Market Watch Monday, May 06, 2013 www.sekeryatirim.com.tr

Agenda 06 Monday • Eurozone, March Retail Sales • CBRT to announce price developments report for April • Japan, March Industrial Production • CBRT to announce REER • Aksa Energy 1Q13 results (Seker Invest: TRY 8mn, consensus: TRY 14mn net profit)

07 Tuesday

08 Wednesday

09 Thursday

• Germany, March Factory Orders

• Germany, March Industrial production. • TURKSTAT to announce March Industrial Production • Treasury to announce cash budget realizations for April. • Treasury to pay down TRY0.1bn domestic debt. • CCI 1Q13 results (Seker Invest: TRY18mn, consensus: TRY21mn net profit.

• US, jobless claims.

10Friday

• BOE, rate decision

Outlook:

Money Market: The lira was relatively flat as the local currency weakened 0.01% against USD to close at 1.7940. Additionally, the lira depreciated by 0.24% against the basket composed of $0.50 and €0.50 due to depreciation in EUR/USD exchange rate. Meanwhile, the local fixed income market was negative. The two year benchmark bond traded within a range of 4.96% - 5.18%, ending at 5.14%, thus 12bps above its previous finish.

Volume (mn TRY)

6,000

CBT is to release Real Effective Exchange Rate (REER) for April at 14:30 (12:30 London time). Decline in annual inflation likely to prove temporary. April inflation beats expectations. Monthly inflation came in at 0.42%, thus below both the market consensus (0.64%) and our own forecast (0.6%). Duly, annual inflation declined to 6.13% from the 7.29% print of March. Declining food and fuel prices, as well as base effects, were behind the sharp decline in annual inflation. Food prices (-1.3% MoM) fell more than our -0.5% forecast and seasonal average of 0% of the past 5 years, erasing 0.23 pp of monthly CPI inflation. Hence, annual food inflation declined to 6.8% from 8.1% in March, converging to the CBT’s inflation report assumption of 7%.

90,000 88,000

1,774

26-Apr

29-Apr

0 Indices (TRY)

3,584

85,154

2,000

86,046

3,488

85,112

30-Apr

2-May

3-May

86,000 84,000 82,000

Previous

BIST 100 BIST 30 BIST-Financial BIST-Industrial BIST-Services

Last

88,670 89,094 109,553 110,187 130,791 131,772 72,148 71,865 54,478 54,756

Chg. 0.48% 0.58% 0.75% -0.39% 0.51%

YTD 13.92% 12.75% 15.97% 11.18% 9.63%

Advances Declines Most Active Stocks Vol (TR) (%) Stocks (%) Stocks MANGO EKIZ ISYHO GLBMD TEBNK

13.64 10.42 10.17 9.23 9.09

DENGE NIBAS KARKM BAKAB ALCTL

Money Market O/N Repo (%) Euro Bond (30 year, $) Bond (Benchmark, %)

Currency

Headlines:

89,094

3,185

4,000

BIST 100

88,670

1,751

The BIST closed Friday 0.48% higher at 89,094 on a volume of TRY 3.6bn, though we experienced a rather volatile second session, with the Index even briefly dipping into the red. The BIST traded at recorded levels all last week, on the back of Moody’s ratings upgrade expectations, strengthened over the weekend according to daily Hurriyet, which reported that a delegation from Moody’s was in Turkey last week to meet with private sector leaders. The banks closed the day up 0.94%, and we observed profit-taking on Vakifbank (VAKBN.TI; OP) shares from the TRY 6.88 level after the realization of its better than expected 1Q13 net profits. And now for the story of the day. Despite much of the hype that Tav Holding (TAVHL.TI; OP) would be the forerunner to win the tender for the 3rd Istanbul Airport, the airline’s holding company threw in the towel, whereby the consortium of Cengiz-Kolin-LimakMapa-Kalyon won the day. This led TAVHL.TI to close limit down at TRY 11.80, on a loss of 7.81%, with its partner Akfen Holding suffering a loss of 5.78%. Today, we may see a flat-positive opening at the BIST, although trading volume may be sluggish due to the Bank Holiday in the UK, while no domestic macro releases are due.

