Teknik Analiz ve Rapor - Anel Elektrik

ANEL ELEKTRIK - Initiation of Coverage - Recommendation: "BUY" – Target Price: TL2.98 – Upside Potential: 42%

Bright future not priced in yet

·  Anel Elektrik is ready to start its operations again in Tripoli after business and political environment starts to normalize in Libya. We estimate the company to increase its backlog by 39% y/y to US$387mn in 2012 and to US$443mn in 2013. Our backlog delivery forecast and profitability assumptions are quite conservative considering the past performance. Our bottom-up analysis suggests a target share price of TL2.98 offering a hefty upside of 42%; we are initiating the coverage with a “BUY” rating.

· According to forward looking P/E, the company is trading at 8.3x 2012E earnings, 48% discount to its historical average, and 45% discount to its peer groups average.

 

· Anel Elektrik has strong ties with big construction companies such as TAV (having worked on 7 airport projects) and Taisei – leader of Marmara Tube Tunnel consortium. The company has a proven track record in big infrastructure projects which paves the way to expand its backlog; considering fixed capital investments of Turkey in 2012, which is up by 13% y/y, and picking up MENA region; we think that Anel Elektrik is one of the best candidates to capitalize on this growth.

 

· Thanks to being a project development and engineering company, Anel Elektrik has low CAPEX and depreciation levels. Since the company has a bargaining power over its suppliers, working capital requirements are at minimum; therefore, it does not require too much cash to feed its operations. On the other hand, the company can reduce its workforce according to its backlog, enabling it to manage OPEX easily during tough times.

 

· Since potential projects from MENA region comprises a significant portion of our backlog forecasts, a prolonged instability in these countries should negatively affect both top line and profitability of the company.

· Anel Elektrik’s 3-month average daily trading volume is US$0.5mn. Low trading volume could result in sharp price changes and bring additional volatility to shareholders.