Buy - Sell Reports

GASOLINE PRICES > According to local dailies, EMRA warned fuel distributer Co’s to cut gasoline, diesel and LPG prices by TL 0.08-0.16 until 7-Aug. If not complied, EMRA will consider introducing price ceiling for gasoline prices.

 

TR BANKS: CAP RATE ON CREDIT CARD LOANS > The CBT was enabled by law to determine the cap rate on corporate & commercial credit card loans starting from 5^th of Aug. The CBT announced that the bank will apply 2.12% monthly cap rate on corporate & commercial loan credit card interest rates; the same rate on individual credit card interest rates. Corporate & commercial credit card loans comprise 1.0% of the total loan book of the banks that we cover. Assuming for 5.25% monthly interest rate and 12.5% roll-over ratio, we exp the total -VE impact on annualized NII at 0.55% & on annualized pre-tax income by 1.11% (see attached file). Among the banks that we cover Yapi Kredi Bank (YKB) has the highest exposure to corporate & commercial credit cards => 2.6% of total loans. -VE impact on YKB’s annualized NII to be 1.36% & YKB’s annualized pre-tax inc to be 2.43%. Comment: Regulatory chng has been awaited; hence we think it has been broadly priced in.

 

TUPRS (HOLD, TP TL50.70) WEAK 2Q13 RESULTS, D/SIDE RISK TO OUR ESTS > NI @ TL138m (up 7% y-y) vs our & cons est of TL183m & TL142m resp’ly. EBITDA @ TL132m (down 45% y-y) vs our & cons est of TL255m & TL246m resp’ly. Revenues @ TL10.1b (down 7% y-y) vs our & cons est of TL10.3b & TL10.5b). Prod’n was up 6% to 5.8m tonnes while unit sales were down 2% to 6.4m tonnes, mainly on lower exports => weak perf on higher-than-exp’d opex & inventory losses (TL70m, twice our est). => Gross refining margin adjusted for inventory loss/gain was up 6%, to USD9.6/bbl in 2Q13 while indicative Mediterranean complex refinery margin was down 56% to USD2.5/bbl (<= 3ppt rise y-y in white product yield to 74%). Weak 2Q13 results, especially from the high operating cost, if not temporary, imply downside risks to our f/casts. The recently launched tax inspections against Tupras and other Koc Holding energy companies, which may not be completed quickly, are likely to continue to create an overhang on the shr price until resolved. The Co will hold an analyst teleconference @ 9am local time tdy.

FROTO (HOLD, TP TL25.90) 2Q13 RESULTS, OP PERF IN-LINE BOTTOM LINE BETTER > NI @ TL259m (+54% y-y) vs our & cons est of TL144m & TL162m resp’ly => deviation fr our est on higher deferred tax inc (TL89m vs our est TL10m) & lower FX losses. EBITDA @ TL208m (-1% y-y) vs our & cons est of TL207m & TL217m resp’ly => mrgn declined by 1.1ppt y-y (+0.3ppt q-q) to 7.1% due to ageing LCV portfolio & declining shr of LCV sales in the domestic market. Mrgn pressure will likely continue in 2H13, as we expect the Co to be more aggressive in the domestic mrkt (<= to maintain market leadership in 2013). Revenues up 14% y-y on 23% growth in intn’l unit volumes (+27% export, -4% domestic). FX losses on the P&L were limited to TL11m (<= booked a portion of FX losses under shareholders’ equity as per the agreement with the FMC). FROTO is benefiting fr i) the launch of the new Tourneo model, ii) the vol contribution fr the relocation of Transit production from Southampton and iii) a strong UK market. FROTO will hold an analyst meeting on 12 Aug to discuss 2Q13 results & 2013 expectations.