US$ Euro Euro/Dolar

-19.37 -14.63 -13.14 -8.70 -8.63

ISCTR GARAN AKBNK THYAO HALKB

Previous

Last

4.44 192.75 5.2

4.29 193.00 5.02

Previous

Last

1.7945 1.794 2.3655 2.348 1.3179 1.30867

Commodity Oil (Brent spot, $) Oil (NYMEX future, $) Gold (Ounce, $) Silver (XAG, $)

Previous

Last

99.7 91.0 1,458.0 23.6

100.8 91.6 1,469.4 24.0

Şeker Funds

Previous

Last*

Şekerbank A T. Shares Şekerbank B T. Bond&Bill Şekerbank B T. Liquid Şeker Yat. A T. Mix Şeker Yat. B T. Gold Şekerbank B T. Short T. Bond&Bill

0.308811 0.019837 0.838557 0.016330 0.015031 0.010327

0.307958 0.019845 0.838853 0.016349 0.015224 0.010330

Prices as of

06-May -13

371,103,575 355,377,728 348,047,513 301,245,862 255,139,457

Pr. Mn 5.80 172.50 6.16

Chg. -0.03% -0.74% -0.70%

Chg. 1.13% 0.64% 0.79% 1.55%

Chg. -0.28% 0.04% 0.04% 0.12% 1.28% 0.03%

YE12 5.25 196.38 6.15

YTD 0.48% -0.49% -0.94%

YTD -9.37% -0.23% -12.30% -20.87%

YTD 9.89% 1.27% 1.60% 5.16% -10.13% 1.38%

Market Watch Monday, May 06, 2013 www.sekeryatirim.com.tr On the other hand, in-line with our forecasts, clothing prices rose 12.7% MoM, and transportation prices declining 0.6% made an 8 bps negative contribution to monthly inflation. Annual transportation group inflation eased further to 3.1% from 4.0% registered in March thanks to the decline in oil prices. Meanwhile, it is clear that the high base of last year stemming from electricity and natural gas hikes in April 2012 also played a role in the decline in annual inflation. Annual core inflation indicators declining, but trend core inflation tells a different story. The CBT’s favourite core inflation indicator annual I index inflation excluding food, energy, beverages, tobacco and gold– eased to 5.4% from 5.8%. Meanwhile, H index inflation, which includes processed food compared to I index, also fell, to 6% from 6.3%. Despite the decline in annual core inflation indicators, the trend in seasonally-adjusted I and H index inflation (annualized 3-month MA of MoM change points to a rising trend, by our calculations. Accordingly, our forecasts point to an acceleration in trend I inflation to 7.2% from 6.7%.

America

World Indices Previous

Last

14,832 3,341 1,598 55,910 3,846 42,263

14,974 3,379 1,614 55,322 3,843 42,602

Dow Jones (US) Nasdaq (US) S&P 500 (US) Bovespa (Brasil) Merval (Argentina) Mexico Bolsa (Mexico)

Europe Dax (Germany) FTSE 100 (UK) CAC 40 (France) WSE WIG (Poland) Prague (Czech Republic) Budapest (Hungary) RTSI (Rusya)

Asia/Africa Nikkei (Japan) Hang Seng (Hong Kong) Shanghai Comp. (China) KOSPI (South Korea) JSE Africa All Shr.(S.Africa)

Albeit slight, we forecast that annual service group inflation might have declined to 7.2% from 7.3% registered in March, still remaining at too elevated levels to achieve a 5% inflation target. Under services we observe an increase in annual rent inflation to 6% from 5.8%, while transportation service inflation fell to 7.4% from 7.9% registered in March. On the other hand, inflation in restaurant prices, which has a noticeable 5.6% share in the CPI basket, eased to 9.2% from 9.6%.

Turkdex (Set. Price)

The decline in annual inflation is positive. However, one should keep in mind that the decline came partially on the back of base effects and favourable annual food inflation, which may reverse in May due to the low base of May 2012. In other words, we may see annual inflation rising to 7% again in May. In addition, still high service inflation and a rising trend in core inflation poses significant risks to the CBT’s year-end forecast of 5.3% and the 5% official target. We maintain our year-end inflation forecast at 7.3%.

Isbank Turkcell Garantibank Migros Park Elektrik Halkbank Aygaz Portfolio Yield

INX100 (JUNE 13) INX30 (JUNE 13) USD (JUNE 13) EURO (JUNE 13) COTTON (MAY 13) WHEAT (MAY 13) GOLD (JUNE 13)

Portfolio Recom mend.

