Yazicilar Holding

Equity / Large Cap. / Conglomerate
03.07.2013
Yazicilar Holding
Initiating Coverage
Bloomberg: YAZIC TI
OUTPERFORM
Reuters: YAZIC IS
Upside Potential
Initiating with an OUTPERFORM and a 12M TP of TL31.6
Despite the recent run outpacing the index by 38% in last three months, the
stock still offers 27% upside potential.
Energy investments could be potential catalysts. Yazicilar Holding has
two on-going energy investments, namely Aslancik and Paravani HEPPs,
and one project in the development stage, Gerze thermal power plant.
We incorporated Aslancik and Paravani HEPPs into our valuation.
Aslancik HEPP has 120MW installed capacity, while Paravani HEPP in
Georgia has 90MW installed capacity. We expect the plants to generate
US$46mn EBITDA and US$35mn positive free cash flow in total in 2014.
Any positive news flow regarding the Gerze TPP investment should
reflect positively on the stock price. The major investment in energy will
be Gerze imported type coal PP with US$1.7bn investment. The plant will
have 1,200MW installed and 8.4bnKWh generation capacity. We roughly
estimate US$265mn annual EBITDA, and calculated US$870mn NPV for
the project, creating 10pp additional upside potential for the Holding. Since
the Environmental Impact Assessment report for the project is not received,
we did not incorporate it into our valuation.
Successful divesture of Alternatifbank. AEH has signed an agreement to
divest its controlling stake at Alternatifbank back in March 2013 at 2x P/B
multiple. We calculated Anadolu Endustri Holding to receive ca.US$370mn
from the stake sale based on 2012YE financial statements.
Stock Data
TL
US$
Price at 02 07 2013
24.85
12.88
12-Month Target Price
31.60
15.77
Mcap (mn)
3,976
2,065
Float Mcap (mn)
1
11.2
6.0
Market Data
TL
BIST 100
76,439
US$ Spot Rate
1.925
US$ 12-Month Forw ard
1.9400
Price Performance (%) 1 Mn
TL
US$
Relative to BIST-100
-9
-11
3
3 Mn
12 Mn
27
19
38
109
96
69
Price / Relative Price
15.0
Please refer to important disclaimer at the end of this report.
25.25
Avg.Daily Volume (3M, mn)
The NAV discount of YAZIC has narrowed by 20pp YtD compared to
2pp average compression for its peers. The stock currently trades at 33%
discount, still higher than its peers’ average of 27%.
Major risks... Deterioration in financing conditions may have an adverse
impact on Group’s future growth plans. Possible new restrictions or tax
increases regarding the alcoholic beverages both in Turkey and Russia put
downward risk on its main asset AEFES, making up 74% of the NAV.
371
160 mn
Free Float (%)
30.0
The valuation gap between Anadolu Efes and Yazicilar has
significantly narrowed. Anadolu Efes is a good proxy for Yazicilar Holding
as it comprises 74% of the NAV of the latter. Therefore, Yazicilar had been
perceived as a cheaper way to get exposure to Anadolu Efes. However, the
current market value of the 28% stake in AEFES is now only 10% higher
from Yazicilar’s current market value, whereas it had been at 45% premium
at the beginning of the year, a 35pp drop. We think unlisted investments,
especially in energy, are more in investors’ focus now.
714
No. of Shares Outstanding
Share purchases by KY Trust. The controlling shareholder of Yazicilar, KY
Trust, has purchased 217k YAZIC shares in June (ca.0.5% of the free float)
at an average price of TL24.5 for a total consideration of ca.TL5.3mn, which
gave a positive signal to the market.
The complicated structure has been over penalized. The three layer
structure of the Group is the main reason behind the higher discount.
However, we believe the structure of Yazicilar Holding and the decision
taking mechanism is very well established by Kamil Yazici to ensure the
continuity of the professional management beyond his life. Moreover, the
Group has an excellent track record of management and corporate
governance, therefore, we think the Holding is over penalized by investors.
27%
TL
Relative
25.0
150
20.0
100
10.0
5.0
200
50
YAZIC
Relative to BIST 100
0.0
01-12 05-12 09-12 01-13 05-13
52 Week Range (Close TL)
19.80
0
28.20
Mustafa Kucukmeral
[email protected]
+90 212 350 25 16
Asli Ozata Kumbaraci
[email protected]
+90 212 350 25 26
Yazicilar Holding
Investment
Positives
Energy investments could be the potential catalysts. Anadolu Group strategically targets energy
sector to further diversify its portfolio. The current energy projects Gerze, Aslancik and Georgia
have a total capacity of 1,410MW and total investment budget of US$2.1bn.
Environmental Impact
Assessment report expected to be received
i) Aslancik HEPP will be completed in 3Q13. Aslancik hydro-energy plant in Black Sea region will
be operated by a consortium formed by AEH, Dogus Holding and Dogan Holding. The plant has
120MW installed and 418mnKWh generation capacity. AEH holds 33% stake (YAZIC has 22%
indirect stake). The total investment for this project is US$230mn. We forecast the project to
generate US$34mn EBITDA and US$26mn positive cash flow in 2014.
ii) Paravani HEPP will be completed in 1H14. AEH also develops 90MW HEPP, Paravani,
(YAZIC holds 61.2% indirect stake) located in Georgia with a total investment of US$175mn. The
plant has 409mnKWh generation capacity. We estimate the project to generate US$12mn EBITDA
and US$9mn positive cash flow in 2H14.
iii) Gerze thermal power plant will be the major investment. Gerze imported coal type PP with
1,200MW installed capacity, located in Black Sea region in Turkey (Sinop-Gerze), is in the
development stage. A 49-year license has been obtained back in 2008. The approval of
Environmental Impact Assessment report (EIA), which the Group applied back in 2011, will be an
important milestone for the project. The Group will apply for electricity production license afterwards.
the HEPPs to generate
US$46mn EBITDA and
US$35mn positive free
cash flow in 2014
AEH to receive
ca.US$370mn from the
stake sale at Abank
We did not include the project into our valuation since the EIA report is not obtained. However, we
roughly forecast the project to produce US$265mn annual EBITDA, when fully operational and
calculated US$870mn NPV for the project. Had we added the project to our NAV, the upside
potential would have been 10pp higher. The investment for this project will be realized through
Anadolu Endustri Holding, yet we assume AEH to form a 50-50% JV (in this case YAZIC to hold
34% stake). The total investment is estimated at US$1.7bn and will be financed via 70/30% debt to
equity ratio. Accordingly, Anadolu Group needs to inject US$255mn equity for the project assuming
50% stake. Given the expected cash inflow from the stake sale at Abank, we do not expect the
Anadolu Endustri Holding to face any difficulty to finance the equity portion of the project, hence, do
not expect Yazicilar to raise capital. Apart from that, Yazicilar Holding also carries US$29mn cash
position on its balance sheet as of 1Q13.
Successful divesture of Alternatifbank. Anadolu Group Companies and Commercial Bank of
Qatar have signed an agreement for the transfer of Anadolu Group's controlling stake in
Alternatifbank (Abank) back in March 2013. We calculated Anadolu Endustri Holding to receive
ca.US$370mn from the stake sale based on 2012 year-end financial statements. The transaction
price will be calculated based on 2x P/B (total equity excluding minority interest) multiple based on
audited IFRS financials of Abank as of 2Q13. The proceeds will possibly be used for new
investments, especially in energy. Following the completion of the deal, Yazicilar’s indirect stake will
be reduced to 17% from current 61%.
