BIZIM TOPTAN / BUY (Prev. HOLD)

 

TL46mn Sok proceeds to provide cushion

• After mentioning in August that the company may dispose its 10% stake in Sok, Bizim Toptan announced on September 9 that it sold its stake in Sok to parent Yildiz Holding for TL46mn, resulting in a gain of TL15.1mn on the sale. 1H13 cash balance was TL24mn, thus the TL46mn in sale proceeds means significant cushion against pressure on margins or working capital requirements.
• While not touching top-line guidance at TL2.3bn for 2013E, the company lowered EBITDA margin guidance by 20bps following 1H13 results. That does not necessarily mean a downward revision to net margin expectations in our view, as financial expenses have been lower than expected as well.
• Although the TL15.1mn gain on the sale lifts the 2013E net profit substantially (31% of net profit forecast), we have otherwise slightly trimmed our top-line and margin estimates. Our impression is that Bizim Toptan may be eager to invest more in pricing and lower margins in the remainder of the year to grow traffic. Our headline earnings forecast for 2013E is TL46mn (+78% y/y). Excluding the one-off gain, our net profit forecast is TL32mn (vs. TL34mn before) and is 23% higher y/y.
• Our DCF points to an almost unchanged 12-mth target price of TL33.0/share (TL33.2/share before). With a 28% total return potential over the next 12 months including a 1% net dividend yield, we upgrade Bizim Toptan to BUY from HOLD. We project 2012-15E revenue and earnings CAGR of 16% and 32% respectively.
• Bizim Toptan has underperformed the BIST100 by 6% and 17% over the past one and three months respectively. We find that unwarranted especially with the cash boost from Sok sale and the relatively resilient nature of the company’s business against economic downturns.
• Key risks for Bizim Toptan include slower than expected store openings, higher competition, the targeted HORECA/Corporate segment exposure proving more costly than predicted and a severe economic recession.