Market Watch (Şeker Yatırım)

Market Watch - Tuesday, August 13, 2024

Outlook:

The BIST100 Index started Monday on a positive trend, weakened throughout the day and closed at 9,828.56, down 0.80%. While the Industrial Index decreased by 1.72%, the Banking Index diverged positively, up 1.09%. After retreating 27% from the peak in a short period of 3 weeks, the Banking Index has started to face purchases again. We think that if the recovery in the banking sector continues, the index may also recover. Additionally, if geopolitical risks decrease, the recovery across the BIST may accelerate. However, it may remain limited due to the lack of supportive expectations for the short term. On the global side, the recovery continues ahead of the U.S. CPI data to be announced tomorrow. Yesterday, the U.S. and European stock markets generally finished the day with increases. This morning, the U.S. futures and German DAX futures are in a mixed trend. We think that global markets will continue to balance unless incoming data increases recession concerns. The U.S. PPI data to be announced today will also have an impact on risk appetite. The VIOP30 Index completed the evening session down 0.56%. Locally, we expect the Benchmark Index to start Tuesday with reactionary purchases, and to continue its fluctuating course thereafter. SUPPORT: 9,750 - 9,600 RESISTANCE: 10,000 - 10,250.
Money Market:
The Lira was negative yesterday, weakening 0.09% against the USD to close at 33.5599. The currency also depreciated by 0.11% against a basket of $0.50 and €0.50. Meanwhile, the local fixed income markets were relatively flat. The ten-year benchmark bond yield fluctuated between a range of 28.27%-28.36%, closing the day at 28.33%, up 1 bps from the previous close.
Headlines:
Balance of payments statistics for June will be released in Turkey today. Market expectations were for a current account surplus of USD300 million. As Seker Invest, we expect a current account surplus of USD250 million. Our detailed analysis will be published during the day.
Company News:
HalkBank (HALB.TI; MP) posted TRY3,440mn net income (-29% QoQ) in its 2Q24 bank-only financial statements boosted by the sharp reversal of loan provisions. This beats our TRY2,764mn call and the TRY2,906mn RT consensus estimate by 24% and 18%, respectively. 6M profit of TRY8,258mn jumped 67% YoY. ROAE weakened to 12.6% in 1Q24 from 14.8% in 3M24, the lowest among peers.
Core banking revenues were weaker than expected. Operating expenses and loan provisions were lower than our expectations, with a positive surprise. TRY8.3bn trading loss significantly dented profitability. The bank posted TRY121mn dividend income.
We expect a slightly positive market impact. Our TP of TRY21.44 offers 40% upside. We maintain our "Market Perform" recommendation. We model 106% earnings growth for the bank for 2024. HalkBank is trading at a 2025E P/E of 2.7x and P/DD of 0.62x (15% discount to domestic peers) with a ROAE of 24.9%.
In the week of August 2 - 9, 2024; naphtha prices increased by 1% while ethylene prices fell by 0.2%. In line with this, the naphtha-ethylene spread decreased to USD 188 marking a 4% weekly decline. While spread is not a direct measure of profitability for Petkim (PETKM.TI; OP) it can be considered an indicator.
Pegasus (PGSUS.TI; OP) has released its monthly traffic figures for July 2024. The carrier's total PAX rose 10% YoY to 3.55mn (July 2023: 3.24mn, June 2024: 3.27mn) for the month. Domestic PAX rose 11% YoY to 1.29mn (July 2023: 1.16mn, June 2024: 1.20mn). International PAX improved 9% YoY to 2.26mn for the month (July 2023: 2.08mn, June 2024: 2.07mn). The total load factor was up 1.9 pp YoY to 88.9% (July 2023: 87.1%, June 2024: 86.7%). The domestic load factor rose 0.4 pp YoY to 94.6% (July 2023: 94.2%, June 2024: 91.8%), while the international load factor rose 2.5 pp YoY to 86.0% (July 2023: 83.5%, June 2024: 84.0%). Thus, the Company's int'l PAX in July 2024 reached approximately 63.7% (July 2023: 64.3%, June 2024: 63.3%) of the