Any potential acquisition or merger may create additional upside. The Group has plans to
acquire new beer brands outside Turkey with a budget up to US$1bn through Anadolu Efes.
Anadolu Efes currently has 5 plants in Turkey, 8 plants in Russia, 2 plants in Kazakhstan and one
plant each in Moldova, Ukraine and Georgia. The strategy to grow abroad is quite understandable
given an increasingly challenging outlook for the local beer sector following the successive
increases in excise duties and unfavorable regulatory changes.
A cheaper way to invest into the defensive beverage stocks. The largest asset in the portfolio
capturing 74% share in the NAV, Anadolu Efes, is the leader of the Turkish beer market with its
78% share and holds 2th position in Russia, and also has 50.3% stake in Coca-Cola Icecek.
Therefore, Yazicilar may be seen as an alternative way to get a regional exposure to the beverage
market. Yet, the Holding is no longer trading at a significant discount to its stake at AEFES.
Yazicilar Holding is a consistent dividend payer. Thanks to the defensive nature of its main
asset Anadolu Efes, Yazicilar Holding is able to pay a cash dividend even during crises times, such
as 2009 and 2010. The Holding received TL69mn and TL68mn dividends in last two years, mainly
coming from Anadolu Efes, while distributed TL40mn gross cash dividends each year to
shareholders corresponding to 2.1% and 0.9% dividend yield, respectively.
2
Yazicilar Holding
Investment
Negatives
The NAV discount significantly narrowed YtD. Yazicilar Holding’s NAV discount has currently
narrowed to 33% from 53% in the beginning of the year. Yet, it is still higher than the average NAV
discount of 27% for holding companies under our coverage. Moreover, the current discount is much
lower than the average of last twelve month, limiting further upside from narrowing discount.
The structure of the Group looks complicated. The three layer structure of the Group looks
complicated as Yazicilar Holding (68%) and Ozilhan Yatirim (32%) control their assets mainly
through AEH. We believe Yazicilar as a multi-layer holding company is penalized by investors, since
the discounts multiply over the control chain. Moreover, Yazicilar Holding as a financial holding, the
one which sits higher in the control chain, is the most penalized. However, we believe the Group is
over penalized considering the decision making mechanism and the good management track
record.
the law regulating the
usage of alcoholic bevThe outlook for the Holding’s major asset, Anadolu Efes, is negative. The outlook for Anadolu
erages has been approved by the President Efes does not look good in 2013, and possibly even in 2014 due to the regulatory concerns both in
Russia and Turkey. Tax increases and implementation of strict regulations in Turkey and Russia
signal that 2013 will be tough for Anadolu Efes. Moreover, the rising competition in Turkey limits the
upside potential in our estimates. As a result of new regulations, Turkish beer market is expected to
be flat and Russian beer market volume is expected to decline by 9.5% in 2013. Note that Anadolu
full realization of the
Efes generates 85% of its sales from these two markets. Nevertheless, our valuation already
dark market environincorporates these negatives and AEFES now offers 21% upside potential in US$ terms following
ment, higher excise tax- 12% decrease in share price in last three months.
es to dent Russian operNo controlling stakes at major subsidiaries. Yazicilar Holding does not hold controlling stakes in
ations
majority of its listed subsidiaries. The Group has 28% stake at Anadolu Efes, for instance, which
constitutes 74% of the Company’s current NAV. Following the share transfer, Alternatifbank, the
second largest contributor to NAV, will be a non-controlled asset. It should be noted large part of
listed conglomerates have some control at most of their assets unlike Yazicilar.
Low dividend income translates in low yield. Although the Company distributed around 60% of
its dividend income, the yield is quite low changing between 2.1% and 0.9% in last three years as
Anadolu Efes is being the main source of dividend income. We expect the dividend yield stay close
to 1% going forward.
Stake sale by family members. Some family members registered shares in the past to be sold at
the market, which may create an overhang on the stock. However, we do not see a significant risk
as the family members tend to hold their shares.
Transparency. Although we are comfortable from the corporate governance angle, there is always
transparency issues with holding company structures like Yazicilar. For instance financial indicators
(except for the top-line) for unlisted subsidiaries and standalone holding company are not provided
by the Company. However, it should be noted that the Group has been known with its excellent
track record of management and corporate governance.
3
Yazicilar Holding
We do not cover Yazicilar Holding’s listed participations except Anadolu Efes. Anadolu Efes
accounting for around 74% of our target NAV is the only participation of Yazicilar Holding that is in
our coverage universe. Our valuation on other listed participations is based on current market
values (Mcap * 1+CoE). Among unlisted participations, we value energy investments using DCF,
Celik Motor via sector average market multiples and Ana Gida with book value.
Valuation
Summary
We attached a 30% discretionary conglomerate discount in arriving to our target value. The
discounts we apply ranges from 10% to 25% to holding companies in our coverage universe.
The main reasons for relatively higher discount applied to Yazicilar are; complicated three
layer shareholder structure of the Group, lack of control premium for major assets in the
portfolio, limited dividend income from subsidiaries, and asset composition (asset quality,
asset scarcity, diversification, as well as dependency on a single asset).
i) the three layer structure of the Group is one of the main reasons behind the high NAV
discount. We believe the Group as a multi-layer holding company is penalized by investors, since
the discounts multiply over the control chain. Moreover, Yazicilar Holding as a financial holding, the
one which sits higher in the control chain, is the most penalized. However, we believe the Group is
over penalized considering its decision making mechanism and the good track record of its
professional management team.
ii) no controlling stakes at major subsidiaries causes trading at discount. Yazicilar Holding
does not hold controlling stakes in many of its subsidiaries. The Group has 28% stake at Anadolu
Efes, for instance, which constitutes 74% of the Company’s current NAV. The Holding will also
loose the control on Alternatifbank following the completion of the deal. Anadolu Isuzu, Ana Gida,
Aslancik Elektrik are other non-controlling assets. Non-controlling assets comprises 79% of its
current NAV, one of the highest among conglomerates under our coverage.
iii) low dividend income from subsidiaries. The Holding only receives dividend from its direct
stakes at AEFES and ASUZU and does not receive any dividend from other Anadolu Group
Companies resulting in low dividend yield.
