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Berna Kurbay

BGC Partners: Arcelik <ARCLK TI> to acquire 57% of Singer in Bangladesh for US$75mn, positive…

Arcelik announced that the company signed an agreement today to purchase 57% of Singer Bangladesh for US$75mn to be paid in cash. Singer owns 100% of International Appliances (IAL) which manufactures refrigerators. The company announcement can be reached at /UserFiles/file/Arcelik%20Investment%20into%20Bangladesh.pdf

Cagdas Dogan

BGC Partners: TURKEY - Consumer confidence mildly improves in March but remains at very weak levels…

Consumer confidence index (unadjusted) was 59.5 in March, compared to 57.9 in February and a high of 73.1 in July. August’s crash in TL and persistently rising lending rates had taken their toll on consumer confidence levels while TL’s partial re-appreciation, some pull-back in loan rates, and tax breaks seem to have led to a stabilization recently but no material improvement.

Berna Kurbay

BGC Partners: Turkish Automotive Export Data Feb-19: Tofas: -40% y/y slightly worse / Ford Otosan: -18% y/y – strong

According to data from OSD (Automotive Manufacturers’ Association), there was an 11.3% y/y decline in Turkish automotive sector exports to 106,882 units in Feb-19, while exports fell by 6.5% YTD to 201,753 units.

Berna Kurbay

BGC Partners: FOOD RETAIL: Trade Minister said that an allocation to local producers at retailers will become mandatory and there will be a limit to private label sales…

The comments are made at a meeting with craftsmen in the province of Nevsehir. The minister said that they are working on a retail law which foresees a minimum level of locally made products on shelves. She also said that the retailers typically have store branded products produced and sold and the ministry will put a limit on those products and make the presence of local products mandatory. Neither BIM nor Migros is aware of the presence of a draft law as yet, according to our understanding. However, the Trade Minister has been talking about a new retail law in the last few weeks, placing sp...

Cagdas Dogan

BGC Partners: PICTURING TURKEY - Some recovery in January but not out of the woods yet

• In this edition, we observe that Turkey’s y/y GDP growth momentum has recovered towards -1% y/y as of January 2019, driven by continued significant support from net exports as well as increased state expenditures as seen in the budget figures. Otherwise, despite some improvement from 4Q18 lows, both consumption and investments remained in deep contraction territory, which seem to have dropped by some 4% and 9% y/y as of January, respectively. Indicators that we have as of today suggest a mild recovery in consumption but not much in investments, while the contribution of net exports is also s...

Cagdas Dogan

BGC Partners: TURKISH BANKING SECTOR: A look at state banks’ exponential market share gains

BGC Partners: TURKISH BANKING SECTOR: A look at state banks’ exponential market share gains: In summary, also considering the fairly limited improvement in the net NPL evolution in the sector so far year-to-date, the combination of market share losses and lower-than-expected margins present some downside risk to particularly private bank earnings estimates, in our view.

Berna Kurbay

BGC Partners: Mavi FY18 Conference Call Highlights

The tone was ‘constructively positive’. 2019 guidance is basically a reiteration of the long-term targets the company set out at the time of the IPO. Whether those targets (particularly in reference to revenue growth and EBITDA margin) would once again be exceeded as was the case in 2018 remains to be seen. Given that the cost pressures are already felt because of the higher costs incurred in the procurement in the second half of 2018, exceeding margin guidance would be difficult initially while the sales trend so far in Turkey appears encouraging. Also, international growth is likely to be mo...

Cagdas Dogan

BGC Partners: Central Government Budget deteriorated in February, as indicated by the Treasury cash balances…

Finance Ministry released February Central Government budget figures and the data showed a deterioration in budget balances, as indicated by Treasury cash balances, in the absence of advance dividend income from the CBT which had boosted revenues in January.

Cagdas Dogan

BGC Partners: TURKEY - Deterioration in the labour market accelerated in December...

TURKSTAT released the unemployment data in Turkey for December (average of November, December, and January). According to the data, unemployment rate in Turkey was 13.5% in December 2018, compared to 12.3% in November 2018 and 10.4% in December 2017.

Berna Kurbay

BGC Partners: MAVI 4Q18 Earnings Review - In line

Mavi reported 4Q18 net loss of TL2.5mn (vs. net profit of TL7.2mn in 4Q17), in line with expectations… The reported net profit is broadly in line with consensus of +TL2.4mn and our expectation of a net loss of 5.5mn. We maintain BUY rating and will go through the results in more detail. Mavi provided 2019 guidance officially for the first time, with no major surprises in our view. The company will hold a conference call at 16:00 Turkish time, with details at the bottom of this note.

Cagdas Dogan

BGC Partners: TURKEY - CBT Expectation Survey: Slight further decline in inflation expectations...

