mn. We will go over our valuation after talking to the company. Positive. BOLUC TI MP -16% Upside Price Mcap, mn FF Mcap, mn P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. %

7 Tupras Tupras 3Q13: Saved by deferred tax income once more. Tupras announced a net income of TL818mn in 3Q13, much higher than our estimate of TL540mn and consensus estimate of TL571mn. Although 3Q13 adjusted EBITDA of TL553mn is only 3% better than our estimate of TL536mn, higher than anticipated deferred tax income and lower than projected financial expenses lead to a better net income than our estimate. Despite seasonality, there was a very poor refining environment for 3Q13 due to lower product ratios, weak crude differentials to Brent and lower global product demand. Tupras announced a net refining margin of US$4.13/bbl in 3Q13 (US$5.91/bbl in 3Q12) compared to the benchmark gross Med-Complex refining margin of US$1.05/bbl in 3Q13 (US$5.23/bbl in 3Q12). The company posted a total inventory gain of US$122.4mn (US$46.7mn from crude oil and US$75.6mn from products) in 3Q13 compared to inventory gain of US$55.7mn (US$32.5mn from crude oil and US$23.2mn from products) in the same period a year ago. Tupras recorded a deferred tax income of TL409mn (Is Investment:TL340mn) in 3Q13 related to its Residuum Upgrade Project and the company capitalized the fx losses related to this project s loans, thus, the company recorded net financial expenses of TL119mn (IS Investment:TL285mn) in 3Q13. Looking forward The company management expects a net refining margin of US$2-2.5/bbl for 4Q13 and US$2.5-3/bbl for The dividend expectation is in line with our estimate of TL2/share, implying a divided yield of 4.4%. We will make upward adjustment in our TP and we might see a positive market reaction. TUPRS TI OP 7% Upside Price Mcap, mn 11,419 12,262 FF Mcap, mn 5,570 5,981 P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % TL (mn) 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues % % % Gross Margin 5.4% 6.2% 2.4% 3.7% 4.3% EBIT (*) % % % EBIT Margin 4.1% 4.7% 0.7% 2.1% 2.8% Reported EBITDA (**) % % , % Reported EBITDA Margin 3.6% 5.0% 0.0% 1.8% 3.8% Adjusted EBITDA (***) % % , % Adjusted EBITDA Margin 4.5% 5.1% 1.3% 2.7% 3.3% Financial Income-net (****) n.m % n.m Net Profit % % 1, % Net Margin 6.7% 4.7% 1.4% 3.6% 3.1% Unye Cimento esezan@isyatirim.com.tr Unye Cement 3Q13 financials: Sharp decline in revenues Higher than our house call of TL16mn and market consensus of TL17mn Unye Cement has disclosed TL18mn net income for 3Q13. Despite decline in revenues TL7.4mn one-off revenues from other operations supported the bottom-line. In the third quarter top-line declined by 12% YoY and 19% QoQ. Domestic sales decreased by 8%YoY and 11% QoQ, while exports halved YoY and decreased by %37 on a QoQ basis. We think that that the decline in domestic revenues is related to the 1mn ton capacity addition in the region (Askale Gumushane), while the severe decline in exports is likely to be due to Russia s recent protectionism. Despite increasing competition in the area Unye conserved its 35% EBITDA margin for the third quarter and 32% for the first nine month of the year. All in all, company s results are worse than our projections, therefore we may go over our sale estimates after talking to the company. For 2013 we were expecting 5% revenue growth and 34% EBITDA margin. UNYEC TI OP 21% Upside Price Mcap, mn FF Mcap, mn P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. %

