17/05/2010 TEB
Transkript
17/05/2010 TEB
Conference Highlights Net Holding Potential asset sales could crystallize value 17 May 2010 Not Rated Conglomerate NTHOL ($) • Inter Limousine: Net Holding also operates in limousine and luxury car rental services with chauffeurs. They are also operating some parking lots in Istanbul. Moreover, recently they inaugurated operational fleet rental for small and mid-size enterprises. According to the management, existing car park value stands at USD4mn with its strong brand name recognition and strategic position in niche market segment. 2) Duty Free Operations: Net Holding has an Italian partner in duty free operations and the consortium name is Net/Nuance. The Group has signed a new 17-year contract in June 2007 for the exclusive operation of all duty free shops in Antalya Airport Terminals 1, 2, and CIP and established Net-Urart JV for the operation of these duty free shops. Net Holding has a 45% stake in Net-Urart where the Italian Nuance Group has a 55% stake. Note that Nuance Group is the world’s largest airport retailer and number one in duty free operations globally. 50% of the Nuance Group is owned by Stefanel and the remaining 50% by Gruppo PAM. • Terminal 1 and CIP sections have become operational in Sept 2007. • Terminal 2 has become operational in Sept 2009; hence in 2009 financials of Net Holding, we see the positive impact only in one quarter. However, the significant positive impact coming from the duty free operations in Terminal 2 will be recorded in full year 2010 financials. Note that 60% of the total potential comes from Terminal 2, while 40% is coming from Terminal 1. The total sales area in Antalya Terminals will reach c.6,500 sqm. Apr-10 May-10 Mar-10 Jan-10 Feb-10 Dec-09 Oct-09 Jul-09 Nov-09 They have sold Bazaar 54 headquarter in 2009; but they still own 5 buildings (Istanbul, Sultankoy, Denizli, Antalya and Nevsehir) at 35K sqm sales area on 219K sqm land at strategic locations in Turkey. Excluding the inventory value, the assets are valued at conservative USD50mn according to the management. On top of the buildings’ value, the most valuable inventory is gold in the stock. The company has USD15mn bulk gold (with 2% discount) plus USD10mn jewellery and carpet. The existing inventory is expected to be depleted in 2010. Sep-09 • Aug-09 1) Touristic Retail: Net Holding is operating in an innovative, largescale and professionally managed touristic shopping center concept. They sell hand-made carpets, jewellery, leather goods and souvenirs. 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Jun-09 Net Holding has 4 main operation lines: 1) Touristic Retail, 2) Duty Free, 3) Hotel Management, and 4) Real Estate Development. ISE 100 Relative (RHS) 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.20 May-09 Net Holding’s CFO Orlando Carlo Calumeno attended our conference in London on May 11th, 2010. The major highlights: Stock Data (as of May 17, 2010) Bloomberg NTHOL.TI Close (TL) 0.94 Mkt cap (TLmn) 318 Free float (%) 59.02% Asyanet Tourism 19.08% Net Tourism 21.65% Key Owners International Ownership in Free Float* (%) 1.92 Shares Outstanding 338,442,000 Avg. 6m Daily Vol. ($m) 7.79 ISE-100 (TRL) 55,442 *Matriks data Performance 1M 3M 12M Absolute (%) -0.4 47.3 123.9 Relative (%) 8.5 39.3 32.0 Key Figures 2007 2008 2009 Revenue (TLmn) 66.6 70.4 69.8 Gross Profit 19.3 24.4 25.1 -12.7 -66.2 -40.2 EBITDA -3.4 -55.8 -28.7 Net Income/(Loss) 76.5 -16.8 -4.0 28.9% 34.6% 36.0% Operating Profit Gross margin Didem Ozatalar didem.ozatalar@teb.com.tr +90 (216) 636 45 29 TEB Investment Institutional Sales Direct: +90 (216) 636 45 05 Fax: +90 (216) 636 61 00 Mail: teb.icm@teb.com.tr tebicm@bloomberg.net 2H 1H • Net Holding consolidates the duty free business by equity pick-up hence recognizes dividend income below the operational line in the other income figure. • Net Holding is expected to generate total free cash flow of EUR255mn over the 17-year concession period. In 2010, on management’s conservative assumptions, Net Holding expects EUR15mn dividend income from duty free operations. Tourist arrivals to Antalya are up by 25% YoY; hence the company’s budget figures are so far achievable. • The consortium expects 150% YoY growth in the total turnover of the business in 2010 and the robust sustainable growth is anticipated to continue over the concession period of 17-years. • Key highligts on Antalya Airport: Recently, the arrival of passengers from Russia has drastically changed the profile of Antalya Airport as Antalya has become the second prime destination of vacation and summer residences for Russian tourists. Note that Russian tourists’ share in total spending in departures has increased to more than 35% from 20% levels. Antalya Airport is expected to attract c.35mn tourists by 2024 compared to current 15mn level. • Dalaman and Bodrum Airport tenders: Net Holding will bid for the tenders of duty free operations in Dalaman and Bodrum Airports’ which are expected to be held in Sept 2010 and 2011, respectively. 