Previous

Last

7,962 6,461 3,859 43,992 961 18,242 1,401

8,122 6,461 3,913 43,992 964 18,319 1,429

Previous

Last

13,694 22,668 2,174 1,957 39,083

13,694 22,668 2,174 1,957 39,592

Previous

Last

87.975 109.825 1.805 2.361 3.385 0.773 85.225

88.975 110.000 1.806 2.373 3.385 0.773 85.480

Inclusio Inclusio Last Date Price Close 22.01.13 04.05.12 26.04.13 22.01.13 22.03.13 26.04.13 24.08.12

7.07 8.83 9.64 22.60 6.62 19.45 8.44

7.26 11.30 10.45 23.45 6.66 21.05 9.90

Chg. 0.96% 1.14% 1.05% -1.05% -0.07% 0.80%

YTD 14.27% 11.89% 13.20% -9.24% 34.65% -2.53%

Chg.

YTD

2.02% 0.00% 1.40% 0.00% 0.31% 0.42% 1.95%

6.70% 9.54% 7.47% -7.31% -7.16% 0.80% -6.65%

Chg. 0.00% 0.00% 0.00% 0.00% 1.30%

YTD 32.66% 0.05% -2.65% -1.52% 0.87%

Chg. 1.14% 0.16% 0.03% 0.51% 0.00% 0.00% 0.30%

YTD 12.73% 11.70% 0.36% -0.11% 2.58% 4.25% -11.26%

Chg. ISE (%) Relative 2.7% 28.0% 8.4% 3.8% 0.6% 8.2% 17.3%

-1.7% -14.8% 3.4% -0.7% -6.9% 3.2% -13.0% 96.1%

Nevertheless, we admit that there are downside risks to our forecast due to more benign energy prices than we had envisaged. However, this risk is not at the magnitude to change our inflation forecast. We foresee that annual inflation is to increase to 7% in May and remain at around this level until year-end. According to CBT data, Turkey attracted USD 920mn and USD 290mn respective foreign inflows to bond and equity markets, adjusted for price and FX levels, in the week ending April 26th. In that week, the compound yield on the benchmark declined by 18 bps, ending the week at 5.38%. On the other hand, the BIST-100 index increased by 2.2%. Year-to-date inflows to the bond and equity market reached USD 8.2bn, and 0.6bn, respectively. The 8-week cumulative inflows also display the strength of inflows. In addition to bonds and equities, inflows to the swap market are also strong. Off-balance sheet FX liabilities of the banking sector released by the BRSA, a good indicator to gauge swaps, show that 8-week cumulative inflows to the swap market are at USD 5.3bn as of April 19th. Consumer credit growth is strong, but a lesser concern for the CBT. Consumer credits rose by 0.5% to TRY 210.4bn in the week of April 26th. On the other hand, the trend pace of consumer credit growth (13-week MA, annualized) remained broadly stable at 31.7% from 31.8% the previous week. Continuation of portfolio inflows makes the CBT’s rate cuts less effective against appreciation pressures. The lira has fluctuated within a narrow range of 2.05 and 2.1 in bi-currency basket terms in recent months as the CBT’s rate cuts balance the strength of the financial inflows. >>> This document has been prepared by the Equity Research Department of Şeker Securities. The information and data used in this report have been obtained from public sources that are thought to be reliable and complete. However, Şeker Securities does not accept responsibility for any errors and omissions. This document should not be construed as a solicitation to buy or sell securities herein. This document is to be distributed to qualified emerging market investors only.

