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February 22, 2019 www.intellinews.com I Page 3
said that the number of homes sold in Turkey declined by 25% y/y in January with mortgage sales shrinking 77% y/y. Also on February 18, the central bank said that home prices in Turkey rose by a limited 9.69% y/y in December versus a CPI inflation of 20.3% y/y.
On February 15, Bespalov said in a note on carmaker Tofas’ TRY1.6 per share dividend an- nouncement, which implies a 9.5% yield, that VTB reiterated Buy advice with a 12-month target price of TRY30.
Tacirler Invest also maintains its BUY rating for Tofas, Ece Mandaci of Istanbul-based brokerage house said on February 19 in a research note.
On February 15, Bespalov said in an earning release on Turkish auto retailer Dogus Otomotiv entitled “4Q18; positive, but leverage and outlook remain a concern” that VTB reiterated its Hold advice on Dogus with a 12-month target price of TRY5.50.
Telecoms and retail cut to hold
On February 21, Ivan Kim of VTB Capital said in a research note on Turkey’s largest mobile operator Turkcell that VTB cut Turkcell to Hold from Buy, given a 12-month target price of TRY16.
Post the 48% dollar-terms gain since the begin- ning of 3Q18 (86% from early September), VTB believes that Turkcell might take a breather.
Turkcell is facing a more challenging year, as the 4Q18 slowdown points to downside risks to mo- bile service revenue performance in 2019, Kim said, adding that Turkcell’s balance sheet remains strong, with the net long FX position post the Fin- tur sale.
Turkcell said on February 20 in a bourse filing that its net income rose by a limited 2% y/y to TRY2bn in 2018.
On February 21, Reuters reported that initial price guidance on Turk Telekom’s six-year Eurobond
issue stood at 7.375%. On February 14, Turkey’s largest telco said that its high-level management would carry out investor meetings arranged by mandated lenders Bank of America Merrill Lynch, Citi, ING, MUFG and Societe Generale in London, Boston and New York, starting from February 15 to issue $500mn worth of eurobonds with maturi- ties between five and seven years.
Currency rally running out of steam
The Russian investment bank expects a gradual weakening in Turkish lira toward 6.5 against the US dollar by end-2019. The latest central bank survey predicted Turkish lira to stand at 6.2 against the dollar at end-2019 while Bloomberg’s consensus stands at 6.1.
On February 19, Jason Tuvey of Capital Econom- ics said in a research note: “The improvement in Turkey’s current account position means the lira no longer looks fundamentally misaligned, but the recent period of stability won’t last. While
a repeat of last year’s currency crisis is unlikely, the lira will depreciate and it remains suscepti- ble to a fresh bout of global risk aversion. This is a key reason why we think that interest rates won’t be lowered as far as the markets are pricing in.”
VTB also does not expect a major lira sell-off like in August 2018. However, it expects geopolitical tension to increase further in 2019.
HSBC Holdings Plc earned about $120mn in
a single day during Turkey’s financial crisis
in August as it profited from the collapse of
the lira, Bloomberg reported on February 19. However, the lira’s collapse over the summer hit trading profits at some investment banks with exposure to the country, such as Barclays Plc.
Capital Economics expects the lira to weaken to 6.25 against the US dollar by end-2019. This pri- marily reflects the large inflation differential be- tween Turkey and the US, which means the nomi- nal exchange rate needs to weaken to prevent the real exchange rate from appreciating.