Buy - Sell

·         TREASURY AUCTIONS > Treasury borrowed TRY5.2bn from mkt yesterday through 5y fixed-coupon and 10y CPI-linker bonds. Will issue 10y and 2y fixed coupon bonds today. Aims to borrow TRY 10.1bn from the mkt this month, including 12m bond auction next week. This means that even a limited TRY 3bn sale in the auctions would be enough. CBT’s corridor hike signal seem to have eased further TRY depreciation. As a result, 2y bond yield declined by 18bps to 8.95% and 10y yield by 36bps to 9.0%, with some flattening bias on tightening signals.

·         TURKISH BANKS - 2Q13 EARNINGS PREVIEW > 2Q13 earnings season expected to start July 25. We expect the banks to contract 9% q-q. Key items => 1) rise in general provisioning exp due to strong loan growth of over 10% q-q, 2) melt down in m-t-m gains lowering equity due to rise in rates, 3) pull back in CARs by around 150bp for our coverage due to strong loan growth and decline in m-t-m gains, and 4) some pressure on NIM due to slight deterioration in L/D spread and lower on CPI linkers yield due to seasonality.

·         TKFEN (BUY, TP TL7.7) TO PARTICIPATE IN TOROS TARIM CAPITAL INCREASE > Decided to participate in the paid-in capital increase of its 99.98% subsidiary Toros Agriculture from TL430.5m to TL530.5m and to facilitate resources as advance paid-in capital. Accordingly, there will be TL99.98m cash outflow from TEKFN.   

Buy - Sell

·        OPPOSITION MP REPORTEDLY FILED FOR CANCELLATION OF NEW AIRPORT TENDER > Opposition CHP MP reportedly filed for cancellation of new Istanbul airport tender with Council of State. MP cited problems with environmental assessment report and changes to tender procedures as reasons for filing. Comment: Given importance gov’t attaches to this project and amount of preparation behind the tender, we think cancellation is unlikely. In case the project is slowed down at some point because of an injunction or cancellation, it could be somewhat good news for TAVHL (BUY, TP TL15.81) and bad news for THYAO (BUY, TP TL9.69) depending on extent of delay.

 

·        BASEL-III TO COME INTO EFFECT JAN 1 2014> BRSA announced that BASEL-III will become applicable starting from Jan 1, 2014. One of the major changes => 100% of unrealized m-t-m gains to be considered in calculation of CAR instead of currently used 45%. Attached pls find our findings according to 1Q13 results, however, given the rise in i/r, the +VE impact is expected to be smaller vs attached. NET/NET> YKBNK will be most +VE’ly impacted followed by ISCTR.

 

Buy - Sell

·         INSURANCE POLICY PRICING REGULATION > Property insurance companies will be allowed to change traffic insurance policy pricing (motor third party liability) whenever they wish starting in 2014, according to daily Hurriyet.  Segment accounts for ~22% of total gross premium generation. Recall two weeks ago new Treasury legislation allowed insurers to renew traffic insurance policy price on a monthly basis instead of twice a year, as previously required. Property insurers will also be able to vary pricing among policy holders according to risk factors, which we expect will further improve technical profitability of compulsory traffic insurance. We expect news to have +VE impact on ANSGR, AKGRT and GUSGR.

 

·         TCELL (BUY, TP TL14.71)> A bundled bill draft which will give authorization to the Investor Indemnification Center (IIC) to convene a General Assembly for companies whose BoD members have been appointed by CMB will reportedly be sent to Parliament on Wed. If approved will be sent to Presidency for approval. TCELL’s GA couldn’t convene on both May 22 & June 24 due to absence of required majority. This new bill can solve TCELL's GA deadlock => needs to be solved to become compliant with corporate governance rules. Whether IIC will enable distribution of blocked divi of est. TL3bn remains a question. NET/NET slightly +VE.

