In 3Q12, Tekfen Holding reported TRY49m net income (-10% y-y), in-line with our estimate (TRY48m), but lower than consensus (TRY58m). EBITDA at TRY66m (-29% y-y) lagged our TRY72m estimate (consensus: TRY85m) on the back of a miss at the agri segment. Lower tax expenses than our estimate compensated for the operating weakness at the bottom-line.
We revise down our 2012/13 EBITDA estimates
We revise down our 2012/13 EBITDA estimates by 5%/7% on continuing weakness in 3Q12, and more conservative margin estimates for 2013. However, our 2012 EPS is raised 3% on revision on financing income/tax estimates. If Tekfen manages to compensate for the cost overcharges as per the latest guidance, there can be upside to our 2012 estimates.
BUY maintained, SoTP-TP revised from TRY8.45 to TRY8.18/share
We revise our 12-month TP (at a 20% discount) to TRY8.18/share reflecting downward revisions to our 2012/13 EBITDA estimates. We maintain our BUY rating on valuations, planned increase in vertical integration in agri segment, and prospect of large scale projects in 2013. Progress on Libyan issues, and new project additions can be among the positive triggers.
Backlog progression better than our estimate
Agri segment’s weakness was on the revenue level due to a shift of consumption from September to 4Q12, along with some miss on margin levels. Backlog increased to USD2,339m in September 2012 from USD2,266m in June 2012, despite USD358m contracting revenues recorded in 3Q12. An USD123m addition from the Sadara project, USD118m project from Toros Tarim, and extensions on existing projects were the drivers of backlog growth. We now believe the downside risks to the USD2b YE backlog target is limited, and any project addition would be a major positive for Tekfen Holding The company will hold an analyst teleconference today to discuss 3Q12 results.
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