Koza Gold - 1Q13 results

·         Koza Gold’s net profit fell by 41.8% YoY and 28.8% QoQ to TRY 111mn in 1Q13. The 1Q13 bottom-line is below our estimate of TRY 138mn and the market consensus of TRY 137mn. The worsening bottom-line mainly stemmed from a lower top-line and margins.

 

·         We have reduced our average gold price assumption for 2013 to USD 1500/oz, and to USD 1450/oz for 2014 from USD 1650/oz. In our model, we estimate average gold prices following a decreasing trend, being at USD 1.250/oz in the long term and ultimately at USD 1.250/oz beyond 2017.

 

·         Recall that potential variations in gold prices constitute the most significant risk factor for the Company since its financial statements are indexed to gold prices. Thus, we have revised our target prices for Koza Gold to TRY 43.50 from TRY 54.0 due to Q1 results being weaker than we had expected and declined sharply gold prices in recent days. Koza Gold’s current price is at TRY 36.80, with our target value representing an 18% upside potential. Thus, we reiterate our Outperform recommendation for Koza Gold. On the other hand, note that accordingly, our Koza Anadolu’s (KOZAA) new target price upon revision is TRY 6.70 (previously TRY 8.20/share).

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