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

·         TTKOM (NR)> 2Q13 results Wednesday. Cons est: Net sales: TL3.3bn, EBITDA: TL1.21bn, NI: TL260mn. 2Q13E NI indicates 51% q/q and 59% y/y declines mainly due to F/X losses recorded over TL5.4bn F/X short position.

 

·         TCELL (BUY, TP 13.56) > 2Q13 results on Thursday. Cons est: Net Sales: TL2.82bn, EBITDA: TL853mn, NI: TL557mn. Our est: Net Sales: TL2.81bn, EBITDA: TL863mn, NI: TL580mn. Main theme is easing price competition, which we think is already included in the cons est. Our est differs at NI level due to our higher net financial income expectation. We do not expect the co to record F/X losses in 2Q13 despite a consolidated short F/X position of TL1.2bn, since it has a slightly long F/X position in TR and its short positions are in Ukraine and Belarus, whose currencies have not depreciated against hard currencies materially.

 

·         DOAS (HOLD, TP TL10.7) > To become exclusive importer of VW and Audi brands in Iraq. DOAS will set-up a subsidiary based in Erbil for start-up capital of 150m Iraqi Dinar ($130k). Iraq market is attractive with low auto penetration levels (~5% compared to 17% in Turkey), and +30m population, however it has security risks as well. We believe DOAS might initially focus on Northern Iraq, which offers a more secure environment. We forecast the initial capital will be used to cover only initial start-up costs, and there might be further capital injection for capital expenditures soon. Our view: We view Iraqi expansion as +VE for the option value it offers, however we do not see it as a major short-term profit driver.

 

·         EREGL (BUY, TP TL2.53) > Union at EREGL’s Iskenderun plant is expected to launch a strike today after failing to reach agreement re 2013/14 collective work agreement, as announced before. We do not know yet how significant the strike may turn out to be. Given EREGL has not announced a lock-out at the plant, however, suggests the mgmt does not expect a high level of participation. 51% and 42% of EREGL’s 13,045 employees worked at its Eregli and Iskenderun plants, respectively, as of YE12. Iskenderun plant represents about 60% of Erdemir’s liquid steel capacity. Everything else being the same we est every 1% increase in labour costs amounts to ~0.8% -VE impact on EREGL’s EBITDA.

 

Buy - Sell

·         CPI (JUNE) @ 10AM > TEB-BNPP & Cons @ +0.1% and +0.15%, respectively. If in line with TEB est, annual inflation rises to 7.5% vs. 6.51% in May. The spike in CPI has been well flagged by the CBRT due to food price increases and a strong base effect.

 

·         BIZIM (d/grd to HOLD fr BUY; TP to TL31.70 fr TL36.30) > on CoE revision & share outperformance (since the 1Q13 results release, o/perf’d the BIST100 by 20%) => i) increase our RfR assumption from 7% to 8.5%, and revise EPS estimates, ii) lower our 2013E EPS by 7% & 2013 EBITDA margin est fr 3.8% to 3.6%, due to Bizim’s on-going investments on pricing, but incr our revenue f/cast by 2%.Trades @ 2015E P/E of 23x vs peer avg of 19.8x, and iii) trim our terminal EBITDA margin est fr 4.9% to 4.7% (2012A: 3.5%). Bizim will need to be aggressive on pricing to incr penetration in the C&C segment. So, net impact of improving customer/product mix on margins might be more limited than we previously exp’d. Metro Group might integrate Real (12 stores) to C&C in TR => we think low probability that all stores can be integrated (some are located close to Metro C&C stores). Nonetheless, rapid expansion in Metro C&C’s coverage could be a competitive threat. Opex mgmt amid a shift of customer mix towards more service-intensive-end, financing exp mgmt, perf of new stores & faster-than-exp’d growth in organised retail trade are the main risks. Faster growth in the share of private labels is a key upside risk.

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.

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·         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

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

Howdy doody folks! As an old cowboy sayin’ goes: “The quickest way to double your money is to fold it over and put it back into your pocket.” Wisdom that might come in handy over the next few months y’all. The recent correction is perhaps just a glimpse of more to come, courtesy the US rate scare; making what transpired over the last few days look like child’s play. Not the time to be dipping in your toes, ladies and germs. Resist temptation! Any hint the Fed is looking to scale down its funny-money printing scheme is likely to bamboozle consensus.

