Buy - Sell

·         TOASO (BUY; TP TL9.25) > Acc’g to Milliyet newspaper, Koc Holding Chairman Mustafa Koc stated; Tofas was waiting for Fiat to proceed with new investments; there were some uncertainties ahead as some of the take-or-pay contracts of Tofas will expire in 2015; however, Tofas was in good position to carry out new investments thanks to its strong B/S => no new information, but first time uncertainties raised by the shareholders. We exp Fiat/PSA to seek for a better deal (lower volume commitment etc.) in the next investment cycle. Separately, Minister of Economy Caglayan stated that the Ministry was in discussion with two groups for the so called national domestic car production, without quoting any names. We understand the discussions are still at very early stages.

 

·         THYAO (HOLD; TP TL4.35) >  unit sales as measured by revenue-passenger kilometres (RPK) up 26.7% y-y in 10m of 2012 (27.1% in 9M12) while passenger load factor up 5.2ppt y-y (5.3 ppt in 9M12). More details later. Comment: Strong growth continued in Oct with gradual slowdown as expected.

 

EARNINGS REVIEW

·         YKBNK (BUY; TP TL 5.46, upped 13%) > 3Q beat @ net oper inc. NI @ TL542m, 22% abv our & 20% higher than cons. Strong tangible ROE of 17% (50bp higher ROE assumption across our est horizon). Net oper inc beat our exp by 10%, o/p’ing our f/casts in all of NII, fees, & costs. Higher-than-f/cast specific prov’s were offset by lower general prov’s. We incr our NI f/casts by 3% & 6% for ’12 & ’13 => driven mainly by better fees-to-opex evolution. Continued growing high-mrg TL loans (+3% q-q) while TL retail deposits were up 5% q-q. NIM -9bp vs. our -24bp est due to 36bp L-D sprd expansion. NPL inflows were faster-than-exp as NPL ratio +35bp q-q vs. our 30bp f/cast; coverage flat @ 66.5% vs. our 65% call, explaining part of higher-than-exp 34bp q-q rise in net CoR. Fees/opex trend improved strongly as fees grew 1% y-y (+15% in adj terms vs. -6% in 1H12); opex rose 3% y-y (vs. +12% in 1H12). CAR declined to 13.2% after Basel-II => should improve sharply via measures such as: 1) sub-debt, 2) MTM gains & lower RW on Eurobonds & 3) insurance subsidiary sale. We assume 18% loan growth for 2013, flat NIM & 20bp higher CoR on a y-y comparison.

·         AEFES (HOLD, TP: TL 25.63) > 3Q weak perf in both int’l & TR operations. NI @ TL246m, much lower than our & cons est @ TL265m & TL270m. TL416m EBITDA was below our & cons est of TL447m. Weakness in int’l vol (-13% y-y organic) stemmed from weak unit sales in RU => due to low stock lvls in distributors, low in-store activity, prolonged negotiations with some key accounts & loss of brand with 0.5% market share. TR operation => high marketing exp’s continued to hurt profitability. We cut unit sales est for int’l & TR operations 3% & 2% for 2013/14. We cut EBITDA/NI est 5% & 9% for 2013/14 on weak vol & sl. decline in profitability. Competitive forces incr’d in RU => recovery in consumption remained weak. Sharp incr in excise taxes/likelihood of further hikes should hurt beer consumption in TR in 2013/14. Moreover, it lost market shr to competition in both TR & RU to sustain its profit mrg. RU gov’s ban on beer sales @ kiosks & train stations from 2013 should have a further adverse impact, as kiosks & train stations account for c.15% of total beer sales. Conference call on results @ 16:30 TR time.

 

EARNINGS TODAY

·         ISCTR (HOLD; TP TL6.01): TEB-BNPP 3Q12 NI est @ TL670m vs.TL576m cons est => BRSA aggregates, if correct, suggest TL640m => we exp it to lose market share in loans while deposit growth to be in line with sector. Following better-than-sector evolution of its L/D spread past few Qs => we exp milder-than-sector expansion @ 5bp. Lower other funding costs & no impact from CPI-linked bonds should help NIM expand by 33bp q-q. Net CoR should come down sharply => we exp it to lower its NPL coverage to 85% => should result in cTL320m lower net provisions. Had coverage ratio remained @ 100% => net CoR would read 34bp vs -9bp in 2Q12. We exp 13% y-y growth in fees (slowdown from 20% in 1H12) & sharp rise in opex by 19% y-y (vs. 9% in 1H12). With lack of TL323m divi income of 2Q12 => we exp largest q-q drop in NI among coverage banks @ 30% & ROE of 13%.

 

·         TUPRS (BUY; TP TL48.6) > We exp TL516m NI, TL617m EBITDA and TL13.6b revenues. Consensus NI TL477m, TL615m and TL13.3b, respectively. A The company will holde a teleconference today. We estimate Tupras will post significantly better profits y-y on => strong refining margins, higher volumes y-y (more than 10% y-y) and a reversal of last year’s FX losses. We expect the –VE impact of lower Iranian crude oil purchases and higher natural gas prices to be offset by higher crack spreads on most products and higher volumes.

 

·         MGROS (BUY; TP TL20.95) > We exp TL5m net loss. Cons est TL3m net loss. We see 3Q12 demand dynamics in the retail sector as similar to those in 2Q12 => Hence, f/casting 13.4% y-y top-line growth (13.5% in 2Q). We incorporate a 0.1ppt lower gross margin (26.6%) and EBITDA margin (6.2%) compared to 2Q12. We est a TL30m FX loss and a net loss of TL5m due to lira depreciation against the EUR.

 

·         ENKAI (BUY, TP: TL5.41) 3Q due today: We exp Rev, EBITDA & NI @ $1.384bn, $210m & $149m, respectively. We f/cast 30% y-y growth in USD based construction rev & growth momentum in construction segment to accelerate in 4Q12. We forecast USD based EBITDA +26% q-q (7% y-y) from low base of 2Q12 as one-offs & start-up costs of 2Q12 are eliminated. 55% y-y (29% q-q) improvement in NI is mostly attributable to our est of net financial inc in 3Q12 vs net financial exp in 3Q11.