 

Buy - Sell

·         EKGYO (NR) > tendered its Bakirkoy land (revenue sharing model). 22 bidders => strong demand considering there were only 3-5 bidders for the previous tender in 2013. Highest bid was from Kuzu Insaat @ TL700m where Emlak’s share is 30% (TL 210m). Appraisal value of land TL114m. There will be a 2nd phase of the tender in the near future where Emlak will proceed with an open auction.

 click here for details

·         TEKFEN (HOLD, TP TL7.9) > TEKFEN INSAAT RECIEVES LOI FOR $136M BTC CONTRACT> TKFEN’s subsidiary Tekfen Insaat received a letter of intent for a $136m contract for BTC (Baku-Tiflis-Ceyhan) pipeline. Contract will be signed on July 1. Project includes maintenance and improvement work for existing pipeline. Project duration 36 months.  Not cost-plus but mgmt notes the project is low risk. Tekfen’s backlog as of March 2013 was $2.39bn. Comment > Not among the potential projects on our watch list so slightly +VE. TKFEN  also announced that Petrol Is Union and Kiplas (union of chemical, petroleum, rubber and plastic sector employers) reached an agreement during collective bargaining. No details on agreed wage increase. TKFEN does not expect a major impact on financials. Employee costs account for <5% of total cost of Toros Tarim (33% of Tekfen Holding’s NAV); Neutral.

click here for details 

·         YKBNK (BUY, TP TL7.15 ) SIGNED $505M SECURITIZATION LOAN > Signed $505m securitization loan with 5 to 13 years maturity. The deal is backed by the bank’s foreign currency denominated receivables. The securitization loan accounts 0.8% of bank’s total assets as of 1Q13. Although the size is small, we expect slight +VE impact due to long term financing.

 

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).

 

Buy - Sell

·         TREASURY AUCTIONS > Treasury holds 2 auctions today and 3 tomorrow ahead of its TL13.6bn redemption on Wednesday. Today 5-yr fixed coupon and tomorrow 10-yr CPI linker; Tomorrow 10y and 2y fixed coupon bonds and 7y FRN.

 

·         TCELL (BUY; TP TL14.71) > General Assembly meeting scheduled for tdy => Recall: on May 22, the GA could not convene due to the absence of the "51% TCELL Holding" representative (<= election of which is only possible with the consent of two disputed major shareholders, Cukurova and Alfa). Expect the same for tdy’s meeting. Recall: the new bundle bill has not passed through the Parliament yet => the bill grants authorization of the GA to Investor Indemnification Center (IIC) for companies whose BoD members are appointed by the CMB.

 

·         ASYAB (HOLD, TP: TL2.15) > sold an NPL portfolio worth TL140m @  TL8.2m => TL102.5m of the sold portfolio was already written-off. Sale is expected to bring down NPL ratio to 4.43% from 4.63% @ 1Q13 ceteris paribus. Comment: Slight positive as this is the 1st time a participation bank has sold a NPL portfolio (prev’ly they had been saying that sale of NPLs wasn’t sharia compliant) => might mean NPL inflow has been continuing (supported by BRSA’s sector data). Guidance 1) max 4.5% NPL ratio & 2) 60%-65% NPL provisioning ratio, which make us to believe NPL inflow is likely in rest of 2013. Read across to conventional banks not positive as participation banks recognize NPLs quicker.

Buy - Sell

The market fell 1.4% yesterday, dragged down largely by the banking index, which closed the day down 2.2% on the back of weakness in HALKB (-3.7%), YKBNK (-3.4%) and VAKBN (-3.2%). Today we expect the weakness and slight underperformance to continue. We’ll be keeping an eye on the ECB rate decision and Erdogan’s speech upon his return from abroad. 78K and 80.5K are support and resistance levels for today.

 

MAY FOREIGN TRANSACTIONS, $174M NET INFLOW > Inflows $8.31b/Outflows $8.14b. Top inflows: SAHOL $289m, TCELL $173m, SISE $48m, THYAO $41m, MGROS $39m, EREGL $30.5m, AKSA $15.5m, PGSUS $13.2m,HALKB $13.2 Top outflows: GARAN $112m, VAKBN $109m, AKBNK $84m, KRDMD $49m, ASYAB $28.9m, KCHOL $28.8m, AKSEN $26.3m.