3) Hotel Management: Net Holding’s subsidiary Net Turizm owns Merit Nicosia (Lefkosa), and Net Holding directly owns Merit Crystal Cove, Merit Cyprus Garden and Merit Green Karmi in the Turkish Republic of Northern Cyprus (TRNC). Moreover, the company has 2 more hotels in Turkey. Total real estate value is estimated at USD250mn according to the management under current situation. Net Holding, 17 May 2010 • Net Holding is considered to be the unique Cyprus play in the ISE with potential to develop further going forward. Therefore Net Holding allows investors to capitalize on possible full integration and/or possibility of start of direct flights to TRNC. • Currently, Net Holding has a dominant presence on the TRNC with its 4 hotels at c.4mn sqm of land with c. 4K beds capacity. There are also 3 casinos in Cyprus placed in these hotels which are owned by Net Holding. Total casino income is expected to be 15-20% higher than 2009. Moreover the Group has 2 duty free shops in Ercan Airport. Total net income from the segment is expected to stand at USD12mn in 2010 whilst it stood at USD10mn in 2009. • Potential investors to acquire Merit Lefkosa: Russian investors are especially interested in acquisitions of hotels and casino complexes in Cyprus as the casinos in their country have been shut down in 2009. Net Group’s Merit Lefkosa which has a 240 bed capacity at USD45mn appraisal value by TSKB is a direct target by those Russian investors among others. Note that Net Group’s asking price for Merit Lefkosa hotel and casino complex stands at USD80mn. The management plans to complete Merit Afrodit and Merit Mare Monte (Kyrenia) with the potential cash inflow coming from the sale of Merit Lefkosa. • Net Holding’s management plans to merge Net Turizm (other listed company of the Group) into Net Holding and complete the transaction in 3Q 2010 to eliminate the cross ownership. Later, they plan to separate gaming & leisure business from Net Holding. Currently, Gulf countries are considering long-term relationship with Net Holding. According to the 2 management, following the disposal of casino & leisure from Net Holding, gulf countries are likely to be interested in investing in Net Holding. 4) Real Estate Development: Net Holding has several real estate development projects. The Group has large and diversified real estate portfolio waiting to be unfolded. According to the management, total real estate portfolio is valued at USD350mn. • Bodrum-Milas Project: The place of the project is 4-hour flying distance covering all of Europe, Scandinavian countries, all of Russia, Gulf countries and mid-Africa. Direct scheduled and charter flights available to Bodrum International Airport through all major carriers. The 9.2mn sqm land is located 8km from the Bodrum International Airport, adjacent to Bodrum Highway. The slope of the land offers a sea view from all points, surrounded by the Aegean Sea and a breathtaking channel uniting with natural lagoon. The project is split into two sites, namely site A&B, covering respectively 4.75mn sqm and 4.45mn sqm. The project is considered to be the widest one-piece project not only in Turkey but also in the EMEA region. It includes golf & country club, hotels, villas, apart units, commercial areas, social center, recreational – sports & reserve green areas. • Net Holding, 17 May 2010 There are several possibilities on Bodrum Project. These are: 1) Agaoglu Insaat could start sales on the project and Net Holding begins to collect 19% of the turnover. 2) Agaoglu Insaat could consider selling its stake in the project and the new partner could begin the construction and sales. 