TRGYO : 3Q22 Review (Oyak Yatırım)

Backed by improved sales and rental revenues
Torunlar REIC has announced 3Q22 net profit of TL361mn (+148% q/q, +136% y/y), in line with both market consensus (TL356mn) and our estimate (TL356mn). EBITDA (+23% q/q, +63% y/y) was strong both q/q and y/y on higher unit sales at Torun Center and 5. Levent projects coupled with surged rental income performance. Revenues from hotel management started to support the top-line, as well. EBITDA margin materialized at 66% in 3Q vs. 71% a year ago. Prevailing conversion of FX debt to TL also led financial expenses to retreat quarterly. TRGYO's net debt position went down by 11% q/q and 9% y/y to TL3.9bn in 3Q. Deleveraging of debt is a major catalyst for the stock, in our view.
23E revenues set to rise on better sales performance
Torunlar REIC has a well-diversified real estate portfolio in terms of geography and type. Citizenship through housing investment and influx of new immigrants from abroad have backed sales performance of developers so far this year. Rising housing sales and recovering rental income post Covid era should support earnings going forward. We expect 23E net earnings of TRGYO to expand 13% y/y. Mall of Istanbul (MOI) Hilton Hotel, convention center and the adjacent residential project keep supporting earnings going forward, in our view, as tourism revitalizes. Destocking of remaining residential units at 5th Levent and Torun Center, will be another focus of Torunlar REIC. The start of 2nd phase of 5th Levent potentially in 1H23 could be named as a short term catalyst. An agreement with a potential tenant for the hotel at the Pasabahce project and unit sales from this project could be named as medium term catalysts. On top of that, Karakoy Hotel construction has already begun and starting from 2023 onwards it could support EBITDA and earnings.
23E EBITDA set to rise; deleveraging continues
We envisage 33% y/y hike in Torunlar's 23E EBITDA on relatively higher unit sales and better rental performance. TRGYO aims to complete its deleveraging process by 2024 and decrease its net debt position to TL3.7bn by year-end 2022 from TL3.9bn as of 3Q22. We expect the company's short FX position to fall further and foresee the FX debt to be replaced by TL.
FY22-23E earnings and OP rating maintained; TP revised up
Our 2022-23E earnings forecasts indicate an average 11% earnings growth. Our revised SOTP model post 3Q22 results indicates a 12M TP of TL16.72/share (previous TL12.74).


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