Şeker Yatırım Menkul Degerler A.S. - Buyukdere Cad. No:171 Metrocity A Blok Kat 44-5 SISLI /ISTANBUL Tel: (+90) 212 334 33 33 Pbx, Fax: (+90) 212 334 33 34, [email protected]

Market Watch Monday, May 06, 2013 www.sekeryatirim.com.tr The Real Effective Exchange rate was above 120 in April, and will likely remain there in May, by our forecasts. The sharp decline in annual inflation, continued inflows, and still gentle economic recovery will likely encourage the Monetary Policy Committee to cut short-term rates by a measured step on May 16th as the CBT tries to support both domestic demand with lower commercial loan rates and net foreign demand through a more competitive currency. To achieve these two objectives, cutting the rates without RRR hikes is the best policy for the CBT. Company News: The Hava-Is union has announced its decision to strike at Turkish Airlines (THYAO.TI; MP) as of May 15. Responding to the decision, Turkish Airlines has said that it would not stage a lockout, and that operations would continue without halt as it hoped employees would not participate in the strike (Negative). The Cengiz-Kolin-Limak-Mapa-Kalyon joint venture has won Friday’s tender for the third airport in Istanbul, promising to pay the government Euro 22.1bn over 25 years starting from 2017. Recall that it had originally been valued at Euro 7bn. The airport deal involves a 25-year build-operate-transfer contract. Four groups attended the tender; i) TAV Airports Holding (TAVHL.TI; OP), ii) IC Ictas-Fraport, iii) a consortium of Turkish construction companies Cengiz- Kolin- Limak- Mapa-Kalyon and iv) Makyol. Note that the full amount of money the consortium will pay the state totals Euro 26.14bn once 18% value-added tax is added. CEO of Limak Company Nihat Ozdemir has also stated that they were also set to invest Euro 10.2bn. Ozdemir said that they needed a specific time period to prepare the latest version of the exact project, to determine the financing model and also for expropriations and permits. Ozdemir also noted that they would hopefully bring the third Istanbul airport into service by the end of 2018. Accordingly, should it commence operations in 2018, TAV would be able to operate Ataturk airport until that date. At this point, since TAV has lost the tender and all expectations have now ceased, we believe that the company might come under sale pressure in the short term. TAV Aiprorts Holding’s shares decreased 8% after it withdrew from the tender. Thus, we have removed TAV Airports Holding from our picks. Koza Gold’s (KOZAL.TI; OP) net profit fell by 41.8% YoY and 28.8% QoQ to TRY 111mn in 1Q13. The 1Q13 bottom-line is below our estimate of TRY 138mn and market consensus of TRY 137mn. The worsening bottom-line mainly stemmed from a lower top-line and margins. On the operational front, Koza Gold's gold production declined by 26.5% YoY to 72k oz in 1Q13 from 98k oz in 1Q12. What’s more, average gold prices decreased by 3.3% YoY and were down by 5.3% QoQ to USD 1,623/oz in 1Q13. Thus, Koza Gold’s net sales revenues decreased by 38.8% YoY and 29.2% QoQ to TRY 186mn in 1Q13 on decreased production volume and average gold prices. The 1Q13 top-line is below the market consensus of TRY 233mn and our estimate of TRY 236mn. On the other hand, the company’s net cash cost increased to USD 539/oz in 1Q13 from USD 308 /oz in 1Q12 due to a reduction in the gold grade rate of the Ovacik and Mastra mines. This negatively impacted its operating profitability in 1Q13 compared to 1Q12. This in turn reduced net profit to below our estimation. EBITDA declined by 46.2% YoY and 29.2% QoQ to TRY 132mn in 1Q13, below than our estimate of TRY 166mn and the market consensus of TRY 173mn. Additionally, the gross margin declined to 69.3% in Q13 from 81.9% in 1Q12, while the EBITDA margin decreased to 70.8% in 1Q13 from 80.5% in 1Q12 (4Q12: 71%). Overall, we expect the 1Q13 financials, to negatively affect its shares in the short-term. TRY Million

1Q12

1Q13

YoY

4Q12

QoQ

2011

2012

YoY

Revenues

304

186

-38.8%

262

-29.2%

806

1,043

29.5%

249

129

-48.3%

186

-30.8%

614

806

31.4%

81.9%

69.3%

76.2%

77.3%

Gross Profit Gross Profit Margin EBIT EBIT Margin EBITDA EBITDA Margin Net Profit Net Profit Margin

228

105

75.1%

56.7%

244

132

80.5%

70.8%

190

111

62.7%

59.7%

71.0% -53.9%

158

-33.4%

60.2% -46.2%

186

-29.4%

71.0% -41.8%

156 59.3%

-28.8%

542

716

67.3%

68.6%

618

807

76.7%

77.4%

460

642

57.1%

61.6%

32.0% 30.6% 39.4%

This document has been prepared by the Equity Research Department of Şeker Securities. The information and data used in this report have been obtained from public sources that are thought to be reliable and complete. However, Şeker Securities does not accept responsibility for any errors and omissions. This document should not be construed as a solicitation to buy or sell securities herein. This document is to be distributed to qualified emerging market investors only.

