Market Watch(Şeker Yatırım)

The BIST-100 Index started Tuesday on a positive trend, tested a new peak of 4,412, and lost some of its gains to profit sales at the end of the day. The Index closed the day at 4,360.28, up 0.66%. The Banking Index diverged negatively, down 0.76%. While the recovery trend in global risk-taking appetite continued, global stock markets closed the day on the up. In the short term, even though the uptrend in global stock markets prevails, we expect it to be used as a selling opportunity, with a downtrend to continue in the medium term on recession concerns. The VIX Index is above 25, and we think that if it settles above 26 again, selling pressure in the U.S. Stock Markets will gain strength. The BIST tests new peak levels after strong balance sheet announcements, and the upward revision to share target values following the balance sheet announcements supports the rise. As of today, with the closing of the balance sheet period, we think there may be profit sales, albeit limited, at the BIST, which has achieved a strong rise in the short term. However, despite profit sales, we expect decreases to present a buying opportunity, thereby maintaining the uptrend given that the BIST is the only alternative among TRY-based assets in a high inflation environment. The VIOP-30 Index closed the evening session down 0.22%. Relative to the BIST close, the U.S. and German futures were slightly positive. Asian Stock Markets have observed a negative-weighted trend. Locally, the Benchmark Index is expected to start Wednesday with a positive trend, and profit sales, albeit limited, may follow during the day. SUPPORT: 4,331 - 4,297 RESISTANCE: 4,412 - 4,444.
Money Market:
The Lira was negative yesterday, weakening 0.07% compared to the USD to close to 18.5942. In addition, the currency depreciated by 0.40% against the basket composed of $0.50 and €0.50. Meanwhile, the local fixed income markets were negative. The ten-year benchmark bond was traded within a range of 12.13%-12.28%, ending the day at a high of 12.28%, 25 bps above its previous closing.
Company News:
Bim (BIMAS.TI; OP) reported a net profit of TRY 1,775mn (3Q21: TRY 1,676mn), in 3Q22, below our expectation (TRY 1,920mn) and the RT’s market average expectation (TRY 1,913mn). Strong operating profit in this quarter was effective in the positive realization of net profit. The reason for the net profit figure falling short of our expectations is; rising cost pressure on gross profitability beyond our calculations, and the deviation in current tax expenses. The net profit margin declined to 4.3% in 3Q22 from 5.1% in 3Q21. The Company announced net sales revenue above expectations thanks to its strong operational performance, high net sales revenues, and solid store openings trend in 3Q22. With the recovery in customer traffic (1Q21: -17%, 2Q21: -4%, 3Q21: 0.1%, 4Q21: 3.0%, 1Q22: 10.9%, 2Q22: 14.1%, 3Q22: 8%), net sales revenues reached TRY 41,026mn in 3Q22 on a rise of 135.0% YoY, due to greater basket size (3Q21: TRY 36,26, 3Q22: TRY 73,10) (+101.6%) and the positive effect of rising store number (number of stores at the end of 3Q21: 10,330 units, 3Q22: 11,274 - 188 new BIM Turkey store openings, 6 new BIM Morocco store openings, 4 new BIM Egypt store openings, and 11 new FILE store openings). Concluding this quarter with a 7.0% EBITDA margin, Bim registered improvement on the operational front based on “Basket Size” / “Like-for-like sales” (3Q21: TRY 20,162, 3Q22: TRY 43,851, on a 117.5% rise YoY). Duly, the Company printed TRY 2,865mn EBITDA on a YoY rise of 89.7% (Seker Invest: TRY 3,229mn, Market Avg.: TRY 3,244mn) (Slightly Negative)
Dogus Otomotiv (DOAS.TI; MP) is to announce its 3Q22 results after the close of the TR markets. For 3Q22, we expect net sales of TRY 11,583mn (Research Turkey market average expectation: TRY 11,513mn), rising 139% YoY. On the EBITDA side, the average market expectation is TRY 2,105mn, while our expectation is TRY 2,152mn. As a result, we expect the Company to print a net profit of TRY 1,715mn (market expectation: TRY 1,681mn).
Pegasus Airlines (PGSUS.TI; OP) is to announce its 3Q22 results after the close of the TR markets. For 3Q22, we expect net sales of TRY 16,838mn (Research Turkey market average expectation: TRY 16,804mn), rising 271% YoY. On the EBITDA side, the average market expectation is TRY 7,839mn, while our expectation is TRY 7,908mn. As a result, we expect the Company to print a net profit of TRY 4,198mn (market expectation: TRY 4,111mn).
Pegasus (PGSUS.TI; OP) has released its monthly traffic figures for October 2022. Thanks to the complete lifting of restrictive measures against the spread of COVID-19 in Turkey from July 1st, 2021 onwards, and the strong tourism activities, the carrier’s total PAX rose by 22% YoY relatively over a weaker base in October 2021, and the load factor improved by 6.0 pp YoY to 85.5% in October 2022. While the results indicate continuing recovery in the carrier’s international load factor, its traffic development in October 2022 largely met expectations. Hence, we expect the data announcement to have a positive impact on the near-term share performance.
