Morning Note /
Turkey

Turkey: We expect a flat opening

  • The approval form Turkey’s CMB for BBVA’s has finally come with the previously announced price of 12.20%/share

  • We advise investors not to tender their shares

  • The improvement in refining margins has pushed Tupras shares higher yesterday

Batuhan Ozsahin
ATA Invest
1 April 2022
Published by

The approval from Turkey’s Capital Market Board for BBVA’s has finally come with the previously announced price of 12.20%/share. Foreign investors have been sellers of Garanti shares since the announcement of the deal as Turkey’s macro picture detorriated since then. Foreign investors share in Garanti’s free float has declined to 31% as of yesterday, down from 56% when the buyback offer was announced back in November. We advise investors not to tender their shares. The improvement in refining margins has pushed Tupras shares higher yesterday and we expect the momentum to continue as we expect strong 1Q results.

Macro news:

*NG price increase> BOTAS increased natural gas prices by 50% for industrials, effective as of April’22.

 *Electricity price increases> increased by 20% for the industrials

Company news:

*GARAN TI> All necessary approvals in relation with the voluntary tender offer launched by BBVA for the entire share capital of Garanti BBVA both in Turkey and in other jurisdictions have finally been completed. The tender offer period for the will start on April 4, 2022 and will last for a term of 20 business days(ending date on April 29, 2022) for a price is TRY 12.20 per share. We find the value of the current offer does not fully reflect the intrinsic value of Garanti franchise and advise investors not to tender into this offer. Our current Price Target for Garanti is 18.03/share

*SAHOL TI> goes ex-dividend today, paying TL0.75/shr (4.27% div. yield) The reference price will be TL 16.80

*TTKOM TI > Turk Telekom General Assembly decided to distribute TL1.4156/shr cash dividend, implying 13.65% payout ratio (positive).

*TTKOM TI > : 55% Share transfer of Turk Telekom to Turkish Wealth Fund is completed yesterday. Analyst Comment: We consider this news positive for TTKOM. We believe that uncertainties about its ownership structure ended . Going forward, TWF’s strategic action plan regarding TTKOM could give us some hints about the prospects of TTKOM. Transaction value of US$1.65bn implies US$3bn value for 100% of TTKOM, which is 25% above mcap of US$2.4bn. Additionally, corresponding to LYY’s 55% shares, an amount out of the dividends to be distributed by the General Assembly of Türk Telekom has been decided yesterday. Cash dividend amount of TL1.4156/shr will be distributed by 5 May 2022. We have outperform rating for TTKOM with 12-mnth TP of TL14.50, implying 48% upside potential, including 13.65% cash dividend yield. TTKOM remains in our top picks list.

 *SISE TI > BOTAS also increased natural gas prices by 35% for households and 44.3% for electricity generations. Please note that, Turkey natural gas costs comprise 12% of total COGS for SISE. Based on our rough calculations, 50% increase in natural gas prices decreases SISE’s EBITDA margin around 391bps on annual basis. Considering this increase will be effective as of April 2022, total impact would be 293bps to the full year if we assume product prices do not change. However, we believe SISE is likely to reflect the cost increases to product prices and negative impact of the cost increases could be mitigated by higher prices, going forward.

Weekly Agenda:

April, 1: SAHOL TL 0.75/share cash dividend payment

April, 4: March CPI ( Ata estimate 4.7% m/m, 60% y/y)

April, 4: KORDS TL 0.82/share cash dividend payment