8 (TLmn) 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues % 70-19% % Gross Profit % 25-18% % Gross Margin 36% 36% 0pp 36% 0pp 34% 35% -1pp EBIT (*) % 20-21% % EBIT Margin 28% 29% -1pp 29% -1pp 25% 26% -2pp Reported EBITDA (**) % 26 7% % Reported EBITDA Margin 48% 39% 10pp 37% 12pp 38% 36% 2pp Adjusted EBITDA (***) % 24-18% % Adjusted EBITDA Margin 35% 35% 0pp 35% 1pp 32% 33% -1pp Financial Income-net (****) 0 0 n.m. 1 n.m n.m. Net Profit % 18 0% % Net Margin 31% 26% 5pp 26% 6pp 25% 23% 2pp (*) EBIT = Gross Profit - M&S Expenses - G&A Expenses - R&D Expenses (**) Reported EBITDA= EBIT + Depreciation & Amortization + Other Income + Other Expense (***) Adjusted EBITDA= EBIT + Depreciation & Amortization (****) Gains (losses) from Equity Investments + Financial Income Reported + Financial Expenses Reported + FX gains (losses) booked under other income (expenses)+ Net income from investments Adana Cimento (A) esezan@isyatirim.com.tr Adana Cement 3Q13 financials: Revenues are on the rise Slightly higher than both our house call of TL15.6mn and TL15mn market consensus; Adana has disclosed TL17mn net income in 3Q13. Despite operational improvement, lack of investment income resulted in a decline in company s bottom-line by 25% YoY and by 19% QoQ. Company has recorded TL107mn revenues in 3Q13, which is flat QoQ yet improved by 47% YoY. On the domestic side Adana generated TL73mn turnover in 3Q13 corresponding to 27% YoY increase. On the other hand Adana s export revenues stood at TL21mn, up by 212% YoY. Cumulative nine moths turnover implies %37. We think that increase in both volume and price played a role in the yearly improvement of the revenues. ADANA TI UP -11% Upside Price Mcap, mn FF Mcap, mn P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % To conclude company financials are better than our expectation in terms of turnover therefore we are going to revise our estimates higher. Positive (TLmn) 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues % 107 0% % Gross Profit % 33 9% % Gross Margin 33% 33% 1pp 31% 2pp 30% 31% -1pp EBIT (*) % 19 23% % EBIT Margin 22% 20% 2pp 18% 4pp 18% 19% -1pp Reported EBITDA (**) % 26 56% % Reported EBITDA Margin 38% 29% 10pp 25% 14pp 28% 27% 2pp Adjusted EBITDA (***) % 25 17% % Adjusted EBITDA Margin 27% 27% 0pp 23% 4pp 23% 26% -3pp Financial Income-net (****) n.m. 4 n.m n.m. Net Profit % 21-19% % Net Margin 16% 31% -16pp 20% -4pp 16% 24% -8pp (*) EBIT = Gross Profit - M&S Expenses - G&A Expenses - R&D Expenses (**) Reported EBITDA= EBIT + Depreciation & Amortization + Other Income + Other Expense (***) Adjusted EBITDA= EBIT + Depreciation & Amortization (****) Gains (losses) from Equity Investments + Financial Income Reported + Financial Expenses Reported + FX gains (losses) booked under other income (expenses)+ Net income from investments 8

9 Cimsa Cimsa 3Q13 financials: As expected company performs well Slightly higher than both our house call and market consensus of TL46mn, Cimsa recorded TL51mn net profit in 3Q13, implying 43% YoY increase yet 73% QoQ decrease. The volatility at the bottom-line stemed from financial expenses and one-off assets sales. Company generated TL270mn revenues, up by 10% YoY yet down by 3% QoQ. On the domestic side company s revenues jumped by 9% YoY reaching TL219mn level. On the other hand, exports surged by 18% YoY to TL72mn level. Cumulative sales increased by %15 slightly higher than our %13 year-end estimate. We think that increase in both volume and price played a role in the yearly improvement of the revenues. CIMSA TI UP -17% Upside Price Mcap, mn 1,756 1,451 FF Mcap, mn P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % In the third quarter, adjusted EBITDA (***) came at TL75mn, implying 9% YoY increase. EBITDA margin, on the other hand, was flat at 28% level. Cimsa s nine months cumulative EBITDA improved by 11% YoY and came at TL181mn. Combined effect of price increase and favourable cost base led to a recovery in EBITDA margins. Bringing year to date EBITDA margin to 25% levels in line with our yearly estimate. To conclude, company performed well operationally, while gains on stake sale will boost 2014E dividend yield to 9%. Positive (TLmn) 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues % 279-3% % Gross Profit % 70 5% % Gross Margin 27% 28% 0pp 25% 