Resuming coverage with Outperform rating at PT of TL 8.47/share
We resume our
coverage on Koc Holding with Outperform rating on Price Target of TL8.47/share,
implying 15% return potential. Our PT is driven from our Sum-of-The-Parts
valuation, applying 5% conglomerate discount (in line with its 2010-to-date and
YTD average NAV discount). We are relatively positive on the Koc’s main
segments, especially Tupras (OP), Tofas (OP), Ford Otosan (OP), Turk Traktor
(OP), Arcelik (OP) and YKB (MP, yet positive in the long term), backed by their
business models, market positioning and growth & profitability outlook.
Macro and market environment favors Koc in the short term
We believe
that Koc Holding may outperform in the short term owing to the fact that (i)
global and local macro environment (global easing trends) helps Koc, as there
has been strong correlation between Koc’s relative stock performance vs. oil
price increases and interest rate decreases (underlying energy, banking and
consumer assets are all affected positively), (ii) CBT’s dovish stance to
support growth is positive for Koc, as its both operational and stock
performances have been superior while GDP growth accelerates, (iii) current NAV
discount has been expanded since June and current 9% level is above 5% average
YTD discount. In general, Koc’s NAV discount contracts in upbeat market
conditions, (iv) tighter return potentials and regulatory risks on banks may
lead to switch to Koc (our average return potential for banking universe is 12%
vs. 15% in Koc Holding).
Long-term dynamics are intact and superior
Firstly, c.
8% outperformance of consolidated revenue and EBITDA CAGRs of Koc vs. Turkey’s
GDP between 2005 and 2011, makes Koc Holding is a preferable asset to take
direct exposure to Turkey’s growth dynamics. Based on its hefty exposure to oil
& energy, consumer (autos and consumer durables) and banking (YKB), Koc
Holding has the most comprehensive asset mix among Turkish conglomerates.
Secondly, Koc’s current portfolio is relatively hedged, considering oil,
domestic and export consumer and banking exposures that have different
dynamics. Especially, in a period of slowdown in economic conditions, export-oriented
consumer (despite majority is directed to Europe, company specific
superiorities, such as Tofas’s take-or-pay deals and Arcelik’s product
positioning) and banking exposure (CBT’s supportive actions for the economy)
may increase the defensive structure of the portfolio. Thirdly, NAV expansion
via EVA generating acquisitions may take place, as far as the conglomerate’s
low leverages (US$80mn total parent-only debt) and high parent-only net cash
position (US$707mn) are concerned. In October, Koc Holding will participate to
the tender for Toll Roads and Bridges privatization (we value the assets c.
US$3.5bn, see page 17) and further acquisitions may take place in the mid-term.
Fourthly, Koc’s cash generation by dividend collection, has been very strong,
as it generated 3% dividend yield through its subsidiary portfolio. The last
but not the least, professional management, good corporate governance and
minority shareholder friendly approach are the main intangible assets in hand.
One of the first stocks to buy in case of rating upgrade
Based on its
diversified portfolio, solid exposure to consumer segments, strong corporate
governance and proxy status for the country’s growth dynamics, we hold the view
that a potential rating upgrade for Turkey will have a positive impact on Koc’s
both operational and stock performance. Investment grade rating for Turkey is
likely to bring additional foreign fund flow and Koc Holding’s stock
performance will probably beat the market in such case.
Hiç yorum yok:
Yorum Gönder