Sabanci Holding (Hold, TRY 8.70)

Sabanci Holding (Hold, TRY 8.70)

Sabanci Holding announced TRY 340mn net profit for 4Q11, 5% above our estimate (TRY 324mn) but 9% below consensus. We do not expect a major impact on the share price as the results of its major subsidiaries are already out. The major short-term catalyst would be Teknosa’s IPO, planned by June, and potential CarrefourSA deal.

■   The top line grew by 15% in 4Q11 (and in 2011) yoy mainly thanks to the strong growth of the non-bank sectors. The growth in the Energy segment’s generation capacity and strong performance of Industrials limited the yoy decline in the operating profit to just 2% vs. the 18% fall in Akbank’s contribution in 2011. The one-off gains from sales of Aksigorta and Advansa during the year more than compensated for the soaring FX losses, leading to a 13% yoy rise in earnings for the year.

■   We expect Sabanci to post a 19% yoy increase in the top line to TRY 27bn in 2012 and a 21% rise in earnings to TRY 2.3bn with growing Energy and recovery in Banking. The holding company is also ready for acquisitions with a strong cash position of TRY 1bn, especially in the cement sector and a potential deal at CarrefourSA.

■   The stock is trading at a 1% premium to its listed subsidiaries vs. an average discount of 13% since 2010. Though we believe there is still some room for further contraction (current discount to NAV is 29%), the drivers of the stock price will be more NAV growth and IPOs of non-listed subsidiaries. Moreover, Citi’s decision to cut its Akbank exposure by half could weigh on Sabanci’s current NAV as well.

■   Incorporating our banking analyst’s valuation of Akbank, we reduce our TP to TRY 8.70 (had there been no change to the Akbank contribution, our TP would have risen to TRY 9.4 from its prev. TRY 9.3). Because the upside remains below our CoE of 14.5%, we downgrade the stock to Hold.