Buy - Sell

·         OCT INFLATION @ 10 AM today. TEB and Consensus @ +2.1%. Would bring annual to 8% down from 9.2%.

 

·         THYAO (HOLD, TP: TL 4.35): Reportedly, PM Erdogan agreed with PM Merkel’s suggestion on Lufthansa & THYAO having joint operations. THYAO chairman says there were no concrete projects yet  => expects main framework for the project to be formed w/i nx 3-5m after a special team is established by both companies => new initiatives b/w both airlines could involve new agreements to incr passenger load factor & JVs in aircraft maintenance or catering. The two airlines (both members of Star Alliance), already have extensive code sharing agreements & a charter / low-cost JV called Sun Express. Comment: We are unable to make much out of this news due to lack of specifics. Some type of merger or joint mgmt seem unlikely due to TR not being an EU member & lmts on ownership of airlines in EU & TR by foreign entities. Cooperation in further code sharing or JVs re support services such as maintenance or catering => not much impact.

 

·         FROTO (HOLD, TP:TL 17.90 upped from TL17.40) 3Q Operationally lags already conservative est: NI @ TL144m in 3Q12 (-17% y-y, our est: TL99m, CNBC-e cons: TL121m). EBITDA @ TL141m (-36% y-y, our est: TL155m, cons: TL162m). Beat @ non-oper lvl => due to lower D&A than our forecast, TL25m deferred tax income & slightly lower financing exp. We revise down our ‘12-‘13E recurring EPS by 13%/14%, revise-up 2014 EPS by 20% due to incremental Transit volumes from UK & lowered financing exp. Biggest upside risk => new export mandates => possible export of Custom & new Courier models to US. FMC decided to relocate remaining Transit assembly from UK to TR (2H13). We exp decline in DPS from TL1.65/’12 => TL1.41/’13 (yield: 7.8%) => most of deferred tax income booked on IFRS accounts will not be included in distributable income of 2012. TP upped => new vol allocation for Transit (+), lower CoE (+), higher peer multiples (+), worsening outlook in export markets (-), lower mrg est due more severe impact of intense competition/ageing product portfolio in s/t (-), and earlier phase-out of Transit Connect than our previous est (-). Company will hold an analyst meeting today @ 16:00.

 

·         TAVHL 3Q12 (BUY; TP TL12.50) > Strong traffic growth continues => €54m NI (up 36% y-y), in line with our est of €52m and better than cons est of €47m. EBITDA of EUR124m (up 24% y-y), also in line with our est of €123m and better than cons est of €118m. Revenue of €335m (up 28% y-y), better than our and cons est’s of €321m and €318m resp’vely <= Growth mostly driven by 33% y-y incr in the number of terminal passengers. Oper perf slightly better than exp’d. We think margins were slightly pressured by strong TL (13% y-y in real terms), which accounted for about 50% of costs but 35% of revenues in 9M12. Net/Net: We reiterate BUY => offers more than 35% upside. We recommend the stock for investors keen for exposure to the fast-growing Turkish aviation industry but want to avoid the volatility and lack of visibility Turkish Airlines’ margins. We think the govt’s plan for a third airport in Istanbul is likely to create more upside risk for TAVHL in the long term.

·         TSKB (BUY, TP TL2.38) => 3Q12 NI @ TL 67m. In-line with exceptions of TL5m discretionary provision. Adj ROE & NI @ 18% and 36% y/y respectively. Loans +1% q/q in FX terms with a 10bp rise in net loan spread. NIM down 57bp on lower bond yields and lack of o/n arbitrage gains. No NPL problems. Basel-II CAR strong @ 18.4% helped by TL45m of MTM gains => 9% q/q increase in equity. Reiterate BUY.

 

·         TATKS 3Q12 (HOLD; TP TL2.90) > Weaker than exp’d oper perf => TL4.7m NI, better than our est of TL2.4m & in line with cons est of TL5.2m <= lower financial expense and minority loss. Yet, TL13m of EBITDA below our est of TL15.5m & cons est of TL15.1m <= weaker perf of dairy segment. Perf of tomato paste, meat and pasta broadly in line with our exp. Dairy segment’s gross profit margin (GPM) declined 2.1 pp q/q (-0.5pp y/y) to 16.5%, as raw milk prices rose 5% q/q. Meat segment improved GPM by 2 pp q/q to 10.5% on low cost meat imports. With a 25.3% GPM, tomato paste segment remained profitable due to strong demand. Rising marketing exp continued to pressure earnings. Net/Net: Don’t find TATKS attractive @ current price and remain cautious on outlook and profitability.

 

·         ADANA (BUY, TP 5.49TL) => 3Q12 NI @ TL22.9m +21% y-y, EBITDA @ TL20m -22% y-y. Broadly in line with estimates on operating level, NI significantly higher than our estimate of TL12.9m on TL10.7m one-off related to gain recorded from sale of CIMSA shares. Revenue -17% y-y to TL73m (BNPP estimate: TL79m) on lower domestic vols and weak exports. Local sales in July and August were particularly weak, followed by a recovery in September. EBITDA margin -180bps y-y to 27% on higher energy prices

 

·         BOLUC (BUY, TP 1.90TL) =>  3Q12  NI @ TL10.7m +49% up y-y and +66% q-q, EBITDA @ TL15m +27% y-y. NI better than our TL6m net income est on impressive gross margin. Despite higher energy prices on y-y comparison, gross margin +7.5pps y-y to 28.6% thanks to recovery in pricing.. Revenues @ TL60m +15% y-y (BNPP: TL63m).

 

·         MRDIN (HOLD, TP 7.61TL) => 3Q12 NI @ TL7.5m -61% y-y and -44% q-q, EBITDA @ TL12m -55%. BNPP 3Q12 NI estimate TL6m. Operationally a weak quarter as expected as increasing capacity in Iraq and rising competition from Iran have led to market share loss and lower cement prices. Revs @ TL51m -17% y-y to (BNPP: TL52m) on -46% y-y decline in export sales @ TL18m. EBITDA margin -18.9pps y-y to 22.9% on lower share of lucrative export sales, lower cement prices in Iraq, and higher energy prices.

 

·         UNYEC (HOLD, TP 5.06TL) => 3Q12 NI @ TL17m +22% y-y and -1% q-q. Better than our est of TL11m. Results were operationally strong. Revs +12% y-y to TL65m while export sales was particularly strong (+145% y-y and +23% q-q) as we suspect sales to Russia could be the main contributor. 3Q12 EBITDA +4% y-y to TL23m as margin -270bps y-y due to higher energy prices.

 

·         UYUM (HOLD, TP 3.45TL) => 3Q12 TL5.1m net loss (BNPP estimate: -TL4.1m) vs. TL2.7m net loss year ago. EBITDA @ TL0.8m (at 0.8% margin), expected TL1m EBITDA loss on better gross margin and sales-marketing expenses. Revs @ TL91m (+41% y-y) 7% below our expectation. Lower revs off-set by better than expected gross margin at 25.4% (+20bps y-y). S/M expenses to revenue -1.3pp q-q, better than expected. 41% y-y rev growth in 3Q12 implies 0.6% rev growth/sqm in nominal terms, implying deterioration over 2Q12 where nominal rev growth/sqm @ 2.6. HOLD maintained

 

·         EKGYO (NR) => 3Q12 NI @ TL159m (cons.TL128m), EBITDA @ TRY160m 30% higher than cons. Net sales @ TL351m (cons TL319m). Gross margin +14.4ppt y-y and +8ppt q-q. EBITDA margin +21.5ppt y-y and +2.5ppt q-q.