Figure 1: Yazicilar Holding NAV Breakdown (US$ mn)
Current
Ticker
YAZIC's
Stake
Anadolu Efes
AEFES
28%
Current Mcap
8,182
2,263
74%
Target Mcap
9,882
2,733
76%
Alternatifbank
ALNTF
59%
Current Mcap
591
349
11%
2 x 2012 P/B value
613
362
10%
Anadolu Isuzu
ASUZU
38%
Current Mcap
335
126
4%
Current Mcap * (1+CoE)
376
141
4%
68%
Peer Comparison
211
143
5%
Peer Comparison
211
143
4%
260
101
3%
56
21
1%
Celik Motor
Adel Kalemcilik
ADEL
Valuation Method
Current YAZIC's Weight
Value
Stake in NAV
Target
Business
Segm ent/Com pany
Valuation Method
Target
Mcap
YAZIC's Weight
Stake in NAV
39%
Current Mcap
232
90
3%
Current Mcap * (1+CoE)
Ana Gida
38%
1Q13 Book Value
56
21
1%
1Q13 Book Value
Aslancık HEPP
22%
Realized Capex
64
14
0%
DCF
102
23
1%
Paravani HEPP
61%
Realized Capex
55
34
1%
DCF
83
51
1%
Total Value from Participations
3,040
100%
Total Value from Participations
3,575
100%
Listed
2,828
93%
Listed
3,337
93%
212
7%
Unlisted
238
7%
29
1%
Holding Only Net Cash (Debt)
29
1%
Unlisted
Holding Only Net Cash (Debt)
Current NAV
3,069
Target NAV
3,604
Prem / (Disc) to Current NAV
-32.7%
Prem / (Disc) to Target NAV
-42.7%
Historical Average Discount (one year)
-49.7%
Historical Average Discount
-55.9%
Current Mcap
2,065
Target Mcap
2,523
Target Share Price (US$)
15.77
net cash (debt) is as of 1Q13
Target Share Price (TRY)
The stake at ALNTF is adjusted with the indirect stake through AEFES at ALNTF
Upside Potential
Source: Company, Is Investment
4
31.60
27.2%
Yazicilar Holding
iv) limited financial transparency. There is limited information available on the unlisted
subsidiaries, which creates some transparency discounts on NAV. However, the unlisted
subsidiaries accounts for a mere 7% in the NAV of the Company, hence limiting the discounts.
v) less diversified portfolio compared to its peers and dependency on a single asset. Yazicilar
Holding’s portfolio is much less diversified than its Turkish peers like SAHOL and KCHOL. Following
the share transaction at Alternatifbank, the major two segment; beverages and automotive segment
will be having a significant 83% share in the portfolio followed by retail segment with a mere 4%
share. However, we believe energy investments will diversify the portfolio going forward. On the
other hand, the major asset, AEFES, captures 74% share in NAV, causing a high dependency on a
single asset risk for the Conglomerate. On the other hand, the percentage of listed participants plus
stand-alone net cash of the Holding to NAV stands at 93%, one of the highest among Holding
companies in Turkey.
It should be also noted that there are several companies in the portfolio like McDonald’s,
Anadolu Motor, Anadolu Araclar, ABH, and Efestur, which we did not include into our
valuation due to lack of financial information. The inclusion of these assets to our NAV
would have further increased the discount.
The discount significantly narrowed. The current discount is much lower than the average of past
three years’ 57%. It has narrowed by 24pp since June 2012, higher than the average decline in
holdings’ NAV discount of 9pp in the same period. YtD NAV discount compression is 20pp
compared to 2pp contraction in average of its peers. Moreover, the current discount, which is much
lower than the historical averages, limits potential gains on discount front.
Figure 2: Yazicilar Holding Premium (Discount) to Current NAV
-15%
-25%
-35%
Premium (Discount) Current NAV
12M Historical Average
3Y Historical Average
3M Moving Average
-45%
-55%
-65%
-75%
Jun-10
Oct-10
Feb-11
Jun-11
Source: Company, Is Investment
5
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Yazicilar Holding
The valuation gap between YAZIC and its major asset AEFES has significantly compressed.
Anadolu Efes is a good proxy for Yazicilar Holding as it comprises 74% of NAV of latter. The
difference in valuation between the two is significantly narrowed in our view. The current market
value of the 28% stake in AEFES is now only 10% higher from Yazicilar’s current market value,
whereas it had been at 45% premium at the beginning of the year, a 30pp drop.
Figure 3: Yazicilar’s Premium (Discount) on AEFES
20%
10%
0%
-10%
-20%
-30%
-40%
Source: Company, Is Investment Estimates
-50%
-60%
-70%
Jul-10
Oct-10 Jan-11 Apr-11
Jul-11
Oct-11 Jan-12 Apr-12
Premium (discount) on AEFES
Jul-12
Oct-12 Jan-13 Apr-13
Jul-13
Historical Average
Source: Company, Is Investment
The stock’s outperformance relative to AEFES standing at 50% YtD causes the compression in
valuation gap between the two.
Outperformed the market by 61% YtD. The share price increased by 58% in 2013. The YAZIC
shares outperformed both the market and the Holding Index by 61% and 52% in 2013.
Figure 4: YAZIC & Market & Holding Index & AEFES
2.6
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0
0.8
Jul-12
Sep-12
Nov-12
YAZIC
Jan-13
BIST 100
Source: IS Investment
6
Mar-13
XHOLD
AEFES
May-13
Jul-13
Yazicilar Holding
Financial
Analysis
The new IFRS standards has negligible affect on Yazicilar’s financial statement. The new
IFRS standards IFRS 11, which become effective as of January 1, 2013 significantly change the
consolidation methodology of companies, eliminating the proportional consolidation for joint
ventures, requiring companies to use either full consolidation or equity pick up method based on the
control. However, the new standards has limited affect on Yazicilar’s financials as the Group has
been already consolidating major non-controlling subsidiaries via equity pick up.
Yazicilar Holding’s financial results do not give a full picture of its operations as the Holding
consolidates its major assets under equity pick up methodology due to the lack of control.
Therefore, listed Anadolu Efes and Anadolu Isuzu and unlisted Ana Gida are consolidated
under unallocated segment through gain/loss from the investments accounted through
equity method as a single line, hence only reflected in the bottom-line as you may see on the
table below.
The automotive segment mainly consist of Celik Motor, Anadolu Motor and Anadolu Araclar
operations. The retail segment on the other hand includes listed Adel Kalemcilik, and unlisted Mc
Donald’s, Efestur and Ulku. Faber Castell Anadolu is consolidated via equity pick up under this
segment. Energy investments are consolidated under other segment. Since the asset sale
agreement for Alternatifbank has been signed, the Holding displayed it as assets for sale as of
1Q13 and restated its 1Q12 financials accordingly.
Figure 5: Yazicilar’s Segmental Breakdown
Yazicilar Holding (TLm n)
Revenues
Financial Services
Automotive
Retailing
Other
Consolidated
Revenue Contribution
Financial Services
Automotive
Retailing
Other
EBITDA
Financial Services
Automotive
Retailing
Other
Unallocated
Assets for Sale
Consolidated
EBITDA Margin
Financial Services
Automotive
Retailing
Other
Consolidated
EBITDA Contribution
Financial Services
Automotive
Retailing
Other
Unallocated
Assets for Sale
Net Profit
Financial Services
Automotive
Retailing
Other
Unallocated
Assets for Sale
Consolidated
2010
2011
YoY
2012
YoY
1Q12
1Q13
YoY
408,602
600,543
440,744
51,272
1,501,161
589,910
588,176
535,018
55,325
1,768,429
44%
-2%
21%
8%
18%
936,101
729,493
635,939
58,042
2,359,575
59%
24%
19%
5%
33%
0
148,092
134,509
19,605
302,206
0
155,140
162,607
21,648
339,396
n.m.
5%
21%
10%
12%
27%
40%
29%
3%
33%
33%
30%
3%
-6.1pp
6.7pp
-0.9pp
0.3pp
40%
31%
27%
2%
6.3pp
-2.3pp
-3.3pp
-0.7pp
0
49%
45%
6%
0
46%
48%
6%
n.m.
3.3pp
-3.4pp
0.1pp
112,293
58,547
40,720
-9,489
8,371
0
210,442
145,774
80,571
51,987
-14,207
12,780
0
276,905
30%
38%
28%
n.m.
