Buy - Sell

·         COMPETITION AUTHORY SLAPS FINES ON 12 BANKS > Akbnk TL172m, GARAN TL213m, HALKB TL90m, ISCTR TL147m, VAKBN TL82m, YKBNK TL150m. The size of the fines (see attached file) are in line with our initial estimates, but higher than recent market speculation. Fines account for 0.5% of FY13E BV and 3.8% of FY13E earnings; and an avg 15.5% of 1Q13E earnings post a 25% early payment discount. We expect limited negative impact on valuations, as the fines are set to wipe away less than 1% of BVs. Some banks are likely to partially or fully compensate for this fine via their discretionary reserves. These fines will be reflected in 1Q13 earnings. All banks are likely to appeal. But we attach a low probability for success, as the decision was taken unanimously for all banks except Isbank.

 

·         REAL ESTATE > Gov’t reportedly working on new legislation which will raise duration of residence permits granted to foreigners who buy property in TR to 1 year from current 3 months. Slightly +VE for real estate mkt.

 

·         KRDMD (BUY, TP TL1.67) > 4Q12 NI TL8.1m (+70% y-y, BNPP: TL14m, Cons: TL30m) EBITDA TL38m (-55% y-y, BNPP: TL37m, Cons: TL56m) Revs TL388m (-9% y-y, BNPP: TL413m, Cons: TL394m). Results (after adj) better than our est and close to cons. Note KRDMD posted actuarial losses due to steep decline in TR interest rates in 2H12. Co provisioned TL23m for potential employee termination costs in 4Q12 vs. TL15m for 9M12. If such costs were similar to 9M12, 4Q12 EBITDA & EBITDA mrgn would be TL56m and 14.4%, respectively, instead of TL38m and TL9.8%. Adjusted 4Q12 NI (TL26m) would also significantly exceed our est but still somewhat short of cons. Vols and prices slightly below our expectations but were more than offset by lower unit costs. Results, even without adj for actuarial impact, have been mostly discounted following tax purpose financials three weeks ago. Also note, financial reporting, especially with YE12 financials, has improved significantly. Co switched to a well-known int’l auditor from local one, further improving our understanding of financials.

 

·         NEW TAX SCHEME FOR AUTO SECTOR > According to dailies, the Min of Finance is evaluating a new taxing scheme for autos => taxes would be based on CO2 emissions/km like in most European countries. Diff to evaluate Potential impact on listed companies:1) Co’s have evolving product portfolios (moving to smaller engines with low emissions, LNG vehicles, hybrids etc.); 2) Unclear whether there would be tax brackets or linear taxing scheme uncertain at this stage, and 3) Unclear impact on product mix. Nevertheless, according to our basic calculations, Peugeot, Citroen, Ford and Renault have good ranking in CO2 emissions (2012 PC data). Asian players have relatively higher CO2 emissions. Among listed companies, Tofas’ PC portfolio’s emissions per km was the highest in 2012 (but slightly below mkt avg), followed by Dogus Otomotiv. Ford’s portfolio had the lowest CO2 emissions.

 

·         TCELL (BUY, TP: TL13.75) > According to FT, a NY Federal Court imposed an escalating series of fines on Cukurova, $10k a weekday for the 1st wk, $25k a weekday for the 2nd, and $50k a weekday thereafter <= related with Cukurova’s liabilities to Turkcell’s 37% shareholder TeliaSonera. Recall  => in Sep’11, Arbitration Court had decided that Cukurova should pay US$932m+interest (US$1.3-1.4bn) to TeliaSonera. Cukurova’s lawyers said the Group had no intention to pay (disputed the NY court’s jurisdiction) and was taking the underlying case to appeal. The fines could affect the group’s ability to raise US$2bn needed for getting the 13.8% controlling stake back from Alfa. Separately, according to daily Vatan, the Iraqi gov budgeted only for US$650m instead of the previously planned US$3.5bn for the expenses of foreign oil companies in Northern Iraq (including Genel Energy, in which Cukurova has a 23% indirect stake). Both news may affect Turkcell share price slightly –VELY <= the market perceives that Cukurova’s pymt would enable the release of the dividends (est. at TL3bn), although Alfa would still have the ability to block dividends even if Cukurova pays.

·         THYAO (BUY TP TL8.46) TAVHL (BUY, TP TL15.61) > Turkish Civil Aviation Authority (SHGM) sent a memo to domestic airlines asking them to shift as many flights as possible to other airports so as to allocate more slots at Istanbul Ataturk airport to int’l flights until new Istanbul airport is constructed. As for 2014, no demand for new domestic flights will be granted unless it is for a new route no airline has been flying to. Comment: Measures seem to accommodate THY’s growth at Istanbul Ataturk. Also +VE for TAVHL, as int’l passengers are significantly more profitable. However, we think these are relatively short-term and inadequate. Gov’t might be forced to take measures in order to expand capacity should construction of new Istanbul airport be postponed beyond 2017 as we expect. Such developments would most probably be very +VE for TAVHL as its concession at the airport is fixed and has no obligation to expand capacity without being compensated additionally.