 

CONSUMER DRAFT LAW > The draft Consumer Law brought to parliament extends the scope for early payment of consumer loans from mortgage loans only to auto loans and other general consumer loans. The early payment penalty for loans due less than 1 year will be at most 0.5% of the remaining loan amount and for loans due over 1 year will be at most 1.0% of the remaining loan amount. According to the existing legislation just mortgage loans can be subject to early payment with 2.0% early payment penalty. Comment: Refinancing/early payment have already taken place widely since the beginning of the year. Therefore we do expect the +VE impact to be limited.

 

Buy - Sell

·         HALKB (HOLD; TP TL20.00) 1Q > TL713m bank-only net profit (+31% y-y, -4% q-q) vs our TL681m est and TRY678m consensus on trading gains. We revise up our FY13 and FY14 earnings est by 2% on avg due to sl improvement in NII. Opex +39% y-y in 1Q13. Although the bank guides for 20% y-y growth in FY13, we remain cautious given the 19% y-y rise in per head HR costs in 1Q13 and high mkt exp rel to the new credit card. Growth in lucrative loan segments (GPLs/housing) might result in better L/D spread in coming quarters. TP revised upward a bit to TRY20.00. Reiterate HOLD due to limited upside. We forecast a slight earnings contraction in FY13, which curtails the relatively attractive price multiples of Halkbank.(Detailed note to follow).

 

·         AKBNK (HOLD; TP TL10.20) 1Q > TL868m bank-only net profit (+56% y-y, -20% q-q), below our TL904m est and TL884m consensus on higher provisioning and low dividend income. Security portfolio contracted 12% q-q in 1Q13 bringing down the security portfolio to assets ratio 370bp q-q to 25.9%, which might enable Akbank to shift to higher yielding loans faster than initially expected. Although strong NFI growth rate should normalize, we expect 24% y-y NFI growth in FY13. Potential trading income might surprise on the upside given the recent decline in interest rates and the bank’s TRY1.1b m-t-m gains booked under equity. HOLD reiterated. Main upside risks to our HOLD recommendation is a further drop in cost-of-funding and higher trading income. Whereas the main downside risk is the NPL threat especially from the sharp growth in the credit card segment.

 

Buy - Sell

·         CONSUMER LOANS ACCELERATE > We calculate the 13-week trend growth rate of consumer loans @ 27.4% (March 8 week), up 1.8pp from the previous week. Increases the chances of a RR hike in the MPC meeting on 26 March.

 

·         THYAO (BUY, TP TLY8.46) MISSES ON POOR PRICING POWER > Adjusted NI TL15m (-94% y-y from adj. NI TL232m 4Q11, BNPP: TL217m, Cons: TL222m); EBITDAR TL413m (-39% y-y, BNPP: TL726m, Cons: TL723m) and Revs TL3.74b (+17% y-y, BNPP: TL4.06b, Cons: TL3.92b). 4Q12 headline NI TL265m vs. TL97m net loss in 4Q11. Announced cash divi TL0.1444/share (TL173m, 2.0% yield) payable on May 31 and bonus divi of 15% (TL180m). Comment > Results weaker than our est on weaker revs. Our first impression is that this is due to seasonality (i.e. trouble selling significantly increased capacities in low season), not beginning of a new downward trend on yields/margins. We will reassess our ests but note that traffic growth is faster than expected so far in 2013. Other news > Lufthansa’s CFO reportedly said there were no concrete projects on the table in discussions with THYAO. We are not surprised and think THYAO might be better off without deeper cooperation with Lufthansa. But mkt expectations were that something concrete might come out of discussions, significantly improving THYAO’s prospects.

 

Buy - Sell

·         THYAO TI (BUY, TP TL8.46) > 4Q12 results today. We expect EBITDAR TL726m & NI TL217m (close to cons). We expect strong top line (+27% y-y) and EBITDAR (+30% y-y) on +26% growth in passenger travel unit sales (as measured by RPK) and 4.5ppt y-y improvement in the passenger load factor. We estimate EBITDAR mrgn expansion will slow to less than 1ppt, from 6ppt in first 9 months, given sharp mrgn recovery already realized in 4Q11. Announcing YE12 financials earlier than usual, as it plans to hold annual shareholders meeting end-March to make changes to co’s charter, as required by new commercial code and capital markets rules.