Şeker Yatırım Menkul Degerler A.S. - Buyukdere Cad. No:171 Metrocity A Blok Kat 44-5 SISLI /ISTANBUL Tel: (+90) 212 334 33 33 Pbx, Fax: (+90) 212 334 33 34, [email protected]

Market Watch Monday, May 06, 2013 www.sekeryatirim.com.tr Vakifbank (VAKBN.TI, MP) posted TRY 523mn NI in 1Q13, vs. the consensus estimate of TRY 518mn and our estimate of TRY 501mn. Quarterly NI of TRY 523mn indicates an annual increase of 25%, while it is also up by 16% in quarterly terms. Even though the quarterly figure is the highest in the bank’s history, it would have be much higher still with a more decent asset quality.Quarterly NII of TRY 1,345mn was almost 5% higher than our estimate as the bank recorded a NIM of 5.34%, which is only 14bps lower than the previous quarter. Thanks to more than a 100bps decline in deposit cost, as the bank refrained from competition on that front in 1Q13 with almost 2% lower customer deposits, and a bearable decline of 64bps in lending yields - as well as the deposits, the bank also did not increase its loans as much as its peers – it saw a higher quarterly core spread by 37bps. Quarterly loan growth of 2% was driven by LC loans on a QoQ rise of 3%. The main contributors to growth were mortgages and GPL on 7% and 6% QoQ rises, respectively. The bank funded the quarter via issuing fresh securities and increasing its bank bill book by almost 25%. As well as fresh funds from securities issued, the bank also tapped the money market for more funding. Thanks to the currently accommodative CBT stance, borrowing costs are lower than deposit costs, and hence the bank did not hurt its margins. Both customer and bank deposits were lower QoQ, while the demand deposit ratio was flat at 17%. Meanwhile, Non FI - LDR was up to 113% from 108% of in previous quarter. We think that VAKBN might have given its best quarterly performance in the near term, and that investors might chose to realize their gains, as it is the only bank to have outperformed the BIST-100 by more than 10% YtD. All in all we retain our Marketperform rating for VAKBN. Park Elektrik (PRKME.TI; OP) has disclosed a net profit of TRY 14mn in 1Q13, down by 27.8% QoQ and by 34.6% YoY from TRY 22mn in 1Q12, below our estimate of TRY 24mn and market consensus of TRY 25mn. The difference between our forecast and the realization stemmed mainly from weak operational profitability (especially the lower top-line). Park Elektrik sold 19,851 dmt of concentrated copper in Q1 of 2013, up by 37.1% YoY. On the other hand, recall that the company has not produced cathode copper since 2Q12 (it had sold of 1,600 tons cathode copper in 1Q12. Additionally, average copper prices, which were at USD 8,309/ton in 1Q12 decreased to USD 7,930/ton in 1Q13. Thus, despite increased sales volume, decreasing copper prices negatively impacted its net sales revenues in 1Q13 compared to 1Q12, decreasing 18.7% YoY and 17.4% QoQ to TRY 54mn for the period, also falling below our estimate of TRY 70mn and market consensus of TRY 69mn. Meantime, asphaltite sales fell 17.5% YoY to 61,089 tons in 1Q13 from 74,088 tons in 1Q12 due to the technical halt at Silopi Elektrik. The company obtained 87.9% of its total sales revenue for Q1 of 2013 from copper sales, and the remainder from asphaltite. EBITDA decreased by 57.7% YoY and 43.2% QoQ to TRY 21mn in 1Q13 due to decreased net sales revenue and also the decline in depreciation expenses (TRY 7.9mn in 1Q13, vs TRY 23.1mn in 1Q12). The 1Q13 EBITDA is below our TRY 46mn estimate, and the market consensus of TRY 41mn. Margins were negatively affected by decreasing copper prices and rising additional costs of the transition from underground to open-pit mining in Q1. Meanwhile, the EBITDA margin fell to 38.9% in 1Q13 from 74.8% in 1Q12, while the Gross margin declined to 37.5% in 1Q13 from 52% in 1Q12. On the other hand, net financial gain rose to TRY 4.4mn in 1Q13 from TRY 0.3mn in 1Q12, thanks to its positive bottom-line. Since Park Elektrik’s results in Q1 are below expectations, we foresee the stock being negatively affected in the short term. TRY Million