·         GARAN (HOLD, TP TL10.80) > Customers pulled TL35-40m of deposits and cancelled 1,500 credit so far, CEO of GARAN said in a newspaper interview. Dogus Holding is GARAN’s parent company. Comment > Given the TL95b deposit and the 8.5m credit cards, the withdrawn amount and number of cancelled credit cards is negligible. Although some may follow in the coming days, we do not expect a major -VE impact on GARAN financials.

 

·         BIMAS > Abdulrahman El Kheiriji registered 1.518m BIMAS shares to the central custody (1% of paid in capital). Kheiriji owns 4.5% of BIMAS shares. Possible share sale by Kheiriji can create some pressure on the price, but we do not expect the impact to be long lived.

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

·         CURRENT ACCOUNT (JAN) @ 10AM > TEB-BNPP & Cons -$5.3bn (Dec -$4.6bn). Recall adjusted tourism revenue calculations go into effect. Should bring last year’s CAD to $46.7bn (5.8% of GDP vs. unadjusted 6.1% of GDP).

 

·         BRSA DATA => LOAN GROWTH BRISK; DEPOSIT GROWTH STALLS; NPL VOLUME GROWTH EYE CATCHING => According to the BRSA data as March 1, loans grew 2.8% y-t-d (annualised 26%). Commercial & instalment loans (+7.8% y-t-d), housing loans (+4.5% y-t-d) and general purpose loans (+3.6% y-t-d). Loans/Deposits ratio has been on the rise since YE12 (101% sector avg vs 99% end-2012), as deposits grew by a mere 0.8% y-t-d (slower compared to loans). 5.5% y-t-d growth rate in shareholders’ equity signals further MTM gains. NPL ratio remained unchanged at 2.9%. However 7.7% y-t-d NPL volume growth is eye-catching (+TL1.7bn y-t-d). NPL vol growth +9.8% y-t-d  for pvt and +9.4% for participation banks. Supports positive core spread evolution so far in 1Q13, as there is almost no growth in deposits (read: no competitive pricing). On the asset quality side, the figure is gradually moving away from the trend. Although the NPL ratio and NPL provisioning ratio hover around 2.9% and 75% respectively, the NPL aging impact might be sever in 2Q13, lifting the specific cost-of-risk ratio towards 125-130bp vs 105bp in FY12.

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

·         YKBNK (BUY TP: TRY6.41) CEO does not expect a fine from the Competition Board, according to dailies Sabah/Zaman and local newswires. Forecasts earnings growth at 10%-15% y-y in FY13; loan growth of 15% y-y.

 

·         HALKB (HOLD; TP: TL18.72) and VAKBN (BUY, TP: TL6.72), according to Hurriyet, might get licenses to operate in the participation (Islamic) banking sector. This would help develop participation banking in Turkey, the news adds. We agree. We do not foresee a major threat to existing participation banks. Sl positive for HALKB and VAKBN but neutral for ASYAB (HOLD, TP: TRY2.18) and ALBRK (BUY, TP: TRY2.50).

 

·         THYAO TI (BUY, TP TRY8.46)/ TAVHL TI (BUY, TP TRY15.61) > THY chairman says despite further measures to be taken at Istanbul Ataturk airport, the airport was unlikely to be able to accommodate THY’s growth until the new Istanbul airport opens earliest by 2017. Adds, construction for the new airport was unlikely to start this year given the likely postponement in the bidding deadline of May 3. THY’s shifting of many flights from Istanbul Ataturk to other airports in Istanbul or Turkey would not be wise given its hub strategy and would hurt margins. Comments for Istanbul Ataturk airport is somewhat good news for TAV Airports as it implies the govt might be forced to consider some physical capacity expansion at the airport providing TAV Airports more than expected growth (and somewhat bad news for THY unless such action is taken).

 

·         BIZIM (NR) 4Q12 review > NI @ TL6.7m (-36% y-y; cons: TL9.3m) => results slightly better than what was hinted by tax purpose financials. Rev @ TL527m (+17.9% y-y; cons: TRY526m). Gross margin @ 8.7% (-0.5ppt y-y) due to one-off inventory tobacco gains recorded in 4Q11. Note that one-off tobacco inventory gains will be realized in 1Q13. EBITDA @ TL18.6m (unchanged y-y; cons: TL19,1m). Deviation in NI from cons est stemmed from financing exps => 4Q12: TL7.2m, 3Q12: TL6,7m, 4Q11: TL3.3m. The independent appraisal value of “Sok Marketler” (recorded under financial assets in BIZIM’s B/S) incr’d from TL24.4m in Dec-11 to TL34.7m in Dec-12. The Co will hold a conf call tdy @ 18:00 local time to discuss 2012 results, and 2013 guidance.