 

·         TR Food retail sector > UCZ discount markets (80% owned by Ciner Group) targets continued aggressive growth => has reached 860 stores since start of operations in Apr’12 & aims to reach 2,000 stores by YE13. The Co has 350 SKUs in its product portfolio (compared to +600 of BIM –BIMAS-). Comment: Need to follow UCZ’s aggressive growth closely with regards to its implications for BIM. BIM had 3,655 stores, as of YE12 and plans to open 350-400 stores in 2013. We believe it is becoming critical for BIM to accelerate store openings. However, the Co does not plan to do so at least in the ST, believing it would compromise its strong execution capability.

 

·         DYHOL (HOLD, TP TL0.83) / HURGZ (HOLD, TP TL0.94) > Advertising spending +8% y/y to TL4.65bn in 2012 (in line with our est), according to the Advertising Assoc. Expects 12% growth in 2013 on domestic economic recovery vs. our expectation of a 7% increase. Better growth in advertising spending would be an upside risk to our ests for DYHOL and HURGZ.      

 

Buy - Sell

·         KCHOL (NR)  SCRAPS PLACEMENT> Placement of 100m KCHOL shares (3.94% of paid-in capital) was withdrawn, according to an official filing, citing unsatisfactory offers. Three family members had yesterday announced intention to sell 3.94% of KCHOL, reportedly at TL9.5/shr (vs TL10 current). The planned sale would have increased KCHOL’s free float from 22% to 26%. Subject stake was worth TL1b @ yesterday’s closing price and c30 days of daily trading vol. Family has said their intention was to increase the free float and meet their own financial needs (including for charity). Comment: News still likely to create overhang on the stock despite the withdrawal. Temel Ticaret, the family’s holding vehicle, owns 42.6% of KCHOL, while family members directly own 25.9% (before this cancelled sale) and the Koc Group related foundations own 9.1%.

 

·         TCELL (BUY, TP TL13.75)> New BoD will reportedly convene on March 20 following yesterday’s replacement of three board members by the CMB. While Cukurova and Teliasonera welcomed the CMB’s intervention, Alpha said the move was forced and temporary and were looking forward to the appointment of directors by shareholders once the dispute with Cukurova is resolved. We reiterate that the dividend decision needs to be approved by TCELL’s General Assembly. This rests on the election of the “51% TCELL Holding” representative which is only possible if a 4/5 quorum is reached at Cukurova Telecom Holding’s BoD, where Alfa and Cukurova are still in dispute. While the CMB’s intervention was required according to legislation, it does not ensure distribution of TCELL dividends.

 

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.

 

Buy - Sell

·         BRSA > Jan banking data expected today after 1st session close. We expect strong core banking performance to be sustained with milder volume expansion. If provisioning expenses normalize in Jan then might see an even stronger start to year. Our earnings ests stands @ TL2.01bn (+8.1% m/m +9.0% y/y), resulting in 13.2% annualized monthly RoE.

 

·         AYGAZ (BUY, TP TL11.68) 4Q12 Review > domestic distribution unit sales down 3% y-y @ 256k tonnes <= unexpected contraction in TR LPG mkt vs. our est of flat y-y for the quarter. EBITDA @ TL49m slightly below our est of TL52m (cons: TL64m) <= higher than exp’d opex. NI @ TL61m vs. our exp of TL45m (cons: TL56m) <= higher equity earnings from Enerji Yatirimlari, which owns 51% of Tupras. Mgmt decided to propose doubling the divi for 2013 (vs 2012 payout) to TL300m (9.7% yield), c.200% more than our exp. Mgt also decided to use upcoming 2-yr TL150m bond issue for this. Although we like to see Aygaz’s B/S getting leveraged, we are surprised given the M&A prospects and think this level of divi is unsustainable.