2pp 24% 26% -2pp EBIT (*) % 58 8% % EBIT Margin 23% 23% -1pp 21% 2pp 19% 20% -1pp Reported EBITDA (**) % 65 21% % Reported EBITDA Margin 29% 28% 1pp 23% 6pp 24% 24% 0pp Adjusted EBITDA (***) % 72 5% % Adjusted EBITDA Margin 28% 28% 0pp 26% 2pp 25% 25% -1pp Financial Income-net (****) n.m. 159 n.m n.m. Net Profit % % % Net Margin 19% 15% 4pp 69% -50pp 36% 13% 23pp (*) EBIT = Gross Profit - M&S Expenses - G&A Expenses - R&D Expenses (**) Reported EBITDA= EBIT + Depreciation & Amortization + Other Income + Other Expense (***) Adjusted EBITDA= EBIT + Depreciation & Amortization (****) Gains (losses) from Equity Investments + Financial Income Reported + Financial Expenses Reported + FX gains (losses) booked under other income (expenses)+ Net income from investments Vakifbank Results were broadly in line with estimates. Vakifbank disclosed TL 256mn net earnings in its 3Q13 solo financials, which was 33% weaker on a quarterly basis but in line with market expectation of TL 260mn as well as our TL 256mn call. In 3Q, 120bps contraction in NIM was the highest among Tier-I banks but NII was virtually in line with estimate. Net fees posted a 28% quarterly decrease from the high base of 2Q and turned out to be weaker than our expectation. This was offset with stronger than anticipated NPL recoveries. Vakifbank reclassified TL 62mn worth of Competition Board penalty under opex, which was previously carried under other provisions. Adjusted for the reclassification impact, provision expenses and opex came in line with estimates. Management preserved its double digit net earnings growth outlook for the full year and sounded happy with the NIM and asset quality evolution in 4Q. RoE running at 13% level in 9M stands by the budget guidance. bsengonul@isyatirim.com.tr kdoganay@isyatirim.com.tr VAKBN TI UP 3% Upside Price Mcap, mn 11,625 11,952 FF Mcap, mn 2,899 2,981 P/E P/BV P/Deposit Avg. Vol. Mn Relative Perf. %

10 Sekerbank Bottom-line missed estimates by a wide margin. Sekerbank posted TL 17mn net earnings in its 3Q13 solo financials, implying 69% QoQ decline. Net earnings missed the TL 36mn of market expectation by a wide margin despite resilient top-line revenues due to sharp increase in specific provision expenses. NIM tightened 72bps QoQ to 5.6% as 155bps QoQ decrease in blended LtD spreads were partially offset with improving securities yields. NII posted a mere 2% QoQ contraction thanks to robust growth in 3Q. This was also reflected to 10% QoQ stronger net fees. Quarterly NPLs increased 22% and the NPL ratio deteriorated 40bps QoQ to 5.3% level. Specific CoR deteriorated 145bps QoQ on higher NPL inflows. Opex eased 7% QoQ mainly on seasonal factors. Overall, annualised RoE tumbled to 3.4% in 4Q, pulling down the 9M figure to 9.2% which was 5.6pts weaker on annual basis. Sekerbank shares trade at 7.0x 14E P/E and 0.82x 14E P/BV based on market expectation vs. 7.7x 14E P/ E and 0.92x 14E P/BV of the Turkish banks on average. SKBNK TI UR Upside Price 1.88 Mcap, mn 1,880 FF Mcap, mn 174 P/E P/BV P/Deposit Avg. Vol. Mn Relative Perf. % Bank-only, BRSA (TL mn) 9M12 9M13 YoY 3Q12 4Q12 1Q13 2Q13 3Q13 QoQ YoY Operating income % (0.7%) (6.0%) Net interest income % (1.7%) 10.1% Commission income % % 25.3% Net trading income 7 3 (59.0%) (5) (1) 9 n.m. (40.5%) Other income (34.5%) (32.7%) (64.7%) Provision expenses (6.8%) % (3.8%) Specific (19.5%) % (13.0%) General % % 48.6% Operating expenses % (7.3%) 21.6% Net income (26.6%) (69.0%) (71.2%) Gross NPL ratio 6.0% 5.3% (69bps) 5.3% 3.7% 4.7% 4.9% 5.3% 40bps (1bps) Loan loss reserve 59% 47% (1,205bps) 69% 60% 56% 49% 47% (214bps) (2,268bps) RoAE 14.8% 9.2% (561bps) 13.7% 14.0% 13.1% 11.2% 3.4% (776bps) (1,031bps) RoAA 1.6% 1.1% (56bps) 1.6% 1.7% 1.7% 1.4% 0.4% (104bps) (116bps) NIM 6.2% 6.1% (13bps) 5.5% 8.1% 7.4% 6.3% 5.6% (72bps) 2bps Adj. NIM (trading & FX) 6.3% 6.1% (18bps) 6.0% 8.7% 7.3% 6.3% 5.8% (44bps) (19bps) Adj. NIM (trading, FX & LLPs) 4.1% 4.2% 14bps 3.1% 4.7% 5.0% 5.1% 3.2% (189bps) 17bps Cost/income ratio (excl. trading) 50.5% 58.2% 775bps 48.2% 48.5% 50.7% 63.3% 61.2% (209bps) 1,299bps Cost/Average assets 4.0% 4.2% 18bps 3.8% 4.9% 4.3% 4.9% 4.1% (85bps) 28bps Specific CoR (gross) (83bps) bps (95bps) Total CoR (75bps) bps (86bps) Source: Is Investment 10

