21 Mart 2012 Çarşamba

Ülker Raporu - Ulker Biscuits

Ulker Biscuits

· Old share type structure: Ülker Biscuits has five share classes: A, B,; C, D and Founders’ shares. Class A, B and Founders’ shares have; privileged dividend rights. Additionally, class A shareholders can; appoint four members of the Board while class B holders can appoint; one member. All classes of shares have voting rights except Founders’; shares.;

 · Cancellation of privileged shares: Under the approved share swap,; holders of class A, B and Founders’ shares, namely Yildiz Holding and; the Ülker family, will relinquish their privileged dividend rights in; exchange for additional class C shares. As a result, the company will; issue 73 million new shares, increasing the total number of outstanding; shares from 269 million to 342 million. Subsequently, Yildiz Holding; and Ülker family ownership will increase to 47.0% and 11.4%; respectively while Dynamic Growth Fund’s shareholdings will decrease; to 20.9%. Free float will decrease to 20.7% although absolute number of; tradable shares will remain unchanged.;

· Financials and valuation: We restate our EPS forecasts based on the; new share count while maintaining all our underlying operational; assumptions; 2012E EPS decreases from TL0.25 to TL0.20 per share.; Based on our DCF methodology and the new number of outstanding; shares we derive a new Dec-12 PT of TL7.00 per share. We remain; Neutral on the stock.

Valuation Methodology and Risks;

Ulker Biscuits (Neutral Price Target: TL7.00);

Valuation Methodolgy :
We rate Ülker Biscuits Neutral. We apply a Discounted Cash Flow valuation to; derive our price target, in order to account for the ongoing margin expansion of the; company. Applying a WACC of 12.0% and terminal growth rate of 5.0%, we derive; a price target of TL 7.00.;

Risks to Our View :
Upside risks to our view: 1) Higher than anticipated growth in the biscuits and cake; markets; 2) Strengthening of the company’s competitive position across markets; 3); Higher growth and margin outlook from the consolidation of Ülker Çikolata; 4); Increase in its free float.;

Downside risks: 1) Potential deterioration of the macroeconomic backdrop in; Turkey; 2) Intensifying competition in the biscuits, chocolate and cake markets; 3); Execution risk of company’s strategy; 4) Potential appreciation of the USD which; would negatively impact exports as well as non-cash FX losses.

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