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Turkey: We expect a slight positive opening

  • We start a quiet day where US and UK markets are closed
  • This week we have important economic releases including May inflation numbers on 3 June
  • The appetite from foreign investors is still very low despite the cheap valuations even in blue chips

We start a quiet day where US and UK markets are closed. This week we have important economic releases including May inflation numbers on June,3rd. We expect 1.44% and consensus estimates are 1.5% but the upside risk is high this month due to the weakness in TL. We expect the inflation to peak in June and then start declining by July unless the depreciation in TL continues.

The appetite from foreign investors is still very low despite the cheap valuations even in blue chips. A slight positive opening is likely in the market today but a weak volume is likely.

Company news:

AGHOL: goes ex-dividend today, paying TL0.16/shr (0.71% div. yield)

SISE: goes ex-dividend today, paying TL0.16/shr (2.06% div. yield)

TUPRS: temporarily shuts its Batman refinery due to low regional bitumen demand. On Friday, Tupras announced that operations in its Batman refinery are being temporarily halted between 3 June 2021 and 31 July 2021 in order to manage elevated inventory levels more optimally due to the decrease in regional bitumen demand. Batman is the simplest refinery in Tupras’ portfolio with a Nelson Complexity Index of 1.83 vs a company-wide average of 9.5. Batman Refinery has 4.6% of Tupras’ total capacity it mostly processes heavier crude oil to produce bitumen for the region and feedstock to be used in Tupras’ other refineries. Even though the Batman Refinery has significant capacity, we believe it does not contribute to profitability in a meaningful scale. All in all, we believe this closure will have a slightly negative effect on Tupras’ share price.

GUBRF: posted TL123mn net income in 1Q21, in line with our estimates. Net sales increased by 35% y/y to TL2,345mn in 1Q21. Domestic revenues increased by 61% y/y to TL2,178mn in 1Q21 whereas Gubretas’ Iranian venture Razi’s revenues decreased by 47% y/y to TL349mn during the same period. Strong fertilizer prices were the main driver of the strong sales growth on the domestic side whereas Iranian operations were weak due to stronger Iranian Rial suppressed exports from Iran. Gubretas’ EBITDA came at TL381mn in 4Q20, up 117% y/y. Domestic EBITDA increased by an impressive 277% to TL300mn thanks to favorable domestic market conditions. Razi’s EBITDA declined 18% y/y to TL81mn. Net debt decreased %57 q/q to TL410mn in 1Q21. The company’s net debt / EBITDA ratio declined to 0.41x in 1Q21 from 1.23x in 4Q20 thanks to strong domestic EBITDA growth.

Weekly Agenda:

May, 31: 1Q21 GDP announcement cons: 1.3%

June, 3: May inflation number ATA exp: CPI 1.44% m/m, cons: 1.5%

June, 4: May REER (prior 62.29)

June, 4: Moody's Turkey Rating Decision


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