11 Aksa Enerji AKSEN 3Q13:Beating estimates Aksa Enerji reported a net loss of TL19mn in 3Q13, much lower than our net loss expectation of TL46mn and consensus net loss estimate of TL39mn. The deviation between the actual figure and our estimate stemmed from higher than expected revenues and lower than anticipated financial expenses, despite higher than calculated tax expenses. Despite the fact that the total sales volume of 2.57bn kwh in 3Q13 contracted by 9% YoY, Company s revenue of TL537mn (IS Investment: TL455mn) almost stayed intact compared to 3Q12, due to the changes in sales breakdown. The increase in the share of bilateral agreements together with 4% YoY price hike on TEDAS regulated tariffs in 3Q13, kept the revenues unchanged. Adjusted EBITDA in 3Q13 surged by 24% YoY to TL112mn, better than our estimate of TL94mn, again due to higher revenues. Aksa Enerji posted net financial expenses of TL91mn in 3Q13, lower than our estimate of TL122mn. It recorded a tax expense of TL31mn, versus our tax income expectation of TL11mn. The company will have a conference call today. Following the call, we may revisit our estimates and target price. The market reaction to the results is likely to be positive. AKSEN TI OP 52% Upside Price Mcap, mn 1,772 2,688 FF Mcap, mn P/E P/BV EV/EBITDA Avg. Vol. Mn Relative Perf. % TL (mn) 3Q13 3Q12 YoY 2Q13 QoQ 9M13 9M12 YoY Revenues % % % Gross Margin 16.4% 12.7% 8.3% 12.9% 13.5% EBIT (*) % % % EBIT Margin 15.6% 12.1% 7.1% 11.9% 12.6% Reported EBITDA (**) % % % Reported EBITDA Margin 20.6% 16.5% 12.8% 17.7% 17.2% Adjusted EBITDA (***) % % % Adjusted EBITDA Margin 20.9% 16.8% 13.6% 18.0% 18.0% Financial Income-net (****) % % n.m. Net Profit n.m % n.m. Net Margin -3.4% 7.4% -18.7% -5.7% 12.5% 11

12 Currency F/X Data Change (%) As of 07/11/2013 Close Daily YTD The euro weakened against its major rivals after the European Central US Dollar Bank surprisingly lowered interest rates to a record-low 0.25% from 0.5%. Euro Euro/US Dollar The ECB President Draghi said the borrowing costs will remain present or Equal Weighted Basket even lower until the economy improves as the Eurozone may experience Source: Bloomberg a prolonged period of low inflation. Meanwhile, the greenback strengthened reacting to better than expected US gross domestic product data that increased speculation that the Fed will pare back its monetary stimulus before March Turkish lira was yesterday s best performer currency by staying flat against the dollar and rising 0.7% against the euro. Euro s fall played into our long TRYHUF call. All eyes will be on non-farm payrolls and unemployment rate in the US. On the local front, investors will follow September industrial production data. Local Bills and Bond Rate market had a volatile day on the back of mixed signals from the Europe and the US. 1.0% Daily Performance Against US Dollar(%) TRY KZT RUB UAH CNY ARP 0.0% INR -1.0% ZAR HUF PLN RON BRL -2.0% -3.0% -4.0% -5.0% -6.0% 0.2 CZK 0.3 Mil TL Daily Volume 07/10* FRN Coupon Zero Bill Turkish bonds reacted positively the ECB s surprise rate cut. However, the market gave most of its gains after better than expected US GDP data that increased speculation that the Fed will pare back its monetary stimulus before March yrs 2-5 yrs We expect a flat to positive opening in Turkish rate market on flat TRY and lower UST yields % TL Yield Curve Yields on the 2-yr benchmark note (TRT071015T12) ended the day 23bps up at 8.46% comp Eurobonds 8.00 Bill Coupon Zero There was a rather positive sentiment in EM eurobond