Buy - Sell

·         NEW TAX: Acc. to local dailies, Finance Min Simsek stated if income from sources such as interest, div & rent exceed a certain threshold (speculated @ TL75k) => 35% tax can be introduced, based on taxpayer declaration. WHT already paid would be deducted from this tax liability. Accordingly, the FM revealed that the target is for income tax equality & some expenses could also be made tax deductable which could incr the # of taxpayers. Says the scheme is being worked on & could be sent to Parliament 1H13. Comment: Would increase the tax load from 15% to 35% => discourage savings & promote spending, which contradicts with Govt’s aim to pull down CAD => no real yield on deposits currently, such an addi tax would reduce the principles in real terms. TL75k threshold is large enough to cover deposits >c.TL1m=> still -VE as this segment has the largest contribution in overall savings. Individuals with such high returns from divi, rent & deposits may tend to move savings off-shore, which would be -VE for TK (already very low savings rate). 

 

·         PRIVATE PENSION SCHEME => Regulation re state contributions in pvt pension system was published @ official gazette => state contributions will be managed by pension co’s in separate accounts where total fee charged is capped @ annual 0.365%. Min 75% of state contributions has to be invested in TRY govt bonds (including sukuks) & max 25% into TRY deposits, bank bonds & equities (companies in ISE-100 or participation index) - not more than 15% into a single instrument. Govt expects c.TL5b of new contributions in 2013 => could translate into annual inflows of c.TL900m into bonds & c.TL150m into equities.

 

·         TTRAK (HOLD; TP TL42.3) > According to the president of Agriculture Equipment Association, replacement of old tractors would contribute for a savings of TL6b for the economy. Says the running cost of old tractors is significant and hurts productivity; hence, the govt should provide scrap incentive to the sector. Note that we f/cast a tractor market of 46K for 2013 and 52K for 2014. We account for a scrap incentive for the sector as from 2014 (when Tier 4 emission regulation is to be adopted in TR). However, a potentially earlier scrap incentive would provide a significant support for 2013 demand.

 

·         KRDMD (BUY; TP TL1.55) > Kardemir announced that it decided to apply to the CMB to increase its registered capital ceiling from TL1.2b to TL3.0b. Comment: Might trigger bonus issue speculations and impact the stock +VELY in the short-term. Yet, no impact on our forecasts or the valuation.

 

·         THYAO (BUY; TP TL7.30) > THYAO disclosed some numbers from its 2013 budget => i) unit sales of 90.8b in RPK (rev passenger km) on prod of 115.2b in ASK (available seat km) => passenger load factor of 78.8%, ii) # of passengers budgeted @ 46m (17.7m domestic and 27.3 int’l) and iii) revenues of $9.7b on fuel consumption / cost of 3.99b litres / $3.7b. Comment: Implies faster growth vs our est in 2013 => THY may sacrifice yields to some extent in order to achieve such growth (top line is only 5% higher, implying a 5% lower yields vs. our est). The budgeted vol’s (unit sales, prod’n, # of passengers) are c.10% higher than our existing est for 2013 (implying c.20% y/y growth). However, the airline’s planned seat capacity growth based on the existing LT aircraft acquisition agreements is only 7% y-y (w/o taking into account potential ST departures from the fleet related with the seven old widebody aircraft on sale (A340s) accounting for c.5% of the existing capacity). The airline might resort to leasing aircraft for the ST (usually more costly). THY’s growth is again likely to mostly happen at Ataturk Airport, implying stronger than exp’d vol growth for TAVHL. Yet, we are curious to see how Ataturk Airport, THY’s main hub, would be able to accommodate this growth.