Buy - Sell

·    FROTO (HOLD, TP: TL 17.4): Ford Motor Company (FMC) announced on Oct 25 it expects a $1.5b+ loss from European ops in 2012 & therefore announced a restructuring program (prev: $1b+ loss=> Will close 3 European facilities (Southampton, Genk, Tooling & stamping operations in Dagenham), decreasing European capacity by 18% (gross annual savings of $450m -500m)=> Transit assembly plant in Southampton (c.28k Transit production in 2011) to be closed & Transit production to be consolidated in Kocaeli/Turkey (est. 2H13) => Transit has highest rev/vehicle & highest mrg w/i FROTO’s portfolio => assuming incremental 25k units (9% of 2012E production) & no incremental Capex need => c.+10% on our DCF val for FROTO (to be partially negated by worsening outlook on mrg for 2013 than our current est indicate). Following relocation decision, FROTO might need to adjust capacity allocation b/w basic Transit models (160k units as of 2014) & Transit/ Tourneo Custom (130k units) => to have a balanced CUR b/w 2 lines in l/t => will recheck production numbers & Capex requirement if any. Restructuring plan of FMC can also facilitate more competitive pricing for PC ops of FROTO in mid-term => -VE trend in mrg of FROTO is not only driven by its ageing LCV product portfolio, but also uncompetitive pricing against VW brands in PC. NET/NET: +VE for FROTO given weakening outlook for 2013 => however we believe market was already partially pricing some positive developments on new sourcing arrangements. DIVIDEND: FROTO TRY0.65/share divi on Oct 31.

 

    Opel - PSA announcement & TOASO (BUY; TL9.25) > On Oct 24, Opel and PSA announced key steps in their global strategic alliance which includes next steps in joint purchasing organization, and four common vehicle platform development projects. The Alliance aims to launch the first vehicles on these common programs by end-2016. Impact on Tofas => possibly limited, but unconfirmed for now: we believe the most critical item that could impact Tofas could be the joint program for a compact-class Multi-Purpose Van

for Opel/Vauxhall and a compact-class Crossover Utility Vehicle for the Peugeot brand. However, it is not possible to read through the implications of the strategic alignment for Tofas without further details.”Multi Purpose Van” is a generic name, which can refer to both passenger cars and commercial vehicles. Speculations should be treated with caution, but downside risks for Tofas might exist considering French govt’s involvement in PSA: Until now, we assigned low probability to non-renewal of PSA/Tofas deal (valid until 2015). However, we noted that a renewed deal could be less attractive than the current one in terms of vol commitment and margins. PSA take-or-pay agreements account for ~25% of Tofas’ capacity. More to follow...

 

    TUPRS ( BUT, TP: TL 48.6): Reportedly raised $700m @ 4.1% & maturity of 5.5 yrs (May 2018) => 1st ever debt security issue by TUPRS. NET/NET: +VE as it enables it to diversify its funding sources. We exp proceeds will mostly be used to finance WC & replace some of existing banking debt. Cost is competitive as i/r is only slightly higher than 3.7% paid for short-term USD debt as of end-1H12.

 

     AKSEN (HOLD; TP: 4.1): Acc. to AKSEN, Syria will resume buying electricity from TR. Syria stopped buying electricity from AKSEN early Oct => has 1yr electricity accord with Syria (started late Sept). Electricity sales to Syria => 20% of total rev of AKSEN

 

     TTRAK (HOLD; TP37.7) > The government will reportedly raise total agriculture support budget for 2013 by 16.9% y/y, at a much higher rate than the current inflation rate of 7.5% => boosting agriculture income for the farmers <= high agriculture income is supportive for the demand for tractors. We were already incorporating a 13% incr in agri support budget in our f/casts for 2013, well above the inflation; therefore, at this point we maintain our 2013 market estimate of 45k tractors (23k for TTRAK), down 10% y/y from around estimated 50k tractors in 2012.

· CUSTOM DUTY UPPED ON MEAT IMPORTS > The gov’t will raise customs duty on imported carcass meat from 75% to 100% and on live animals from 30% to 40%. +VE for cattle growers but -VE news for meat processors who use meat as major input => +VE for Banvit (NR); -VE for Tat (Hold, TP:2.94) and Petun (NR).

 

teb