53%
n.m.
32%
314,479
96,402
57,536
-20,042
9,073
0
457,448
116%
20%
11%
n.m.
-29%
n.m.
65%
0
24,573
2,815
-2,117
-1,830
2,465
25,906
0
21,537
11,224
-3,072
-1,736
0
27,953
n.m.
-12%
299%
n.m.
n.m.
n.m.
8%
27%
10%
9%
-19%
14%
25%
14%
10%
-26%
16%
2.8pp
-3.9pp
-0.5pp
7.2pp
-1.6pp
34%
13%
9%
-35%
19%
-8.9pp
0.5pp
0.7pp
8.9pp
-3.7pp
0
17%
2%
-11%
9%
0
14%
7%
-14%
8%
n.m.
2.7pp
-4.8pp
3.4pp
0.3pp
53%
28%
19%
-5%
4%
0%
53%
29%
19%
-5%
5%
0%
0.7pp
-1.3pp
0.6pp
0.6pp
-0.6pp
n.m.
69%
21%
13%
-4%
2%
0
16.1pp
-8.0pp
-6.2pp
0.7pp
-2.6pp
n.m.
0
95%
11%
-8%
-7%
10%
0
77%
40%
-11%
-6%
0%
n.m.
17.8pp
-29.3pp
2.8pp
-0.9pp
n.m.
31,298
21,442
17,946
3,145
147,868
0
221,699
23,212
8,924
27,813
-17,832
98,182
0
140,299
-26%
-58%
55%
n.m.
-34%
n.m.
-37%
81,281
31,917
18,634
7,859
767,942
0
907,633
250%
258%
-33%
n.m.
n.m.
n.m.
n.m.
0
14,484
-2,743
716
671,128
18,820
702,405
0
4,558
3,427
239
711,835
20,993
741,052
n.m.
-69%
n.m.
-67%
6%
12%
6%
Source: Company
7
Yazicilar Holding
Combined Financials of Anadolu Group is more meaningful. For top-line and EBITDA
performance, the combined financials of Anadolu Group disclosed by the Holding on its quarterly
earnings presentation are more meaningful in our view. The revenues of the Group grew by CAGR
of 14% since 2008, while EBITDA (exc. financials) by 10% in the same period.
Figure 6: Anadolu Group Revenues & EBITDA (TL bn)
2.0
14
12
11.6
10
8
6
1.2
8.9
7.1
6.9
1.8
1.6
1.2
7.5
1.4
1.4
1.2
0.8
4
0.4
2
0.0
0
2008
2009
2010
Net Sales
2011
2008
2012
2009
2010
2011
EBITDA exc. Financial Services
2012
Source: Company
The beverage sector dominates both revenue and EBITDA of Anadolu Group, capturing 73% and
89% of revenues and EBITDA, respectively.
Figure 7: Anadolu Group Revenues & EBITDA Breakdown
2012 Breakdown of EBITDA
2012 Breakdown of Revenues
0%
8%
7%
4%
8%
Beer
37%
Beer
Soft Drinks
11%
Soft Drinks
Automotive
Automotive
51%
Finance
38%
Retail
Retail
36%
Source: Company
The consolidated assets of the Anadolu Group has been growing with a CAGR of 21%, while the
net debt position posted a CAGR of 9% since 2008. Net debt to EBITDA multiple fluctuates
significantly YoY, averaging at 1.16x, same as 2012 actual figure.
Figure 8: Anadolu Group Assets & Net Debt (TL bn)
1,500
25
1.6
1.43
20
21.5
1.02
900
15
10
10.1
10.2
1,100
0.88
865
14.2
1.4
1.31
1,200
865
600
1.16
1.2
1,234
1.0
816
0.6
11.1
0.4
300
5
0.8
0.2
0
0
2008
2009
2010
Asset Size
2011
0.0
2008
2012
Source: Company
8
2009
Net Debt
2010
2011
2012
Net Debt/ EBITDA
Yazicilar Holding
Business Overview
One of the oldest and most prominent industrial groups in Turkey. Yazicilar Holding
incorporated in 1976 by Kamil Yazici, yet the roots go back to 1950s. Kamil Yazici’s move to
Istanbul during military service and coincidental acquaintances with Izzet Ozilhan in 1949 turned
into a very successful partnership in a short time. Two entrepreneurs started with a hardware store
in Tahtakale, Istanbul, and now, the Group operates with over 80 companies in 16 countries with
very successful businesses like Anadolu Efes (Europe’s 5 th largest and world’s 12th largest beer
producer in terms of volume) and Coca-Cola Icecek(6th largest Coca Cola bottling company in the
world).
Yazicilar and Ozilhan families manage their assets through Anadolu Endustri Holding. The
group of companies was structured under a holding company in the end of 1960s and named
Anadolu Endustri Holding. Yazicilar and Ozilhan families manage all of their investments through
unlisted Anadolu Endustri Holding (AEH), in which Yazicilar Holding has 68% stake, while Ozilhan
Family has 32% stake. The three layer structure of the Group looks complicated at first glance, yet
both families have been jointly taken all decisions at Anadolu Endustri Holding level to manage their
businesses. Mr. Tuncay Ozilhan has acted as the Anadolu Endustri Holding’s CEO for over 20
years and appointed as the Board of Directors Chairman as of May 2007.
Yazicilar Holding operates in five main businesses currently through its subsidiaries and
participations; beer, soft drinks, automotive (passenger vehicles, commercial vehicles, generator
and spare parts), retail (food and stationery), and financial services. In addition, the Group has
interests in a number of other sectors such as information technology, asset management and
electricity production. The Group has number of business alliances with multinationals including
SABMiller, Coca-Cola, Isuzu, Itochu, Kia, Faber-Castell and McDonald’s. The operations of the
Group cover Turkey, CIS, Central Asia and Middle East. The Group has signed agreement to
partially divest its financial services business (banking and leasing) back in March 2013, and will
more focus on energy.
Yazicilar Holding’s 18.2% shares are offered to the public on Borsa Istanbul (BIST) through an initial
public offering in 2000. The Companies current free float on the BIST stands at 28.25%.
Figure 9: Anadolu Group
Özilhan Sınai
Yatırım
Yazıcılar Holding
68%
Holding
Companies
Anadolu Endüstri Holding (AEH)
Main
Business
Groups
Beer
Anadolu Efes
Major
Group
Companies
32%
Soft Drinks
Coca-Cola İçecek
Efes Breweries
International
Automative
Retail
Financial Services
Anadolu Isuzu
Adel Kalem
Abank
AYO
Çelik Motor (Kia
and operational car
leasing)
Anadolu Motor
Anadolu Araçlar
(Geely)
Anadolu Restoran
(McDonald's)
Ana Gıda
ABH
Efestur
Faber-Castell
Anadolu
*Blue boxed companies are publicly traded
Source: Company
9
Alease
Ayatırım
Others
Aslancık Elektrik
Georgia Urban
Energy
Anadolu Termik
Anadolu Etap
Polinas
AEH Gayrimenkul
Anadolu Varlık
A
N
A
D
O
L
U
G
R
O
U
P
Yazicilar Holding
Participation Structure
Has direct stake at AEH, AEFES, ASUZU and Anadolu Motor . The Holding manages its assets
mainly through Anadolu Endustri Holding, where it has direct stakes of 68% Other direct stakes are
Anadolu Efes (AEFES) (23.61%), and Anadolu Isuzu (ASUZU) (35.71%), and unlisted Anadolu
Motor (7.35%). The Company does not hold any stake in any company outside of Anadolu Group.