total passenger number. Total ASK rose 8% YoY to 6.4bn in July 2024. The continued strength of the PAX growth trend in domestic and international flights and the growth in domestic and international LF indicate the continuation of Pegasus' positive operational trend. In the 7M24 period, the total load factor was up 42 p.p. to 87.6% (7M23: 83.4%). We consider the outlook based upon the data, which is consistent with the Company's expectation of an increase in LF for 2024, positive. We believe that the announced traffic results may have a positive impact on the short-term performance of the Company's shares (Positive).
Pegasus (PGSUS.TI; OP) reported a net profit of €112mn in 2Q24, above the market average expectation of €71mn and our expectation of €72mn net profit (2Q23: €91mn). The Company announced a net profit thanks to the positive impact of solid revenue growth, operating profitability and deferred tax income in 2Q24. Rising fuel + personnel costs & the increase in OpEx and net financing expenses (2Q24: €62mn, 1Q23: €43mn) (increased interest expenses on leases, & FX losses) were the factors that suppressed the Company's net profit figure in this quarter. Total sales revenues rose by 16% YoY to €763mn, above the market average expectation of €737mn and our expectation of €745mn. The Company's int'l scheduled passenger revenues rose by +4% YoY, domestic scheduled revenues rose by 43% YoY and ancillary revenues rose by +28% YoY (2Q24: €262mn, 2Q23: €206mn). Pegasus' EBITDA reached €230mn in 2Q24, above the market average expectation of €194mn (Seker: €213mn). EBITDA margin was 30.1% in 2Q24. We believe that the announced 2Q24 financial and operational results will have a positive impact on the Company's shares performance.
Pegasus' total PAX in 2Q24 rose 19.2% YoY to 9.4mn compared to 2Q23, thanks to strong passenger demand in this period. The Company's sales revenues rose 16% YoY in €-terms in 2Q24, rising to €763mn (2Q23: €657mn) (Market average: €737mn, Seker: €745mn). In addition, domestic passenger yields rose by +71.4% YoY, reaching TRY 965, and international yields were c.13.3% higher at c.€68 when compared to 2Q19, and -9.3% YoY. Ancillary revenues/PAX rose by c.6.9% YoY when compared to 2Q23, to €28.0 in 2Q24. Pegasus' load factor was strongly up by 6.2 pp at 87.5% YoY, whereby RASK rose by c.4% YoY in EUR terms to €¢4.51 in 2Q24 YoY. Total ASK rose 11% YoY in 2Q24, while int'l ASK rose 9% YoY. Meanwhile, total CASK rose by c.8% to €¢3.64 when compared to 2Q23, due to the increase in jet fuel CASK, and the negative impact of the rise in personnel, and maintenance expenses (CASK non-fuel: 2Q24: €¢2.29, 2Q23: €¢2.13). Pegasus thus recorded a quarterly EBITDA of €230mn (2Q23: €221mn) according to CMB financials in 2Q24 with a EBITDA margin of 30.1%. The Company's net debt amounted to €2,483mn at the end of 2Q24, slightly up by 2.7% YoY compared to the end of 2023 (€2,418mn). The Company was also able to achieve 50% of the jet fuel consumption for 2024 and 35% for 2025. Pegasus's cash position reached €579mn at the end of 2Q24 (end-2023: €512mn).
The Company plans for total ASK growth of 10%-12% (Previous: 10%-12%) in 2024. Pegasus mentioned that the Company expects RASK to be flat YoY in 2024. The Company stated that ancillary/PAX is budgeted for mid-to-high single digit growth this year. Pegasus estimates that upward pressure on cost items (especially personnel expenses) will continue, predicting that CASK, excluding fuel, may rise by mid-to-high single digits. The Company expects its 2024 EBITDA margin to be around 28%-30%, among the highest among airlines globally. In addition, with the order delivery plan for its aircraft fleet, Pegasus plans for a total fleet size of 118 aircraft by end-2024. For 2024, the Company states that 11 A321NEOs will be received; while 1 B737-800s will be removed from the fleet. The Company expects the average number of seats to rise from 191 in 2021 to 229 in 2029 (Positive).



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