Buy - Sell

·         SNGYO (NR) >  Bought 45ksqm of land in Atasehir (Istanbul) from SDIF for $90m. Recall appraisal value of land is $111m and SNGYO had offered the highest bid @ $80m with JV partner Maslak Ticaret two weeks ago. Newly acquired land is very close to the Istanbul Finance Centre project and if zoning plans don’t change the co can develop a residential project with c.100k sqm sellable area. This land will raise 2012 year-end NAV ests by c.1%. Based on conservative ests, SNGYO can generate TL500m revs and TL150m NI. We believe this project will be finished in 1H2017.

 

·         EKGYO (NR)> Only one company bid for EKGYO’s Avcilar land tender (revenue sharing model). Co bid TL380m with 12% revenue share agreement to EKGYO (TL46m). Appraisal value is TL78m. We believe EKGYO will cancel this tender. They can re-tender the land or turn it to a public procurement model project where margins are lower than RSM projects.    

 

·         EREGL (HOLD, TP TL2.68) > Will increase paid-in capital by TL410m (13.27%) to TL3.50b through a bonus issue. No date set yet.

 

Buy - Sell

·         HALKB (HOLD; TP: TL18.72 cut from TL21.3) 4Q12 beat on higher trading gains; caution on restructured loans > 4Q12 NI @ TL742m (+24% q-q and +47% y-y) > Quarterly ROE @ 25.4%. FY12 NI +27% y-y. Annual ROE @ 24.8%. Top-line performance in line. Positives: Stronger than sector avg loan growth (+4.6% q/q & +17.2% y-y), mostly from housing & corp loans. +30bp q-q core spread => due to falling deposits costs. NIM +115bp q-q => +ve CPI linker contribution (~TL275m higher than 3Q). Deposits +4.6% q/q (20.7% y-y), sustained L/D ratio c. 82%. Negatives: Significant opex jump of 34% y-y in 4Q12 (22% y-y in FY12) => launch of new credit card scheme. 4Q net NPL addition @ TL91m in 4Q12 => better than TL137m in 3Q12, BUT restructured loans signals NPL inflow in 1Q13. Share of closely monitored loans => up from 2.9% to 4.7% q-q. TL83m discretionary provisions might be related to potential NPL inflows ahead. NET/NET: Despite higher-than-exp NI, possible NPL inflow makes us cautious re earnings performance.

 

·         ISCTR (BUY; TP TL8.63) 4Q12 results today > TEB-BNPP NI @ TL836m (-3% y/y & +22% q/q) Cons @ TL857m. We exp Isbank to gain mkt share in loans and deposits in 4Q12. We f/cast a relatively limited 36bp q-q improvement in total L/D sprd and a 54bp q-q expansion in NIM. However, strong trading gains should allow for an 83bp q-q widening in the FX & trading-adj’d NIM. We exp a sharp incr in net CoR, from the low base of 3Q12 when the bank changed its 100% NPL coverage policy, to 44bp levels. Otherwise, we f/cast a stable NPL ratio when adj’d for portfolio sales, which should lead to TL50m of one-off gains. Meanwhile, headline NPL ratio should improve to 1.9%. We f/cast fees and opex (adj’d for pension deficit) to have risen by 13% and 8% y-y, respectively, in line with 9M12 trends. We est a 22% q-q incr in NI, leading to an improvement in ROE, to 15% from 13% in 3Q12. Isbank will hold conference call and webcast at 18:30 Istanbul time. Webcast link => http://www.media-server.com/m/p/2q7yu5q8 Dial-in => Turkey “+90 212 708 12 36” UK “+44 203 367 94 53” USA “+1 866 907 59 25”.

