20180902-法国巴黎银行-Turkish_Corporates_Update_8页_627kb

Turkish Corporates Update Summary

Core Content

This document provides an analysis of the impact of the sharp Turkish Lira (TRY) depreciation on the balance sheets and operations of Turkish corporate issuers. It highlights the sensitivity of certain companies to foreign exchange (FX) volatility and offers investment recommendations based on the exposure and performance of these firms.

Main Views

Balance Sheet Impact

The TRY depreciation has led to significant non-cash FX losses and gains for companies based on their FX positions. The following are the key findings:

• Positive Impact:

  • MERSIN Liman (MERSIN Corp): Uses US$ as its functional currency, and thus is not affected by translation gains/losses. It has a strong FX-linked free cash flow profile.
  • SISE Cam (SISETI Corp): Has the largest Long FX position, recording a non-cash FX gain of c.TL700mn, which is about 5% of its equity and 40% of its LTM net income.
  • Koc Holding (KCHOL Corp): Has a minimal FX exposure and no significant impact on its balance sheet.
  • Turkcell (TCELLT Corp): Has a Short FX position but fully hedges it, resulting in negligible exposure.

• Negative Impact:

  • Turk Telekom (TURKTI Corp): Has the largest open Short FX position (c.TL12.3bn), leading to a quarterly FX loss that could almost wipe out its equity.
  • Coca Cola Icecek (CCOLAT Corp): Has a Short FX position of about 29% of its equity, resulting in a FX loss of 10% of equity.
  • Anadolu Efes (AEFES Corp): Has a Short FX position of 10% of its equity, with a FX loss of 3% of equity.
  • Arcelik (ACKAF Corp): Has a Short FX position, with a FX loss of 2% of equity.
  • Petkim (PETKM Corp): Has a Short FX position, with a FX loss of 3% of equity.

Operational Impact

The FX depreciation has created a mismatch between FX-linked revenues and TRY-based costs, affecting margins and performance:

• Positive Impact:

  • MERSIN Liman (MERSIN Corp): Revenue is closely tied to Turkey's trade volumes and is fully FX-linked, giving it a natural advantage.
  • Tupras (TUPRST Corp): As the only refinery in Turkey, has strong pricing power linked to international oil prices. Operational costs are mostly in TRY, which could reduce costs and improve margins.
  • PETKM (PETKM Corp): Similar to TUPRST, it is the only large petrochemicals producer in Turkey and has a strong product range and low sensitivity to domestic demand.
  • Arcelik (ACKAF Corp) and Koc Holding (KCHOL Corp): Both have high FX-driven revenues, which benefit from a weaker TRY, leading to better margins and top-line growth.

• Negative Impact:

  • Turk Telekom (TURKTI Corp): Has predominantly domestic revenues and is highly sensitive to FX depreciation.
  • Turkcell (TCELLT Corp): Despite a Short FX position, it fully hedges its exposure, so the impact is minimal.
  • Coca Cola Icecek (CCOLAT Corp) and Anadolu Efes (AEFES Corp): Both have significant FX exposure and have taken steps to hedge, but still face FX losses due to the depreciation.

Key Investment Ideas

• Recommended Buys:

  • PETKM 5.875% 23 @ 86.5 / 9.7% / 685 z-spread
  • MERSIN 5.875% 20 @ 98 / 7% / 417 z-spread

• Recommended Sells:

  • AEFES 3.375% 22 @ 87 / 7% / 416 z-spread

• Existing Trade Ideas:

  • Buy TUPRAS 4.5% 24 vs Sell CCOLAT 4.215% 24 initiated on 5 July

Summary Table (Table 1)

Note: MERSIN's functional currency is US$, and it reports no FX gain due to translation. Its last reporting date was 2017.

Conclusion

The analysis emphasizes that companies with FX-linked revenues and lower domestic exposure are more resilient to the TRY depreciation. Investors are advised to shift from those with significant Short FX positions to those with strong FX-linked revenue streams and minimal exposure to the domestic currency. The document also highlights the importance of hedging strategies in mitigating FX risk.