 

ARCLK (BUY, TP TL14.7) WEAK 2Q13 RESULTS, LOWERS GUIDANCE > NI @ TL151m (-10% y-y) vs our & cons est of TL177m & TL167m resp’ly <= worse-than-exp’d EBITDA @ TL260m (-9% y-y) vs our & cons est of TL326m & TL312m resp’ly. Better financing expenses and other non-operating items partially compensated for the operational weakness. EBITDA missed on high opex and lower revenues. Sales declined 4% y-y (our est: +4%) <= 36% decline in electronics sales & weak growth in white goods. Gross mrgn improved 1.2ppt y-y <= better product mix & easing input costs. Yet, EBITDA mrgn was down 0.6ppt to 9.8% y-y (our est: 11.2%) <= jump in opex/sales ratio by 2.2pp y-y. Main -VE => weak domestic durable sales (and probable market shr loss) despite the incr in marketing expenses, and A/R days. Net debt incr’d to TL2.7b fr TL2.1b in Mar <= dividend pymt (TL355m) & incr in working capital. Arcelik lowered TL-based FY13 revenue guidance to >8% fr >10% & kept EBITDA mrgn guidance unchanged @ 10.5% (noted the exp’d +VE impact of high-margin POS machine sales in 2H13).

 

KOZAL (BUY, TP TL29.1) 2Q13 RESULTS, SLIGHTLY BETTER > NI @ TL130.8m => higher than our & cons est of TL119.5m & TL120.1m resp’ly <= higher-than-exp’d gold sales vol (84K vs. 82K ounces) and lower-than-exp’d tax expense. EBITDA @ TL155.5m = >slightly abv our & cons est of TL151.5m. Cash costs @ USD487 per ton were abv our estimate of USD460m but the avg sales price @ USD1,477 was also abv our est of USD1,450 per ounce.  

 

OTKAR (NR) 2Q13 RESULTS > Sales @ TL375m (+12% q-q, +42% y-y) vs cons est of TL 317m), EBITDA @ TL 48m (+10% q-q, +6% y-y) vs cons est of TL 38m) and NI @ TL 29m (+10% q-q, -6% y-y) vs cons est of TL 24m. 

 

ISCTR (BUY, TP TL5.4) 2Q13 RESULTS TDY > We exp NI @ TL805 (21% q-q & 15.5% y-y contraction) vs cons exp of TL907m. We exp operating perf to contract by 11% q-q <= higher provisioning expenses on NPL aging & rising general provisioning due to fast loan growth of 11.6% q-q. While we f/cast an dividend inc to double in 2Q13 compared to 1Q13, we exp lower trading inc & other operating inc to pave the way for a 21% q-q drop in net profit. We project 11.6% q-q loan and 6.2% q-q deposit growth both slightly below the sector avg. We exp the quarterly L/D spread to be flattish q-q, but NIM to be down by 20bp to 4.08% (<= shrinkage in security portfolio yield). We exp net NPL inflows to be flat q-q resulting in almost no change in NPL ratio @ 2% level. Due to NPL aging we exp the NPL coverage ratio to incr by 2pp to 80% and the CoR by 8bp to 89bp.Isbank’s capitalization is effected less compared to its peers from the drop in MTM gains (TL430m as end of 1Q13)

 

TOASO (HOLD, TP TL12.1) 2Q13 RESULTS TDY > We exp TL1.89bn rev, TL242m EBITDA and TL134m NI. Cons: TL1.95bn, TL239m and TL127m resp’ly. We estimate 6% y-y growth in EBITDA <= on cost-efficiency programs and the incr in domestic volumes. Quarterly perf could surprise on the take-or-pay booking.

TCELL (BUY, TP TL13.56) BUNDLE LAW PASSED > The bundle law, which allows the CMB to appoint new BoD members to TCELL’s board & to acquire General Assembly right is approved by the President. Recall: 4 memberships out of total 7 expired in April 2013. New members could not be appointed <= General Assembly could not convene. The CMB is said to appoint 2 members while the remaining 2 members will be representing main shareholders. Note: 5 votes are sufficient to take BoD decisions. Whether the CMB will execute its right to distribute blocked TL3bn (est.) dividends is unknown. Considering that Cukurova Group had an extension from the Privy Council, the CMB may not rush in utilizing its authorization for imminent distribution of dividends.