 

Buy - Sell

·         CAD (Dec) @ 10am > TEB-BNPP & Cons @ -$5.4bn, 12-month @ $50.7bn (6.3% of GDP)

 

·         TSKB (BUY; TP: 2.67) 4Q12 Strong Core Perform > 4Q12 bank-only NI @ TL68m (flattish q-q & -6% y-y), 16.0% Q’ly ROE. 2012FY12 NI @ TL307m +20% y-y & 20% ROE. NIM c.+40bp q-q => backed by +VE contribution from CPI linkers. (adj for CPI-linkers +15bp q-q). Guides -30bp y-y NIM in FY13 (in line => due to drop in bond rates & tougher competition in loans). Loan spread +30bp q-q to 3.7% => helped NIM vs 3Q. Achieved 13.8% y-y FX adj loan growth in FY12. Mgmt exp 15% y-y FX adj loan growth in FY13 (inline). Strong asset quality maintained in 4Q12, but mgmt expects some tolerable NPL inflow in 1Q13 => we exp 15bp specific cost-of-risk ratio for FY13. Opex @ 12% y-y in FY12. Mgmt guides 9%-10% y-y opex in FY13 (inline). Plans at least 20% divi pay-out (2.36% yield) => if BRSA allows, may climb up to 30% (~3.5% yield). Mgmt projects 17%-18% ROE for FY13 (TEB-BNPP:17.3%). NET/NET: Conservative guidance for FY13 & possible NPL inflow expectations in 1Q13 might put some pressure in short-term. Trading @ 8.1x 2013E P/E & 1.3x P/BV multiples & 17.3% ROE in FY13 (higher vs sector avg @ 15%) => maintain BUY.

 

·         HALKB (HOLD, TP TL21.30) > 4Q12 results today. TEB-BNPP NI @ TL708m (+40% y/y and +18% q/q) Cons @ TL711m. We expect slight mkt share gains in loans and deposits and foresee a lower-than-sector 21bp q-q improvement in loan-deposit spread. However, CPI-linked bonds should allow for 116bp q-q expansion in NIM. Widening in FX & trading-adjusted NIM should be lower @ 63bp q-q due to lower trading gains. We expect a 3bp q-q drop in net CoR and flat q-q NPL ratio. We forecast fees to rise @ steady pace of 12% y-y but opex to rise sharply by 25% due to personnel and marketing expenses for bank’s new credit card brand. We est an 18% q-q increase in NI, leading to an improvement in ROE to 25% from 22% in 3Q12. Conference call @ 17:30 Istanbul time.

Buy - Sell

·         TREASURY AUCTION TODAY > Treasury will issue 14m zero coupon bonds, which should attract decent interest. Treasury plans to borrow TL 6.7bn from market in Feb vs TL 10.4bn redemption. The sale amount in this week’s auction exp c.TL1.4bn.

 

·         TSBK (BUY, TP TL2.67) > 4Q12 financials today. TEB-BNPP NI @ TL74m vs Cons @ TRY75m. We expect 4% q-q loan growth in FX-basket terms, a 21bp q-q improvement in NIM on back of support from CPI-linked bonds despite steady loan-borrowing spreads. We expect no asset quality problems but forecast higher general provisions. Expect fees and opex in line with trend in the previous three quarters. We estimate 11% q-q increase in NI, leading to marginal improvement in ROE to 18% from 17% in 3Q12. Conference call @ 18:00 Istanbul time.

 

·         TAVHL (BUY, TP TL14.60) > Only 15%-17% of land required for new Istanbul airport will need to be appropriated according to the State Airports Authority. In other news: 16 companies have reportedly obtained tender documents (@ TRY100k) including SAHOL, ALARK, Limak, KCHOL, Dogus Holding and  AIC Holding (parent of Atlasjet). Reportedly, there can be at most three companies in any of the consortia to bid at the tender. Comment > Low ratio of land appropriation requirement is relatively good news, as it reduces chances of construction delays. Number of interested parties relatively high and shows significant interest in project. Yet, given challenges, most might not follow up. If limit to number of consortium members is true, would be somewhat good news for TAVHL which plans to bid alone.

 

·         HALK GYO (REIT) > To IPO 28% stake (TL250m) @ TL1.35/share on 13-15 Feb 2013. Price implies 32.5% discount. Allocation 20% institutional; 80% domestic retail. Company will own 20% of the Istanbul Finance Centre upon its completion. No impact on HALKB, as this is an IPO via capital increase.