1Q12

1Q13

YoY

4Q12

QoQ

2011

2012

YoY

Revenues

304

186

-38.8%

262

-29.2%

806

1,043

29.5%

249

129

-48.3%

186

-30.8%

614

806

31.4%

81.9%

69.3%

76.2%

77.3%

Gross Profit Gross Profit Margin EBIT EBIT Margin EBITDA EBITDA Margin Net Profit Net Profit Margin

228

105

75.1%

56.7%

244

132

80.5%

70.8%

190

111

62.7%

59.7%

71.0% -53.9%

158

-33.4%

60.2% -46.2%

186

-29.4%

71.0% -41.8%

156 59.3%

-28.8%

542

716

67.3%

68.6%

618

807

76.7%

77.4%

460

642

57.1%

61.6%

32.0% 30.6% 39.4%

This document has been prepared by the Equity Research Department of Şeker Securities. The information and data used in this report have been obtained from public sources that are thought to be reliable and complete. However, Şeker Securities does not accept responsibility for any errors and omissions. This document should not be construed as a solicitation to buy or sell securities herein. This document is to be distributed to qualified emerging market investors only.

Şeker Yatırım Menkul Degerler A.S. - Buyukdere Cad. No:171 Metrocity A Blok Kat 44-5 SISLI /ISTANBUL Tel: (+90) 212 334 33 33 Pbx, Fax: (+90) 212 334 33 34, [email protected]

Market Watch Monday, May 06, 2013 www.sekeryatirim.com.tr Migros (MGROS.TI; OP) opened a total of 5 Migros stores 9 MigrosJet stores, one 5M store and 2 Tansas stores (total of 17 stored) in Turkey in April 2013. Accordingly, it has 919 stores (888 in Turkey and 31 in abroad) as of the end of April 2013 (Slightly Positive). Türk Telekom’s (TTKOM.TI; MP) General Assembly is to be held on May 28, 2013. Bagfas (BAGFS.TI; N/C) has disclosed a net profit of TRY 1.9mn in 1Q13, down by 85% from TRY 12.7mn in 1Q12. Akfen Holding (AKFEN.TI; N/C) is to distribute an 8.77% (TRY 0.0877) gross cash dividend beginning on May 30, 2013, and indicating a 1.7% dividend yield (Neutral). Garanti Bank (GARAN.TI; OP) is to distribute a 14.20% (TRY 0.1420) cash dividend starting today. Koza Anadolu (KOZAA.TI; OP) has announced that it would not distribute dividends. Alarko Holding (ALARK.TI; NC) has stated that the Tanger-Kentira railway project, undertaken by its subsidiary Alsim Alarko, has been cancelled due to delays in the acknowledgment of sites, and also to falling behind the projected construction schedule. According to daily Vatan, Turkish Metal Union workers are contemplating industrial action due to the failure to reach an agreement on collective wage bargaining. According to the newspaper, there are around 115k related workers in prominent companies such as Ford Otosan (FROTO.TI; MP), Tofas (TOASO.TI; OP), Arcelik (ARCLK.TI; MP), and Turk Traktor (TTRAK.TI; MP). Aksa Energy (AKSEN.TI; OP) will announce its Q1 of 2013 financials today. We expect the company to announce a net profit of TRY 8mn while the market expectation of TRY 14mn net profit.

This document has been prepared by the Equity Research Department of Şeker Securities. The information and data used in this report have been obtained from public sources that are thought to be reliable and complete. However, Şeker Securities does not accept responsibility for any errors and omissions. This document should not be construed as a solicitation to buy or sell securities herein. This document is to be distributed to qualified emerging market investors only.

Şeker Yatırım Menkul Degerler A.S. - Buyukdere Cad. No:171 Metrocity A Blok Kat 44-5 SISLI /ISTANBUL Tel: (+90) 212 334 33 33 Pbx, Fax: (+90) 212 334 33 34, [email protected]