26 Eylül 2012 Çarşamba

TURKEY STRATEGY UPDATE: "Non-EU(phoria)"

Non-EU(phoria)
Economic growth in the EU is in doldrums… According to IMF forecasts, GDP growth in the EU should remain subdued at best in the coming years. High public debt coupled with austerity packages implemented in large economies should lead to a lackluster domestic demand in the EU. Therefore, investors’ focus has been shifting towards companies that either exports to non-EU countries or have revenues based in growing regions outside that of EU. According to the IMF projections, GDP growth in Turkey’s primary non-EU export destinations, including Middle East, North Africa and Russia should exceed 4% over the next two years.
Majority of Turkey’s exports are routed to non-EU countries…  Over the past decade, Turkey has been diversifying its exports away from Europe. Turkey’s largest export partner continues to be the EU-27, however, its share in total exports declined sharply from 58% in 2003 to 41% in the past 12 months as of July 2012. Middle East and North Africa appear to be the key new destinations for exports. In the first seven months of 2012, exports to Middle Eastern countries almost doubled to 28% of the total while North African countries increased their share to 7% due to reconstruction activities in the aftermath of uprisings.

In terms of product categories, Turkey primarily sells iron and steel (12% of total), precious metals (11%), machinery (7%), mineral fuels (6%) as well as motor vehicles (6%) to its new trading partners outside of the EU. In the first seven months of 2012, it is worth to note that precious metals, railways, tobacco, carpets, arms and ammunitions indicate a rapidly growing trend. In terms of services, contracting revenues generated by Turkish companies are primarily originated in the Middle East, North Africa, Russia and Central Asia. Tourism is another source of service revenue but the dominance of Europe appears not to have dissipated with European tourists accounting for 58% of the total. However, exports of goods and services do not tell the whole story because Turkish companies have also been investing abroad, a total of US$4bn over the past decade, primarily in the Middle East, North Africa and Central Asia. These Turkish companies consolidate international operations in their financial statements and provide exposure to growing economies located outside of the EU. 
Which Turkish companies provide exposure to non-EU international revenue growth? On page 7, we have listed Turkish companies with considerable non EU international revenues. Among large caps, Anadolu Efes (44%), Anadolu Cam (43%), Turkish Airlines (46%) and Tekfen Holding (46%) are notable names that generate in excess of 40% of their revenues internationally and outside of EU. While Anadolu Efes has beer operations in Russia, Ukraine and Kazakhstan, contracting services in the Middle East drive Tekfen Holding’s international revenues. THY capitalizes on the strong passenger growth in new routes. Among small caps, Anel Elektrik (58%), Mardin Cimento (37%), Park Madencilik (87%) stand out with considerable non-EU international revenues.

 

BGC Partners Istanbul

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