Buy - Sell

·         CAPACITY UTIL RATE (FEB) > 14:30 TR; No cons. Jan @ 72.4%

 

·         CONSUMER LOANS +24.5% > the 13-week trend growth rate of consumer loans strengthened for the 4^thconsecutive week to 24.9% as of Feb 15 => much above the 15% year-end growth target. Seasonal pattern suggests further acceleration in 2Q. We think current growth pace means further RRR hikes in the upcoming MPC meetings.

 

·         TCELL > OPERATING BETTER, GUIDANCE CAUTIOUS > 4Q12 NI TL459m +38% y-y- in line; adj for TL106m one-off exp, NI @ TL565m, beating est significantly (cons: TL465m) => +29% yoy vs adj 4Q11 (TL105m one-off expense). Beat due to better than exp oper perf. 4Q12 revenues @ TL2,807m => +15% y-y. Data rev +47% y-y & Superonline rev +35% y-y & voice ARPU +9% y-y in 4Q12. Vodafone & Avea’s voice ARPU in 4Q12 @ +6% & +5% y-y, resp. TCELL’s blended ARPU @ TL21 => +10% y-y in 4Q12. Sub base -50K to 35.1m vs Vodafone & Avea +215K & +300K, resp. Continued shift from pre-paid to post-paid (37.5% of total sub base from 36.7% in 3Q & 33.8% in 4Q11) => helped ARPU. 4Q12 EBITDA @ TL848m; +22% yoy=> better. EBITDA mrg @ 30.2% vs 28.4% in 4Q11 => FY2012 @ 30.9% (FY2011’s 31.1%). EBITDA mrg expansion due to lower S&M expense/sales due to lower subs additions. GUIDANCE: Mgmt believes voice, mobile broadband & incr’d contribution of subsidiaries should continue to be growth drivers. Rev guidance: TL11.2bn-11.4bn (7-9% y-y) & consolidated EBITDA @ TL3.3bn–TL3.5bn (2-8% y-y). Capex guidance @ 15% of revenues. Mgmt guidance reflects cautious view both @ rev & costs with mid-range EBITDA mrg @ 30.1% (30.9% @ 2012). Both TCELL’s & Avea’s guidance of mobile price rationalization in the last couple of Qs has NOT become a trend yet. Teleconference @ 5.30pm local. COURT CASE > Separately, the SDIF filed a case demanding compensation for alleged TL131.9m loss due to TCELL’s termination of contracts with A-tel on Aug 1, 2012. A-tel is a 50/50 JV between TCELL and SDIF and is in charge of distribution and sales of pre-paid cards in TR. Compensation amount corresponds to 6% of 2012 NI (0.5% of MCAP) => could be provisioned for in the following periods.

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

·         MOODY’S > Moody’s reportedly says Turkey’s investment grade “depends on structural improvement in current account deficit and more economic resilience to external shocks”. Says its “opinion has not changed after the C/A gap update”. We think this is as good as it gets for the current account deficit going forward.

 

·         VAKBN (BUY; TP: TL 6.72) Stronger-than-exp top-line (NII+Fees) > 4Q12 bank-only NI @ TL451m (+48% q-q & +72% y-y), 10% above our est & beating even highest mkt exp. FY12 NI @ TL1,460m (+19% y-y) & yielded 13.9% ROE (4Q12: 15.7%). Trading income compensated for provisions. NFI -30% y-y in 9M12, +15% y-y in 4Q12 => we exp further pickup in FY13 & conservatively pencil in 40% y-y. Loans +5.8% q-q (7.3% q-q on TL) => retail, commercial & installment loans => supported fees. Core spread +90bp q-q on TRY & +20bp q-q on FX. Deposit +8.5% q-q TL (120bp q-q lower cost) => supported +100bp q-q NIM (+60bp q-q adj. for ex-CPI linkers). Per-head HR costs -3.8% y-y in FY12. TL164m security portfolio trading gain & more may come in FY13 due to TL1,450m MTM gains being booked under equity. Asset quality strong => +5% q-q restructured loans. CoR +60bp q-q to 174bp due to ageing NPLs. CAR +240bp to 16.1%. NET/NET: 4Q12 oper performance strong & we exp this to be carried into 2013. We exp +16.4% y-y EPS in FY13 (outpacing sector avg), improving ROE & multiples attractive @ 2013E P/E & P/BV of 7.9x & 1.1x & ROE of 13.9%, maintain BUY.

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”.