3) Agaoglu Insaat and Net Holding together could sell the project to a third party and cash injection could occur earlier. • Baku-Azerbaijan: Net Holding has a construction permit for 38K sqm land in the downtown area of Baku which could be used to build residential flats, offices and shopping malls. Moreover, the Group has also acquired 30K sqm land for development which is located close to Baku Airport. Net Holding has already been operational in Baku since 1994 with a travel agency and Baku Entertainment Center which is the leading leisure, restaurant and entertainment company of Baku. Net Holding is about to rent its entertainment center to an international company for an annual rent of USD1.5mn (monthly USD125,000). According to an expertise of a company based in Azerbaijan, Net Holding’s total property in Baku is valued at USD75.5mn. • Bomonti land, Istanbul: Net Tourism has an 18K sqm land in Bomonti, Istanbul where lately important projects are developed for residences, office buildings and hotels. The land is valued at USD2K-3K per sqm. Net Tourism has won the court case regarding this land and currently is waiting for the Appeal Hearing where the file is expected to be resolved. 3 Summary: All in all, Net Holding stands as the Turkey’s tourism conglomerate with outstanding tourism operations and precious real estate portfolio, values of which are expected to be unfolded in the near term. The Group’s efforts to restructure the holding structure by write-offs, asset sales, elimination of the cross ownerships, and mergers to simplify the operational structure and targets to bid for upcoming National Lottery and duty free tenders could be the catalysts and should enhance the Group’s corporate governance and transparency going forward. Note that the Group plans to finalize the major potential asset sales in 2010. Moreover, being a unique tourism and real estate conglomerate, Net Holding’s stock will be included in the MSCI small cap index starting from May 26th. All in all, the aforementioned positive developments coupled with potential asset sales which are likely to be announced in the near-term could narrow the NAV discount. Moreover, Net Holding plans to pay cash dividends at 10% yields in 2011. Current NAV Valuation Methodology Net Holding NAV Table 17/05/2010 Assets % Stake Net Turizm * (NTTUR) 41.8% Market Cap. 136 57 Antalya Duty Free Business 45.0% @ 2010E P/E of ISE-100 225 101 Real Estates Bodrum-Milas Real Estate Development Project Land in Baku-Azerbaijan Bazaar 54 Inter Limousine Assets (hotels) in Cyprus and Turkey 19.0% 100.0% 100.0% 100.0% 100.0% Estimated Value of the Project (@ 50% discount) Expertise Value (@ 30% discount) Estimated Asset Value (@ 30% discount) Estimated Asset Value Appraisal Value (@ 30% discount) 1,100 53 53 4 175 209 53 53 4 175 Total NAV of Listed Stakes NAV of Unlisted Stakes Net Cash (Debt) - Holding only Total NAV Market Cap. Premium / (Discount) % Value (USDmn) Stake Value (USDmn) 647 57 590 -34 614 209 -66% * listed company Source: Company data Net Holding, 17 May 2010 4 TEB Investment Macro Estimates TRY/US$ (average; CB Bid rate) TRY/US$ (end of period;CB Bid rate) O/N borrowing rate (end of period; %) CPI (annual-end of period; %) GDP growth rate (%) 2008 1.2944 1.5218 15.0 10.1 0.7 2009 1.5469 1.4873 6.5 6.5 -4.7 2010E 1.5424 1.5915 9.3 7.5 3.9 2011E 1.6335 1.6762 12.3 8.0 3.9 TEB Investment: Stock Rating Definitions TEB Rating Definition Outperform The stock's return including dividends is expected to be higher than the ISE-100 index over the next 12 months. 1 year Marketperform The stock's return including dividends is expected to be similar to the ISE-100 index over the next 12 months. 1 year Underperform The stock's return including dividends is expected to be less than the ISE-100 index over the next 12 months. 1 year Net Holding, 17 May 2010 Investment Horizon 5 TEB Investment TEB Kampüs D Blok Saray Mahallesi Küçüksu Caddesi Sokullu Sokak No:7 34768 Ümraniye / İstanbul Phone : +90 (216) 636 44 44 Fax: +90 (0216) 631 44 00 Trading Bulent Levi Director bulent.levi@teb.com.tr +90 (216) 636 45 00 Kurt Atay Manager kurt.atay@teb.com.tr +90 (216) 636 45 27 Inci Kalkavan Assistant Manager inci.kalkavan@teb.com.tr +90 (216) 636 45 15 +90 (216) 636 45 39 Institutional Sales Ali Kerim Akkoyunlu Assistant General Manager ali.akkoyunlu@teb.com.tr Tunc Ural Director tunc.ural@teb.com.tr +90 (216) 636 45 06 Hasan Sevket Colakoglu Director hasansevket.colakoglu@teb.com.tr +90 (216) 636 45 09 Henza Tukel Associate henza.tukel@teb.com.tr +90 (216) 636 45 18 Research Selim Yazici Co-Head of Research, Banks selim.yazici@teb.com.tr +90 (216) 636 45 33 Fazil Zobu Co-Head of Research, Strategy fazil.zobu@teb.com.tr +90 (216) 636 45 35 Kenan Cosguner Logistics & Aviation, Food & Beverage, Fertilizers, Media kenan.cosguner@teb.com.tr +90 (216) 636 45 31 Didem Ozatalar Automotive, Retail, Durables, Conglomerates didem.ozatalar@teb.com.tr +90 (216) 636 45 29 Ozkan