markets yesterday ahead of today s ECB meeting and Friday s important employment data in the US. ECB s meeting and the rate decision will be closely followed today. There are few speculations that the ECB might cut the policy rate by 25 bps to 0.25% on the back of increasing deflation risk. However it is possible that the ECB waits until year-end to see more inflation data and keep the rates on hold for the time being. US 10-yr notes retreated back below 2.65% yesterday and are at % as of this morning. Yields across Turkish eurobond curve shifted down by 5-7bps following the ECB s policy rate cut. Turkey 5 year CDS trades 2bps tigther at 199bps Month

13 Recommendations Local Rates: We keep our BUY call for long-term CPI linker notes. We downgraded our BUY call for medium term CPI linkers to HOLD. We downgraded our BUY call for long term fixed coupon notes to HOLD. Deposits versus short notes: We recommend deposits against shortterm notes as the decline in short-term yields was not followed by deposit rates. 13

14 Most Traded Local Bonds & Bills Instrument Maturity Zero Coupon Bonds Term Amt Outstd. (M il TL) Daily Volume (M il TL) Weekly Volume (M il TL) Last Traded Price TRT090414T19 09/04/14 5 m 2, TRT110614T13 11/06/14 7 m 3, TRT060814T34 06/08/14 9 m 2, Simp. Yield Comp Yld Chg 1D (bp) Wk (bp) Low (%) 3 mo Range High (%) Avg (%) Dur. Cnvx PVBP * 100 Coupon Bearing Bonds TRT080323T10 08/03/23 9,3 y 16, TRT150120T16 15/01/20 6,2 y 11, TRT200618T18 20/06/18 4,6 y 13, Rating Disclosure: Is Investment s ratings for the listed stocks are Outperform, Market Perform and Underperform, which are all benchmarked with the expected return of the Istanbul Stock Exchange (BIST 100). All these ratings are independently assigned by Is Investment equity analysts based on company s estimates which pertain to future earnings, cash flow and balance sheet of the company. Additionally, analysts may put the stocks Under Review on a temporary basis if conditions do not allow or restrict to make a proper assesment of the company. Investment Ratings for each individual company are assigned in accordance with the following criteria, i-) Outperform is assigned when the company s total expected return exceeds the target index return by 5% points ii-) Underperform is assigned when the company s total expected return remains 5% points under the target index return, iii-) Market perform is assigned when the company s total expected return remains higher than the target index return -5% points, yet below than the target index return +5% points. This report has been prepared by İş Yatırım Menkul Değerler A.Ş. (İş Investment) solely for the information of clients of İş Investment. Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies, investment banks and the clients. Opinions and recommendations contained in this report reflect the personal views of the analysts who supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be suitable for all investors. Investors must make their decisions based on their specific investment objectives and financial positions and with the assistance of independent advisors, as they believe necessary. The information presented in this report has been obtained from public institutions, such as Borsa Istanbul (BIST), Capital Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of Turkey (CBT); various media institutions, and other sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed. All information in these pages remains the property of İş Investment and as such may not be disseminated, copied, altered or changed in any way, nor may this information be printed for distribution purposes or forwarded as electronic attachments without the prior written permission of İş Investment. ( This research report can also be accessed by subscribers of Capital IQ, a division of Standard & Poor's. For more information, please visit Capital IQ's web site at 14