Buy - Sell

·         BANKS > Gov’t plans to double deposit guarantee to TL100k per depositor => the first rise in deposit guarantee level since 2004 . +VE, as it will encourage savings and help increase deposit duration to some extent. However, burden of increased insurance premium paid to the Savings Deposit Insurance Fund by banks is likely to be around ~3% of NI. Among banks under coverage, VAKBN likely to most affected while GARAN the least.

 

·         THYAO (BUY, TP TL8.50) / TAHVL (BUY, TP TL14.6) > Gov’t reportedly plans to grant exclusive rights for 70 new domestic routes to airlines that promise to fly the routes at least three times weekly, to incentivize flights to cities currently getting too little air travel service.  Comment: Slightly +ve for THYAO and TAVHL and good to see the gov’t still trying to take measures to expand domestic air travel (650% growth between 2002 and 2012). Supply might create its own demand, but we are not sure if this incentive will be enough and we presume THYAO will not come under any significant political pressure to start new routes and incur any additional losses. We estimate THYAO is at best breaking even in its domestic business

 

·         TOASO (HOLD; TP: TRY11.5) > CEO announced they were working on 2 new PC projects for domestic & export markets => targeted launch time 2015YE => a sedan car B sgmnt (might be replacement of Albea) & other might be a model relocated from Italy or brand new model (low cost PC like Renault’s Dacia). It will own patent rights for both cars. He refrained from further details, hopes to disclose more details before July. We had been noting new PC mandate as an upside risk. This is the 1st official announcement => co assigns high chance to realization of projects. Val impact => critical unknowns such as sales vols & investment figures. We believe it might receive less attractive terms for new PC mandate than contract terms for LCVs (lower vol security, lower mrgs etc). Track record of sedan PC export to EU is limited. Nevertheless, new PC mandates would reduce question marks on L/T prospects (especially after 2015, when current take-or-pay contracts for Minicargo will expire).

Buy - Sell

·         TTKOM (transfer of coverage) > 4Q12 NI @ TL600m (+1% y/y, - 6% q/q), -4% below TL622m cons. 4Q12 Consol EBITDA @ TL1,292m (+4% y/y, -1% q/q), sl. above TL1,281mn cons. 4Q12 Fxd business sluggish: Rev sl above cons, 4Q12 EBITDA 5% below. Stable number of ADSL sub (4^th consecutive Q) => concern. NET/NET: Fxd rev +8% y/y (+1% y/y w/o construction rev), EBITDA almost flat (-1% y/y) @ TL1,0989m & EBITDA mrg @ 44% in 4Q12 with -4.3pps y/y. W/o low mrg construction rev & expenses, y/y EBITDA decline & EBITDA mrg => -4% & -2.3pps, resp. Mobile surprised +vely: 4% better than expected 4Q rev & much better EBITDA => 25% above consensus even after adj for TL35-40m one-off reversal income. Mobile sub +300K/4Q12 to 13.5m vs a total of 400K/9M12. Mobile ARPU incr’d impressively by 10% y/y. NET/NET: Mobile voice ARPU improvement & growing sub => indication of easing price competition => +VE for TCELL. Will pay out 68.95kr/share divi (92% payout ratio- inline) => 9.3% yield.

·         TOASO (HOLD, TP TL11.5) > 4Q12 NI TL126m (House/Cons @ TL105m & TL113m) & EBITDA TL227m (House/Cons @ TL184m & TL200m). Beat on operating level with 27% y/y rise in EBITDA on better pricing in dom mkt and one-off warranty income (TL1.8 vs TL31.6m exp in 3Q12 and TL12.3m exp in 4Q11 probably on change in assumptions for whole year). Balance sheet stronger, as net cash increased to TL529m in Dec-12 from TL342m in Sep-12 while account receivables remained low. ST impact +ve, but LT prospects more important. Our cautious stance re mrgns/vols for next Minicargo invest cycle holds but we believe TOASO has chance to secure entry-level passenger car production mandates, which if realized- would reduce concerns to a certain extent. Co will hold an analyst meeting today.