Figure 10: Participation Structure
As of March 31, 2013
Direct share (%)
Indirect share (%)
Total share (%)
Subsidiaries
Anadolu Endüstri Holding A.Ş.
68
-
68
Alternatifbank A.Ş.
-
61.11
61.11
Alternatif Yatırım A.Ş.
-
61.11
61.11
Alternatif Finansal Kiralama A.Ş.
-
65.16
65.16
Alternatif Yatırım Ortaklığı A.Ş.
-
40.19
40.19
Çelik Motor Ticaret A.Ş.
-
68
68
Anadolu Motor Üretim ve Paz. A.Ş.
7.35
60.58
67.93
Anadolu Otomotiv Dış Ticaret ve Sanayi A.Ş.
-
67.38
67.38
Anadolu Elektronik Aletler Paz. ve Tic. A.Ş.
-
34.65
34.65
Adel Kalemcilik Ticaret ve Sanayi A.Ş.
-
38.68
38.68
Ülkü Kırtasiye Ticaret ve Sanayi A.Ş.
-
49.76
49.76
Efes Turizm İşletmeleri A.Ş.
-
67.92
67.92
Anadolu Bilişim Hizmetleri A.Ş.
-
65.15
65.15
Oyex Handels GmbH
-
67.32
67.32
Anadolu Endüstri Holding und Co. KG
-
67.32
67.32
Anadolu Restoran İşletmeleri Ltd. Şti.
-
68
68
Hamburger Restoran İşletmeleri A.Ş.
-
68
68
Anadolu Varlık Yönetim A.Ş.
-
67.99
67.99
Anadolu Taşıt Ticaret A.Ş.
-
68
68
Anadolu Araçlar Ticaret A.Ş.
-
67.97
67.97
Anadolu Termik Santralleri A.Ş.
-
68
68
AES Toptan Elektrik Tic. A.Ş.
-
68
68
AEH Sigorta Acenteliği A.Ş.
-
68
68
Anelsan Anadolu Elektronik Sanayi ve Ticaret A.Ş.
-
48.94
48.94
Anadolu Kafkasya Enerji Yatırımları A.Ş.
-
68
68
Antek Teknoloji Ürünleri Pazarlama ve Ticaret A.Ş.
-
67.97
67.97
Georgian Urban Energy LLC
-
61.2
61.2
AEH Anadolu Gayrimenkul Yatırımları A.Ş.
-
67.99
67.99
61.11
61.11
4.05
27.66
Alternatif Portföy Yönetimi A.Ş.
Associates
Anadolu Efes Biracılık ve Malt Sanayi A.Ş.
23.61
Joint Ventures
Anadolu Isuzu Otomotiv San. ve Tic. A.Ş.
35.71
1.85
37.56
Ana Gıda İhtiyaç Maddeleri Sanayi ve Ticaret A.Ş.
-
37.57
37.57
Aslancık Elektrik Üretim ve Tic. Ltd. Şti.
-
22.67
22.67
D Tes Elektrik Enerjisi Toptan Satış A.Ş.
-
17
17
Faber-Castell Anadolu LLC
-
19.34
19.34
Source: Company
10
Yazicilar Holding
Shareholder Structure
The Company is controlled by Kamil Yazici (KY) Trust, which is a professional management
company, ensuring the professional management and the continuity of Yazicilar Holding and the
integrity of Anadolu Group beyond the life of the founder of Kamil Yazici. Kamil Yazici resigned from
his chairman position at Yazicilar Holding and other Anadolu Group companies leaving the posts to
professional executives as of 2007, now serves as the honorary chairman.
Figure 11: Shareholder Structure
38.25%
33.5%
28.25%
Source: Company
Board Structure
Although KY Trust holds only ca.36.7% (3.2% of which is free float) stake at Yazicilar Holding, it
ownes four of the six seats on the board, while the remaining two seats belongs to Yazici Family
members. KY Trust owns special board nomination rights granted to Class A and Class B shares (1
+ 3), hence it is entitled to appoint 4/6 directors to the Company’s board.
The current free float of Yazicilar Holding (YAZIC) in Borsa Istanbul stands at 28.25%, of which
3.2% owned by KY trust. The foreign shareholding ratio stands at 65% as of June 2013.
Figure 12: Board Structure
Source: Company
11
Yazicilar Holding
KY Trust Shareholder Structure
KY Trust is controlled by a council of six members, five of which are non-family and chosen among
prominent figures of the Turkish business community. Although the council members own a mere
7.1% stake, they control the Company as they own A type shares, attached with 15 voting rights vs.
one voting right of B-type shares. Consequently, the professional managers have 54% of the votes
and control of the Trust Company’s board. All these managers are also having executive positions
in each subsidiary of Anadolu Endustri Holding. Kamil Yazici is KY Trust Board’s lifetime president.
Figure 13: KY Trust Shareholder Structure
Source: Company
We believe the structure of Yazicilar Holding and the decision taking mechanism is very well
established by Kamil Yazici to ensure the continuity of the Company beyond his life. It should be
highlighted that the Group has excellent track record of management and corporate governance.
Dividends
Yazicilar Holding is a consistent dividend payer. Yazicilar Holding receives dividends from its
subsidiaries, in which it has direct stakes like Anadolu Efes and Anadolu ISUZU and distributes at
least 50% of it to shareholders in principle. Thanks to the defensive nature of its main asset,
Anadolu Efes, Yazicilar Holding is able to pay a cash dividend even in adverse years, such as 2009
and 2010. In recent years, the Company paid ca.60% of its dividend income in average. The
Company received TL69mn and TL68mn dividends in last two years, which mainly came from
Anadolu Efes, while distributed TL40mn gross cash dividends to shareholders.
Figure 14: Dividends Received & Paid (TL mn)
70
3.5%
69
68
3.0%
60
3.0%
50
2.5%
2.3%
40
30
41
47
39
34
2.1%
2.1%
40
40
2.0%
40
35
1.5%
20
0.9%
10
1.0%
0.5%
0
0.0%
2008
2009
2010
Dividend Received
Source: Company
12
2011
Dividend Paid
2012
Yield
Yazicilar Holding
The Portfolio
Anadolu Efes
Business overview. The beverage sector comprises the lion’s share of the Conglomerate’s
operations, with 74% of the Holding’s NAV derived from its 28% stake in Anadolu Efes (AEFES),
which carries out beer and soft drink operations in Turkey as well as in Russia, the CIS, Southeast
Europe and Middle East regions.
Founded in 1969 with two breweries in Turkey, with a total production capacity of 0.3mhl per year,
Anadolu Efes became Europe’s 5th largest and world’s 12th largest producer in terms of liters sold.
Anadolu Efes is the flagship of the Group with its total 18 breweries and 7 malt production facilities.
The current beer capacity stands at 43.7mhl, whereas total malt capacity stands at 293.7 tons.
Besides Efes products, the Group produces over 40 brands, including leading local beer brands.
