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.

 

·         TOASO (HOLD, TP TL11.90) > CEO reiterated co is working on two new passenger car models. Noted that IP rights of these models will belong to TOASO and comments on the prospects of these two models were quite +VE. We assume the Linea model will be renewed, and a new passenger car will be launched in 2016, increasing TOASO’s domestic passenger car market share from 8.4% in 2012 to 10%. We assume the new PC will have an export volume of 30K units in 2016, and the co will benefit from investment incentives for these PC investments. Comment > Realization of a new export mandate would be +VE. Nevertheless, update on Minicargo investment after current take-or-pay agreement expires would be critical to assess long term prospects of TOAS. We attach little chance to an update on Minicargo at this stage.

 

·         FROTO (HOLD, TP TL25.9) > incr’d its 2013 export guidance from 217k units to 219k units (our estimate: 218k units), while decr’g domestic volume guidance from 116k units to 115k units (our est: 116k units). We believe the revision was driven by good export volume progression, and weak market share in TR (declining share of LCV sales in the market), in which Ford Otosan commands a strong position. Our view: Although the net revision in volumes is slightly +VE, we the impact should be neutral on financials <= domestic sales command higher absolute margins than exports.

 

·         THYAO (BUY, TP TL10.35) > The PA said that there were no preparations for the sale of the gov’s 49%  stake in Turkish Airlines. A new advisor was appointed because the previous advisor’s mandate ended as of March 2013. The new advisor is to focus on assessment of operational & strategic perf of Turkish Airlines and help the PA prepare privatisation plans if/when necessary. We do not exp the gov to sell or reduce its stake in Turkish Airlines any time soon.

 

teb ytr