OUR TAKE: We observe slight further declines in inflation expectations over the 24-month horizon with the 2019-end CPI expectation dropping to 15.6%. Regarding expectations on monetary policy, market participants seem to expect 150bps cut from the CBT over the next three month horizon, which is probably for the June meeting. Whereas, total rate cut expectation for 2019 increased further to 550-600bps. (CBT, BGC Partners)

Cagdas Dogan

BGC Partners: Food for Thought: Rates conundrum…

- Market rates are well below the CBT policy rate… CBT maintained its policy rate at 24% in last week’s MPC meeting as expected; however, key market rates have already dropped sharply over the past three months, trading well below their historic ranges in comparison to the CBT policy rate. 2Y benchmark bonds trade at 18.5%, about 550bps below the CBT rate. Similarly, deposit rates plunged by 300bps over the past three months, standing at around 19.6% or 440bps below the CBT rate. Partial exception here are the swap rates which currently hover at around 23.5% and O/N money market rates that tra...

Erdem Hafizoglu

BGC Partners: KOZA ALTIN (BUY Maintained, 60% upside)

• BUY maintained with a 60% upside potential… We updated our valuation for Koza Altin; a) excluding Sogut from reserves and resources, b) raising our 2019 production and sales volume estimate to 300k oz (guidance 300-320k oz), c) including 4Q18 financials and our latest macro assumptions, d) raising our cash cost estimate from US$500/oz to US$550/oz in the model staying more on the conservative side (although an improvement in volumes/grades is likely to push cash costs below US$500/oz). With the new set of assumptions, we decrease our TP for the company from TL79.3/share to TL70.8/share (down...

Erdem Hafizoglu

BGC Partners: YATAS 4Q18 - BETTER

Yatas reported TL34.7mn net income in 4Q18 (consensus: TL29.0mn, BGC: TL29.3mn), better… Recall that strong bottom line was hinted by 2018 “tax office” results released on 19 February. In 4Q18, Yatas has benefited from VAT cut (to 8% from 18%) re-initiated in October, and TL’s stabilization after significant volatility in 2Q and 3Q18. The company posted TL271.8mn revenues in 4Q18 up by 32.9% y/y (consensus: TL268.7mn, BGC: TL267.6mn), as expected. The company has 412 total stores in 4Q18 including international stores (228 Enza home, 184 Yatas bedding) with 353.0k m2 sales area vs. 414 total ...

Cagdas Dogan

BGC Partners: Turkey produced a C/A deficit of US$0.8bn in January 2019, broadly in line with expectations…

Current account balance in January produced a deficit of US$0.8bn, which was broadly in line with expectations. This is a pretty small deficit for January, considering the seasonal rise in energy consumption and decline in tourism income. With the January data, we see that Turkey’s 12-month rolling C/A deficit improved from US$27.8bn in December to US$21.6bn in January, or to below 3% of GDP.

Cagdas Dogan

BGC Partners: GDP growth in 4Q18 came in at -3.0% y/y, broadly in line with expectations…

Turkey’s GDP contracted by 3.0% y/y in 4Q18, broadly in line with the -2.7% consensus forecast. It was widely expected for the GDP to have contracted in 4Q18 and activity is likely to have remained in contraction territory in 1Q19. As such, GDP growth materialized at 2.6% y/y in 2018. The seasonally and calendar adjusted GDP data pointed to a 2.4% q/q decrease in 4Q18 being the second consecutive quarterly decline in output, following the 1.6% q/q drop in 3Q18.

Erdem Hafizoglu

BGC Partners: Highlights from Kardemir <KRDMD TI> Conference Call, neutral…

No EBITDA margin or EBITDA per ton guidance has been provided by the management for 2019 at this stage. A profitability guidance will be provided after the announcement of 1Q19 results. The only guidance for 2019 is 2.4mt sales volume (2017: 2.2mt, BGCe: 2.3mt) and US$117mn capex (2017: US$81mn, BGCe: US$110mn). The main focus will be on the sales of value added products in the product mix.

Berna Kurbay

BGC Partners: BIM 4Q18 Conference Call Highlights

Cautious tone on outlook: BIM used a cautious tone on 2019 outlook during the conference call, saying that the consumer behavior currently reflects the economic pressures

Cagdas Dogan

BGC Partners: Food for Thought: Why no dividends from banks?

For the first time since the 2002-03 period in the aftermath of the Turkish banking system crisis, it looks like Turkish banks will not be able to distribute any cash dividends in 2019. We should note that even during the 2008-09 global crisis episode, many of the Tier-I banks were able to distribute close to 20% of earnings. It had been reported by Bloomberg and later confirmed by bank managements that the BRSA had sent a document to banks back in November 2018 stating that capitals should be maintained to weather the negative impact of financial market volatility and that they could allow di...

Berna Kurbay

BIM 4Q18 Earnings Review - BETTER

BIM reported 4Q18 net profit of LT359mn (+62% y/y), beating consensus by 19% and our estimate by 29%. BIM not only delivered a stronger top-line growth than we predicted in 4Q18 (+38% y/y, thanks to a LFL revenue growth of 27.2% on company calculation) but also a better EBITDA margin at 5.6%, thanks to a lower cash opex/sales ratio than we expected. There was a surprise TL13mn provision reversal, as well as a higher investment income than we predicted in 4Q18, giving further boost to the bottom line. The company simultaneously declared cash dividends of TL2.4/sh (yield: 2.8%) in line with expe...

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