· Total PAX rose 22% YoY over a weak base - Pegasus’ domestic PAX declined by 15% YoY to 0.99mn in October 2022 and remained c.28% below the domestic PAX of October 2019. However, due to continuing strong tourism activity, the carrier’s international PAX improved notably by 64% YoY to 1.68mn in October 2022, remaining c.23% above October 2019.
· Load factor rose by 6.0 pp YoY to 85.5% in October 2022 - The carrier’s domestic load factor has improved by 5.5 pp YoY to 85.5% in October 2022, although still 7.8 pp lower when compared to a strong October 2019. Its international load factor improved more notably by 6.6 pp YoY to 85.5% in October 2022, and was 0.6 pp higher compared to October 2019.
Turkish Airlines (THYAO.TI; OP) has released its traffic figures for October 2022 with strong PAX growth of 29% YoY due to the increased number of both international and domestic passengers, compared to October 2021, a relatively weak base period. THY’s total PAX in October 2022 was at 6.63mn, c.0,1% below October 2019 (October 2021/October 2019: -22.5%); meanwhile, the share of international PAX in total PAX has reached 67.4% in October 2022 (October 21: 58.2%, October 19: 60.9%). Prepared to benefit from the potential further recovery of passenger traffic, the total load factor was 1.9 pp higher when compared to October 2019, and 15.3 pp higher YoY at 85.2% in October 2022. October 2022 traffic figures feature the gradual recovery of its international passenger traffic and indicate a PAX recovery.
· Turkish Airlines’ total PAX recovered by 28.8% YoY over a weak base, to 6.62mn in October 2022. The carrier’s international PAX rose by 49.2% YoY to 4.73mn over a relatively weak base in October 2021; domestic PAX, on the other hand, recovered slightly, up 0.4% YoY to 2.16mn in October 2022. THY’s international PAX was 10.7% above October 2019 levels, but domestic PAX was, however, still 17.0% below October 2019 levels (Int’l PAX October 21/October 19: -25.8%, Domestic PAX October 21/October 19: -17.3%).
· Turkish Airlines' load factor improved by 15.3 pp YoY to 85.2% in October 2022. The total load factor was 1.9 pp higher at 85.2% in October 2022 as compared to October 2019, due mainly to a 16.5 pp increase in its international load factor and a 7.0 pp increase in domestic load factor when comparing the same periods. The load factor picked up by 15.3 pp YoY in October 2022. Also, THY's cargo operations volume declined by 17% YoY in October 2022; however, when compared to October 2019, cargo operations slightly declined by 0.3%.
The Company's announced October 2022 traffic data indicates that the share of international passengers in the total number of passengers has increased, & that the high season effect supports approximating the figures of 2019 with the significant improvement in PAX number, continues to support the Company's operations. (Positive).
Turk Telekom (TTKOM.TI; OP) printed a net profit of TRY 1,171 mn in 3Q22, above our expectation of TRY 713mn and the average market expectation of TRY 704mn. The discrepancy results from deferred tax income of TRY 816mn. Operational expenses and financial expenses (TRY 3,893mn) suppressed net income.
Strong rise in subscribers and ARPU supported revenues. In 3Q22, with the seasonally effect, tourist arrivals supported subscribers adds on the mobile side. Mobile blended ARPU has increased 40% YoY. On the mobile side, the strongest subscriber adds of 15 quarters at 682k new subscribers, took total subscribers to 25.3 million. Net subscribers rose to 52.8mn. 1.4mn new subscribers were added in the past 12 months. Also with the seasonally effect, increased mobility supported turnover, too. Revenues rose to TRY 12,551mn by 45% while our expectation was TRY 11,856mn and the average market expectation was TRY 12,252mn. EBITDA has reached TRY 4,674mn up 17% YoY. The figure was similar to our TRY 4,637mn, and slightly below the average market expectation of TRY 4,890mn.
2022 guidance - The company now expects its revenues to rise by 37% (Previous: 33%), EBITDA in the vicinity of TRY 19bn (Previous: TRY 18,5bn), and consolidated capex expenses of approximately TRY 14bn (previous: TRY 13bn) in 2022E.
Accordingly, price hikes gradually reflect to ARPU, and we expect continued growth in ARPU over the coming quarters. Meanwhile, the company has implemented a new contract system (12+12 months) on the fixed side, and we expect it to support ARPU. In previous quarters; it was hard for the company to reflect inflation to prices. Yet with this low base, we foresee the company delivering stronger financials in subsequent quarters. Note here that financial expenses due to Fx-denominated debt continue to threaten profitability.
In line with financial statements, the company's guidance and our expectations, we revise our 12-month target price for TTKOM from TRY 12.97/share to TRY 16.36/share, raising our recommendation to "Outperform" from "Market Perform" given the 19% return potential.

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