Morning Note /
Turkey

Turkish markets start the week with Lira 11% lower vs USD than a week ago

  • BIST-100 is up 17% m/m against a 15% depreciation of the Lira

  • Foreign investors are coming back to equities and will continue to do so with Lira at these levels

  • Cabinet will meet today to talk abut the recent economic development

Batuhan Ozsahin
ATA Invest
22 November 2021
Published by

Turkish markets are starting the week with Lira having depreciated 11% against USD last week alone( 48% ytd) and the only Turkish financial asset class that is keeping itself well against this melt down are the equities. BIST-100 is up 17% m/m against a 15% depreciation of the Lira. Foreign investors are coming back to equities(USD480m of net buying the week before) and will continue to do so with Lira at these levels.

Equities can continue to be a natural hedge against devaluation until the magnitude and the volatility starts a larger than expected deterioration in macro fundamentals starting with inflation and consumer confidence etc. Sise’s new acquisition in Turkey’s Ciner group’s US natural soda business will carry it to the top of the global soda business and is great in the long term.

Macro news:

Cabinet will meet today to talk about the recent economic development and as the year ends, the level of inflation will determine next year’s minimum wage and general level of wage increases.

Company news:

Koc Holding applied to Capital Markets Board for a tender call to Yapı Kredi minorities at TL2.2980/share. YKB shares closed at TL3.55/share on Friday, hence we do not think minorities will tender at these prices.

Sisecam (SISE TI) BoD decided to purchase 60% of Ciner Group's soda business operations in the USA, by paying US$450mn. <Positive> BoD decided to purchase 60% of Ciner Group's soda business operations in the USA, by paying US$450mn. The deal has 3 components. 1) SISE will acquire 10% of Pacific Soda LLC from Imperial National Resources Trone. Pacific Soda LLC is currently owned 50-50% by Imperial National Resources Trone Inc and Sisecam Chemicals USA Inc. 2) SISE will acquire 60% of Atlantic Soda LLC from Imperial National Resources Trone Inc. Atlantic Soda LLC is currently fully owned by Imperial National Resources Trone. 3) SISE will acquire 60% of Ciner Resources Corporation, 74% interest owner in Ciner Resources LP, which is holding 51% in Ciner Wyoming USA, a fully operational natural soda ash production facility with 2.5mn tons/year capacity. SISE and Ciner Group became production JV partners in the natural soda ash project based in the USA in 2019. With this acquisition SISE-controlled soda ash production capacity will exceed 10mn tons/year, comparing to the existing capacity of 2.5mn tons/year today. In addition, SISE is expected to become a world leader in soda ash production with the additional soda ash capacity it will create by 2026, where it ranks 8th as of today. With the investments that will include the establishment of the largest soda ash production facility in a single location, SISE is expected to become the largest natural soda ash producer in USA. With their new partnership structure and investment plan, the 2 companies will expand the scope of their cooperation and will realize a natural soda ash investment of approximately US$4bn in total in USA as they develop the Pacific and Atlantic Projects together. According to chairman Prof. Dr. Kırman, production of natural soda ash compared to synthetic soda ash provides a decrease in approximately 50% in carbon intensity and approximately 50% in water consumption which makes it more desirable considering environmental sustainability. Chairman has stated that they are expecting Pacific and Atlantic investments will come into operation gradually starting from 2025 and the new facilities will reach full capacity in 2027. Analyst comment: In 2019, 2020 and 9M21 SISE posted TL18,059mn, TL21,341mn and TL21,013mn consolidated net sales respectively. In 2019, 2020 and 9M21 SISE posted TL2,706mn, TL3,103mn and TL2,791mn in soda ash net sales respectively which corresponds to 15.0%, 14.5% and 13.3% of consolidated net sales respectively. Currently SISE has approximately 2.5mn ton/year capacity operating 3 plants in Turkey, Bosnia and Bulgaria. With Pacific project, SISE was planning to produce 2.5mn ton/year soda ash and 0.2mn ton/year sodium bicarbonate. Under this new investment structure, SISE expects to reach 10mn ton/year soda ash capacity by 2026E. We see that soda is a highly profitable business segment which produces around 25-30% EBITDA margin which requires lower NWC and maintenance CAPEX compared to SISE’s glass businesses. SISE will hold a telco on their new investment in 22 November 2021. We rate this news as “Positive”.

LKMNH: will distribute TL 0.1111 /share dividend today and the reference price will be TL 11.839

Weekly Agenda:

Nov 22: November Consumer Confidence (October 76.8)

Nov 24: November Capacity Utilization (October 78%)

Nov 24: November Real Sector Confidence (October 109.6)