Buy - Sell

·         Normal? Extraordinary? CBRT announced yesterday it would sell at least $150m through daily auctions (on “normal” days i.e.), even during days when they provide repo funding at the policy rate. This means that they will sell at least $3bn till the next MPC meeting on 23 July.

 

·         TCELL (BUY, TP: TL4.71) Surprise MTR Cut, effective July 1^st> Telecom Regulator cut both MTRs & TCELL’s on-net price limit (mid-Mar Regulator had incr’d it by 70% to Kr5.35 – to be effective July 1^st) by 20%. TCELL will receive Kr2.50/min vs Kr3.13/min (was stable since May’10) for incoming calls. MTRs paid by TCELL to VOD & Avea also declined to Kr2.58/min & Kr2.96/min, resp, from Kr3.23/min & Kr3.70/min. Min on-net price limit for TCELL will be Kr4.28/min vs Kr5.35/min. COMMENT: No material direct impact on TCELL’s EBITDA from the chg in interconnect rev & costs (similar amounts). Reduction of min on-net price limit by 20% will enable TCELL reprice its related sub base more easily, limiting churn. More aggressive pricing from other operators can be experienced due to lower MTRs. NET/NET we believe this reduces TCELL’s relative competitive disadvantage re min on-net price incr but nets off part of +VE impact of the avg price incr in the market. We give higher emphasis to TCELL’s repricing becoming easier 1) VOD & Avea were expected to follow TCELL in raising prices in May-June instead of trying to attract more subs 2) nominal MTR cut amount small (Kr0.63/min vs. approx. Kr3/min in prev cuts) lmtd impact on sub preference => sl +VE for TCELL & -VE for Avea  & slightly –VE for TTKOM (NR).

 

·         TCELL (BUY, TP: TL4.71) General Assembly couldn’t convene> GA couldn’t convene due to absence of"51% TCELL Holding" representative, as exp. Bundle bill draft, including articles enabling functioning of TCELL’s GA, is currently @ Parliament commission. It seems that a few days will be enough to enact the law. Authorization of GA can be transferred to Investment Indemnification Committee with this law => can solve GA deadlock => distribution of blocked divi of est. TL3bn by IIC remains as a question mark. Recall that, Privy Council decision for compensation amount to be paid by Cukurova to Alfa to get 13.8% controlling shares back is still awaited. TeliaSonera said that they trust CMB to solve deadlock, but do not welcome the CMB’s appointment of all BoD members of the company, as they perceive it as nationalization of the company. Alfa said that they expect a complete resolution only after the Privy Council decision.

 

·         AYGAZ (BUY, TP TRY11.37) > Will start a 50-50 fuel distribution JV with Opet pending approval from EPDK and CA. Will build a distribution network of gas or auto-LPG stations under a company-owned, company-operated or a company-owned, dealer-operated model. Will have a paid-in capital of TRY90m which AYGAZ and Opet will contribute in cash. Comment: Net impact is not possible to estimate at this time due to lack of important details on JV’s plans. On +VE side, new JV will enable AYGAZ to venture into a segment of energy business growing faster than its core LPG business. -VE side, will lower company’s cash flow at least in med-term. AYGAZ and Opet are currently close partners in the auto-LPG business. Auto-LPG is the only growing segment of the LPG market in Turkey and accounts for c60% of AYGAZ’s domestic LPG distribution business by volume. Opet is a 50-50 JV between KCHOL and Ozturk family while AYGAZ is majority-owned by Koc Group.

 

·         KRDMD (HOLD, TP TRY1.96) > Announced its sales program for 3Q13, implying max steel sales of 472k tonnes for the quarter, up 12% y-y but flat q-q. Comment > Announcement implies our 1.56m tonnes unit sales est, up 10% y-y, for 2013 might be within reach, but there still seems to be some downside risk as hinted by unit sales realisation in 1Q13. Despite announcing the same sales program, the unit sales had come down 5% y-y in 1Q13 to 335k tonnes. The quarterly sales program refers to its sales capacity not the company’s exact sales plan. KRDMD usually realises about 85% of the its quarterly sales program but the ratio had come down to 71% in 1Q13. The company announces its sales program on a quarterly basis in order for its shareholders to be able to plan ahead and place their orders. KRDMD shareholders have the first right of refusal in purchasing up to 40% of production capacity at list prices.  

 

·         FATIH TABLET TENDER; ARCLK (BUY; TP TL16.6), VESTL (NR) > 11 firms/consortiums applied for the prequalification of “Fatih project” tender (10.6m tablets to be delivered in 3-yrs) => incl’g Vestel Elektronik Sanayi (VESTL) and Arcelik (ARCLK). Following the pre-Q’n, there will be price based negotiations=> revenue potential significant but expect slim margins. We do not expect Arcelik to bid aggressively. Nevertheless, winning the tender could still be a +VE catalyst for the share price.

 

·         ISGYO (NR) > Received U$110m project finance credit (2y grace period + total 10y) from ISCTR for Tuzla project which has been leased to ISCTR for 25years with an annual rent of $18m. Neutral.