Ozkaynak Quantitative Research ozkan.ozkaynak@teb.com.tr +90 (216) 636 45 30 Cagdas Dogan Banks, Strategy cagdas.dogan@teb.com..tr +90 (216) 636 45 38 Ozgur Guler Telecoms, Cement ozgur.guler@teb.com..tr +90 (216) 636 45 32 The information and opinions in this report were prepared by TEB Investment solely for information purposes, based on information available as of the date of this report. TEB Investment does not undertake to advise you of changes in the information or opinions set forth herein subsequent to such date. TEB Investment and entities or persons associated with it may make markets or may trade heavily in the securities of companies mentioned in this report. TEB Investment and entities or persons associated with it may have positions in and effect transactions in securities of companies mentioned in this report and may also perform or seek to perform investment banking services for those companies. TEB Investment and/or their affiliates or their employees may, from time to time, have a long or short position in any one of the securities mentioned herein and may buy or sell those securities or options thereon either for its own account or on behalf of its clients. The investments discussed in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and in reliance on an offering circular or prospectus approved by the issuer, their own investigations and the advice of such independent advisers as they deem appropriate. Investors should not make their investment decisions on the basis of this report and construe the contents of this report as legal, tax or financial advice. Where an investment is denominated in a currency other than the investor’s currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. Past performance is not indicative of future results. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may increase or decrease against the interest of investors resulting in the loss of invested capital. Investors should have the financial ability and be willing to bear the risks associated with the investments discussed in this report. This report is based on publicly available information and other sources which TEB Investment considers to be reliable. TEB Investment does not make any representations or warranties, express or implied, for the accuracy, completeness or fairness of any such information or any estimates, conclusions or opinions based thereon, and does not accept any liability or responsibility whatsoever, including without limitation liability for any direct/indirect damages, financial/moral loss suffered by any party. This report does not constitute an offer to sell or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. This report reflects the personal views of the analyst who prepared it regarding the subject securities and issuer. No part of the analyst’s compensation, was, is, or will be directly or indirectly related to the specific recommendations or views in this report. This report is not intended to be distributed in the United States except when distributed to major U.S. institutional investors as defined in Rule 15a6 of the United States Exchange Act of 1934, as amended. Any US Person (as defined in the US Securities Act of 1933, as amended and regulations promulgated thereby) that accepts this report thereby certifies that it is a major U.S. institutional investor. The distribution of this report in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. By accepting this report you acknowledge and agree to be bound by the foregoing instructions. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of TEB Investment. Notice Published in accordance with “Communiqué Regarding the Principles on Investment Consultancy Activities and the Investment Consultancy Institutions” Series: V, No: 55 issued by the Capital Markets Board The investment related information, commentary and recommendations contained herein do not constitute investment consultancy services. Investment consultancy services are provided in accordance with investment consultancy agreements executed between investors and brokerage companies or portfolio management companies or non-deposit accepting banks. The commentary and recommendations contained herein are based on the personal views of the persons who have made such commentary and recommendations. These views may not conform to your financial standing or to your risk and return preferences. Therefore, investment decisions based solely on the information provided herein may fail to produce results in accordance with your expectations.