ANEL
ELEKTRIK - Initiation of Coverage - Recommendation: "BUY" – Target
Price: TL2.98 – Upside Potential: 42%
Bright
future not priced in yet
· Anel Elektrik is ready to start its operations
again in Tripoli after business and political
environment starts to normalize in Libya. We estimate the company to
increase its backlog by 39% y/y to US$387mn in 2012 and to US$443mn in 2013.
Our backlog delivery forecast and profitability assumptions are quite
conservative considering the past performance. Our bottom-up analysis suggests
a target share price of TL2.98 offering a hefty upside of 42%; we are
initiating the coverage with a “BUY” rating.
· According to forward looking P/E, the company
is trading at 8.3x 2012E earnings, 48% discount to its historical average, and
45% discount to its peer groups average.
· Anel Elektrik has strong ties with big
construction companies such as TAV (having worked on 7 airport projects) and
Taisei – leader of Marmara Tube Tunnel consortium. The company has a proven
track record in big infrastructure projects which paves the way to expand its
backlog; considering fixed capital investments of Turkey in 2012, which is up by 13%
y/y, and picking up MENA region; we think that Anel Elektrik is one of the best
candidates to capitalize on this growth.
· Thanks to being a project development and
engineering company, Anel Elektrik has low CAPEX and depreciation levels. Since
the company has a bargaining power over its suppliers, working capital
requirements are at minimum; therefore, it does not require too much cash to
feed its operations. On the other hand, the company can reduce its workforce
according to its backlog, enabling it to manage OPEX easily during tough times.
· Since potential projects from MENA region
comprises a significant portion of our backlog forecasts, a prolonged
instability in these countries should negatively affect both top line and profitability
of the company.
· Anel Elektrik’s 3-month average daily trading
volume is US$0.5mn. Low trading volume could result in sharp price changes and
bring additional volatility to shareholders.