Yazicilar Holding has 23.6% direct stake (plus 4% indirect stakes) at Anadolu Efes, while Ozilhan
Sinai Yatirim and AEH have 13.5% and 6% stake, respectively. Anadolu Efes fully consolidates its
100% stake in domestic beer operations, Efes Breweries International (EBI), and 50.3% stake at
Coca-Cola Icecek (CCOLA). Anadolu Efes shares trade on the ISE since 2002 with 32.9% free
float, of which 74% was held by foreign investors as of June 2013.
Figure 15: Shareholder Structure
Source: Company
Rapidly growing beverage assets. Operating in 16 countries with 42 plants, Anadolu Efes
reaches 658mn customers through its beer operations in Turkey, Russia, Ukraine, Kazakhstan,
Moldova and Georgia and also soft drink operations via Coca-Cola Icecek in Turkey, Kazakhstan,
Azerbaijan, Pakistan, Kyrgyzstan, Turkmenistan, Jordan and Iraq as of 2012.
Figure 16: Growing Operations
140
120
100
80
60
40
20
0
297
306
327
25
27
27
11
11
12
2005
2006
2007
# of Countries
658
494
511
601
612
36
36
36
36
42
15
15
15
15
16
2008
2009
2010
2011
2012
# of Plants
Population Served (mn)
Source: Anadolu Efes
13
Yazicilar Holding
Joining forces with SABMiller in Russian and Ukrainian markets. The Group reinforced its
existence in Russia and Ukraine as well as other countries of the region with the agreement
concluded with SABMiller as of March 2012. Through this acquisition, total international beer
capacity rose to 37.7mhl from 25.2mhl with additional 4 breweries (three in Russia and one in
Ukraine). Following this acquisition Anadolu Efes captured 2 nd position in Russia (prior 4th position)
in both volume and revenue terms with a 16% market share as of YE2012.
Anadolu Group is interested in acquisitions outside Turkey if opportunities arise. The Group
has plans to acquire new beer brands outside Turkey with a budget up to US$1bn. Anadolu Efes
currently has 5 plants in Turkey, 8 plants in Russia, 2 plants in Kazakhstan and one plant each in
Moldova, Ukraine and Georgia.
Low per capita consumption in operating territory offers future growth prospects. The
majority of operating markets have further room to develop per capita consumption levels both in
beer and soft drink segments. As might be seen in the chart below all operating countries have
common characteristics of low per capita consumption except Ukraine and Russia.
Figure 17: Per Capita Beer Consumption by Countries (lt)
Uzbekistan
Turkey
Georgia
Kazakhstan
Greece
Moldova
China
Ukraine
Serbia
Denmark
West Europe
Netherlands
Russia
Bulgaria
UK
Spain
Romania
Finland
Ireland
Poland
Germany
Austria
Czech Republic
0
20
40
Source: Anadolu Efes
14
60
80
100
120
140
Yazicilar Holding
The Group has a very strong existence in duopolistic Turkish beer market with its 78%
market share. Anadolu Efes is the market leader in Turkish beer market; however its market share
has started to deteriorate in last few years declining to 78% as of 1Q13. Tuborg is the other major
player in duopolistic Turkish beer market with its 21% share.
Figure 18: AEFES Market Share Development
17%
83%
2005
2006
14%
14%
12%
12%
12%
13%
17%
22%
86%
86%
88%
88%
88%
87%
83%
78%
2007
2008
2009
2010
2011
EFES
Other
2012
1Q13
Source: Anadolu Efes
A slim operational performance is expected in 2013. Anadolu Efes’ outlook is not bright due to
the increased competitive pressure in Turkey and regulatory changes both in Turkey and Russia. In
Russia, the regulatory issues (i.e. full realization of the dark market environment, the full impact of
kiosk ban, restrictions on beer selling hours, higher excise taxes etc.) and pricing environment dent
on operations. In Turkey, the law regulating the usage of alcoholic beverages has been approved
by the President. According to the law, sale of alcoholic beverages is banned within 100m vicinity to
mosques, churches, all similar places of worship and educational institutions. Furthermore, the sale
of alcoholic beverages after 10pm is not allowed any more. It may result in a substantial contraction
in the sellable area of alcoholic beverages, in our view.
Possible excise tax increase is also on cards in 2013. Excise tax has been increased by 17% in
2012 in Turkey, which may have a negative impact on beer operations in 2013. Further tax
increases parallel to inflation is also on cards in 2013. Thanks to its strong market share, AEFES
doesn’t have any difficulty to fully reflect tax hikes onto sales prices.
The Company no longer expects to meet its previous guidance that was low single digit
volume growth in Turkey and mid-single digit volume growth in international operations for 2013.
However, the Company prefers to wait until the end of 1H13 in order to quantify the downwards
revision in the guidance.
We revised our estimates. In Turkey, we expect the management’s focus on initiatives to
revitalize volume growth will limit the negative effect of recent restrictions imposed by government.
Hence, we project revenue and volume growth of 12% and 0%, respectively, with slightly lower
EBITDA margin of 34.1% in 2013, down by 0.4pp from 2012.
In Russia, we project weakness in volumes due to the excise tax increase of 25% on beer and the
ban on sale of alcohol above 0.5% in kiosks effective from January 2013 and intense competition to
continue in 2013. Therefore, we project 9.5% decline in Russian operations in 2013 on the back of
the lackluster beer market outlook.
Despite the cost synergies through the SABMiller merger, we expect 4.9pp contraction in EBITDA
margin of Russian operations in 2013 to 12.9%.
15
Yazicilar Holding
Figure 19: AEFES Key Estimates (TL mn)
Anadolu Efes
Revenues
growth
EBITDA
growth
EBITDA Margin
**2011
**2012
2013E
2014E
2015E
4,761
6,417
7,231
7,817
8,514
14%
35%
13%
8%
9%
952
1,264
1,509
1,750
1,919
-5%
33%
19%
16%
10%
20.0%
19.7%
20.9%
22.4%
22.5%
Net Profit
341
607
3,446
892
1052
EV/Sales
2.4x
2.4x
2.6x
2.4x
2.2x
EV/EBITDA
12.2x
12.8x
12.6x
10.8x
9.9x
P/E
28.7x
23.1x
22.9x
18.6x
15.8x
EPS
0.6x
1.0x
1.2x
1.5x
1.8x
Net Debt to EBITDA
1.2x
0.4x
0.5x
0.3x
0.2x
Equity
3,144
6,772
7,161
7,636
8,157
*MCAP
9,791
14,044
16,177
-
-
*2011-2012 f igures are y early av erage, 2013 f igure is Y tD av erage
**based on av erage Mcap during the y ear
Source: Company, Is Investment
Coca-Cola Icecek
Business overview. The Group is performing the production, marketing and sales operations with
Coca-Cola Icecek (CCOLA), the 6th largest bottling company of the world by sales volume. The
Group operates with 22 bottling plants in 10 countries, including Azerbaijan, Kazakhstan,
Kyrgyzstan, Turkmenistan, Tajikistan, Iraq, Syria, Jordan and Pakistan, besides Turkey.
Strong market share. Coca-Cola Icecek is the market leader in sparkling beverages, fruit juice &
nectars, sport drinks, second in iced tea and third in bottled water categories in Turkey. The
company has 67% market share in sparkling beverage, while has 25% in still beverages and 7% in
water. The Group has also strong international operations, being the market leader in sparkling
beverages in Azerbaijan, Kazakhstan with respective 59% and 42% market shares and 2nd player
in Pakistan with 29% market share.
