27 Ağustos 2013 Salı

TURKEY – THYAO – 2Q13 Earnings Review: Robust margin; FX loss hits NI; S/T rating downgraded to MARKETPERFORM

BUY (L/T) MARKETPERFORM (S/T)
2Q13 Results at a Glance
Net income down 29% yoy -- Turkish Airlines reported TRL144mn net income for 2Q13, well below expectations (BurSec: TRL350mn; Cons: TRL293mn). The small miss in revenues was offset by much better-than-forecast margins, though a huge FX loss hurt the bottom line.
Our View
Effective cost control -- The miss in revenues was expected, in view of the recently posted tax financials. Passenger yields were worse than expected, which should be related to the strong passenger growth, even during Gezi Park events. However, both gross and EBITDA margin expanded (and were better than expected), thanks largely to improvement in fuel expenses, as well as personnel expenses. The stock is trading at 2013E 9.0x P/E, at a large discount to international peers’ average of 11.1x. We believe initial market reaction could be negative -- despite recent weakness following the tax financials -- and downgrade our S/T rating to MARKETPERFORM. However, the stock offers ample potential in the long run, in our view.
 
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