Turkey operations accounted for 67% of CCI’s consolidated sales volume, 19% of consolidated
revenues and 21% of consolidated EBITDA as of YE2012. Sparkling beverages had 70.3% share in
CCI’s consolidated sales volume, whereas the remaining 21.8% and 7.9% consisted of still
beverages and tea, respectively as of 2012.
Coca-Cola Icecek plans to make further acquisitions in the region. Although the Company has
acquisition plans outside Turkey, this will not happen before 2-3 years, until the investments will be
completed and the growth in the current markets will be more mature. The Company will invest for a
capacity increase in Pakistan and will establish a distribution network in Southern Iraq.
Top-line growth ahead of volume growth. The Company targets mid to high single digit volume
growth in Turkey and mid to high teens volume growth in international operations in 2013. Driven by
price increases, EBITDA growth should exceed the revenue growth in 2013. Finally, the Company
projects flat to positive EBITDA margin performance in 2013 over 2012 due to the impact of S. Iraq
and Pakistan operations.
2013 will be a bright year for CCOLA. Ahead of 12% consolidated sales volume growth, we
project consolidated revenues to increase by 11% in 2013 thanks to effective pricing and continued
focus on immediate consumption channels. Favorable demographics, low per capita consumption
levels and rising income levels are the key drivers for CCI’s strong volume growth which will also be
sustainable in the future. Following lackluster volumes in 2012 due to high base, we expect 7%
volume growth in Turkey operations in 2013 driven by increased focus on category and package
mix. Thanks to full contribution of Southern Iraq operations, int. operations’ volume is projected to
post a growth of 18% even after a strong base in 2012.
16
Yazicilar Holding
Favorable raw material cost environment likely to remain. CCI benefited from declining trend in
input costs in 2012, achieving ca.3.0pp margin increase in 2012. We don’t expect a distortion in
favorable input cost environment in 2013. Therefore, we anticipate a mere 0.3pp enhancement in
EBITDA margin to 16.6% in 2013 driven by increasing economies of scale.
Figure 20: CCOLA Key Estimates (TL mn)
Coca-Cola Icecek
Revenues
growth
EBITDA
growth
EBITDA Margin
**2011
**2012
2013E
2014E
2015E
3,409
4,132
4,785
5,462
6,273
-18%
21%
16%
14%
15%
477
671
792
911
1,056
-53%
41%
18%
15%
16%
14.0%
16.2%
16.6%
16.7%
16.8%
Net Profit
140
380
614
495
586
EV/Sales
2.0x
2.5x
3.2x
2.8x
2.5x
EV/EBITDA
14.4x
15.4x
19.5x
17.0x
14.7x
P/E
39.3x
18.6x
23.0x
28.5x
24.1x
EPS
0.6x
1.5x
2.4x
1.9x
2.3x
Net Debt to EBITDA
2.3x
1.4x
1.3x
1.3x
1.2x
Equity
1,650
1,910
2,350
2,569
2,932
*MCAP
5,507
7,079
12,074
-
-
*2011-2012 f igures are y early av erage, 2013 f igure is Y tD av erage
**based on av erage Mcap during the y ear
Source: Company, Is Investment
Alternatifbank
Anadolu Endustri Holding and Commercial Bank of Qatar (CBQ) had agreed on the sale
AEH's controlling stake in Alternatifbank (Abank) back in March 2013. The Group companies
Celik Motor, Anadolu Motor, Efes Pazarlama ve Dagitim and AEH's other shareholder Ozilhan
Yatirim have signed an agreement for the transfer of Anadolu Group’s controlling stake of 70.84% to
CBQ. Following the completion of the deal, Celik Motor, Efes Pazarlama ve Dagitim and Ozilhan
Yatirim have no longer any stakes at Abank, while AEH and Anadolu Motor will still remain holding
17.21% and 7.79% direct stakes, respectively. The total indirect stake of Yazicilar Holding will
decrease to 17% from current 61.11%. The free float of Alternatifbank stands at a mere 4.16%.
Anadolu Endustri Holding to receive ca.US$370mn from the stake sale. We calculated Anadolu
Endustri Holding to receive approximately US$370mn cash from the stake sale at Alternatifbank
based on 2012 year-end financial statements. The actual transaction price will be calculated with 2x
P/B (total equity excluding minority interest) multiple based on audited 2Q13 IFRS financials of
Abank. The Turkish banking authority, BRSA, has approved the deal.
The parties also agreed for the sale of 95.82% shares of AEH in Alternatif Finansal Kiralama
(Alease). The purchase price will be determined by 1.8x P/B (total equity minus minority interest)
based on 2Q13 audited IFRS financials.
Figure 21: ALNTF Solo Key Financials
Alternatifbank (TL m n)
2008
Loans
2,726
growth
15%
Total Assets
3,629
growth
-3%
Deposits
2,548
growth
-4%
NIM
7%
Equity
435
RoE
15%
*MCAP
367
*2011-2012 f igures are y early av erage, 2013 f igure is Y tD av erage
Source: BRSA, Is Investment
17
2009
3,246
19%
4,259
17%
2,442
-4%
5%
462
6%
336
2010
4,336
34%
6,445
51%
3,643
49%
5%
485
6%
476
2011
5,201
20%
7,969
24%
4,176
15%
6%
569
13%
418
2012
5,201
20%
7,969
24%
4,176
15%
6%
569
13%
436
Yazicilar Holding
Energy Investments
Aslancik HEPP will be fully operational in 2014. Aslancik HEPP (AEH holds 33% stake) with
120MW capacity is under construction. The plant has 418mnKWh generation capacity. The total
investment for this project is around US$230mn. A loan of US$160mn with a maturity of 12-year
and grace period of 3.5-year is received. The completion rate at the project is 92%. The project is
expected to be completed in 3Q13.
Figure 22: Aslancik DCF Analysis (US$ mn)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
EBITDA
2013
34.1
34.1
34.0
33.9
33.8
33.7
33.7
33.6
33.6
33.6
EBITDA Margiın
81%
81%
81%
80%
80%
80%
80%
80%
80%
80%
5.4
5.4
5.4
5.3
5.3
5.3
5.3
5.3
5.4
5.4
(-)Tax on EBIT
(-) Capex
73
2
2
2
2
2
2
2
2
2
2
-73
26
27
27
27
26
26
26
26
26
26
7.4%
7.5%
7.6%
7.8%
8.0%
8.3%
8.6%
9.0%
9.6%
10.4%
11.5%
Discount Factor
1.07
1.15
1.24
1.34
1.45
1.57
1.70
1.85
2.03
2.24
2.50
Discounted FCF
-68.3
22.4
21.5
19.9
18.3
16.9
15.5
14.2
12.9
11.7
10.5
FCF ($ mn)
WACC
Sum of DCF
96
Terminal Grow th
1%
Terminal Value
101
Estimated Net Cash
-110
TOTAL
102
Source: Company, Is Investment
Paravani HEPP will be completed in 1H14. The Group also develops 90MW HEPP, Paravani,
located in Georgia with a total investment of US$175mn. The plant has 409mnKWh of electricity
generation capacity and 80% of the electricity will be sold to Turkey. A US$115.5mn loan with 15year maturity and four-year grace period has obtained and the construction started in 2010. The
completion rate for the project is ca.92%, and the project is expected to be completed in 1H2014.
Figure 23: Paravani DCF Analysis (US$ mn)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
EBITDA
2013
12.0
24.1
24.1
24.1
24.1
24.1
24.1
24.1
24.1
24.1
EBITDA Margiın
79%
79%
79%
79%
79%
79%
79%
79%
79%
79%
1.0
2.8
2.8
2.8
2.8
2.8
2.8
2.8
2.8
2.8
(-)Tax on EBIT
(-) Capex
FCF ($ mn)
WACC
50
2
2
2
2
2
2
2
2
2
2
-50
9
19
19
19
19
19
19
19
19
19
7.8%
7.8%
7.9%
8.0%
8.2%
8.3%
8.5%
8.8%
9.0%
9.4%
9.8%
Discount Factor
1.08
1.16
1.25
1.36
1.47
1.59
1.72
1.88
2.04
2.24
2.46
Discounted FCF
-46.4
7.5
15.1
14.2
13.2
12.1
11.2
10.3
9.4
8.6
7.8
Sum of DCF
63
Terminal Grow th
1%
Terminal Value
90
Estimated Net Cash
-83
TOTAL
83
Source: Company, Is Investment
We have used a US$ denominated DCF model and reached a target value of US$185mn and its
contribution to Yazicilar Holding is computed as US$74mn (comprises 2% of NAV) based on the
following assumptions:
 Electricity Generation: We estimate that the Aslancik and Paravani will operate with a CUR of
40% and 52%, and sell 407mnKWh and 398mnKWh of electricity, respectively, slightly lower
than the Company’s guidance. We kept this assumption constant for the rest of our forecast
period.
18
Yazicilar Holding
 Customer Breakdown: For Aslancik, we assume that the company will sell 70% of its sales
volume by bilateral agreements and the rest via spot market for our forecast horizon. For
Paravani, we pencil in 40% share for bilateral contracts and spot market each, while the remaining
20% share for the sale in Georgia.
 Electricity Price: We foresee an electricity price of US$0.1075/KWh for bilateral agreements and
US$0.0938/KWh for spot market in Turkey and US$0.06 for the price in Georgia and left it
unchanged throughout our forecast horizon.
 Operating Expenses & CAPEX: We project operating expenses of US$0.02/KWh for Paravani
and US$0.16 for Aslancik for our forecast period. We anticipate an annual maintenance expense
of US$2mn through our forecast period for each plant.
 WACC: We have taken risk free rate of 6% with 5.5% equity risk premium and 1.0x stock beta.
We have changed our WACC calculation based on the changes of debt to equity ratio in the
upcoming years.
Plans to invest US$1.7bn in 1,200MW Gerze thermal power plant. The Group plans to develop
an imported coal type PP with a capacity of 1,200MW. Anadolu Endustri Holding was granted a 49year license in December 2008 for the plant, located in Black Sea region in Turkey (Sinop-Gerze).
The plant is expected to generate 8.4bnKWh electricity, corresponding 3% of Turkey’s energy
supply. The construction will be completed in 48 months once the construction starts. The Company
applied for the Environmental Impact Assessment report (EIA) back in 2011, yet still waiting for the
approval. The Group will also apply for electricity production license afterwards. The total
investment for the project is estimated at US$1.7bn and will be financed via 70/30% debt to equity
ratio. We expect the Group to form a JV with possible 50-50% stake to realize the project.
Accordingly, Anadolu Group need to inject US$255mn equity for the project. Given the expected
cash inflow from the stake sale at Abank, we do not expect the Anadolu Endustri Holding to face
any difficulty to finance the equity portion of the project, hence, do not expect Yazicilar to raise
capital. We believe the possible news regarding the approval of EIA report, obtaining production
license, teaming with a partner or closure of the financing of PP will be major triggers for Yazicilar
Holding in upcoming periods.
Benchmark comparison. Gerze Thermal PP of Yazicilar has very similar characteristics as
Karabiga Thermal PP developed by Alarko Holding, therefore, we think it offers good benchmark
comparison. You may see the comparison table between the two. Using similar assumptions we
roughly expect US$265mn EBITDA for Gerze PP, in which Anadolu Endustri Holding is expected to
hold 50% stake (Yazicilar holds 34% indirect stake in this case).
We calculated the NPV of the project as US$870mn, which creates additional 10pp upside potential
for the Holding. Yet, we did not incorporate the project into our valuation since EIA report is not
obtained and the financing is not completed.
Figure 24: Benchmark Comparison for Gerze Thermal PP
Type
Installed Capacity
Generation Capacity
Total Investment
Startup
Licence Period
Debt to Equity
Maturity of Debt
Ownership
Sources of Imported Coal
Gerze Thermal PP
Karabiga Thermal PP
Imported Coal
1,200MW
8,400mnKWh
US$ 1.7bn
2018
Imported Coal
1,320MW
9,900mnKWh
US$ 1.35bn
2017
49 years
70-30%
10-15 years
a possible 50-50% JV
49 years
75-25%
10-15 years
a 50%-50% JV
Australia, S. Africa, Colombia,
Indonesia
US$100/ton
US$830mn
US$330mn
n.a.
Coal Cost Assumptions
Estimated Revenues
Estimated EBITDA
US$100/ton
US$750
US$265
Source: Company, IS Investment
19
Yazicilar Holding
Turkey’s electricity market offers rich growth prospects. Turkey’s electricity demand grew 7.2%
CAGR in last ten years to ca.200TWh in 2012. Turkish Electricity Transmission Co. forecasts this
demand to grow 6.5% CAGR 2012-2020 in a low case scenario and 7.5% CAGR in the high case
scenario. 4-5GW of net capacity additions will be needed to cover this demand growth. Again based
on the official forecasts, reliable reserve margin projected to erode gradually until 2016-2017,
therefore new capacity need is substantial.
Figure 26: Turkish Electricity Demand Forcasts (TWh)
Figure 25: Electricity Consumption vs. GDP per Capita
50,000
Netherlands
Austria
Japan
45,000
United States
400
Germany
40,000
30,000
350
France
UK
Italy
35,000
OECD
300
Spain
250
Greece
25,000
Portugal
Czech
Republic
20,000
Low case CAGR for
2012-2020 period
6.5%
200
150
15,000
Poland
50
2020E
Power consumption per capita (kWh/pa)
0
2018E
14,000
2016E
12,000
2014E
10,000
2010
8,000
2012E
6,000
2008
4,000
2006
2,000
2004
0
2002
0
2000
China
1998
India
1996
5,000
100
Russia
World
Mexico Turkey
1994
10,000
1992
Brazil
1990
GDP per capita (USD)
High case CAGR for
2012-2020 period
7.5%
450
Source: Turkish Electricity Transmission Company
Source: World Bank
The market to fully liberalized post 2015. The Turkish electricity market will be fully liberalized in
2015. Therefore retail prices will set by end users, reflecting supply - demand balance.
20
Yazicilar Holding
Anadolu Isuzu
Business overview. Anadolu Isuzu (ASUZU) is a partnership with the Japanese automotive
manufacturer Isuzu. Anadolu Isuzu incorporated in 1984, mainly involves in the production and
sales of Isuzu commercial vehicles including light trucks, pick-ups and midibuses. Japan based
companies Isuzu and Itochu have a total of 30% stake in the Company, while Yazicilar Holding is
the major shareholder, having 36% of the shares. 16% of Company shares trade on the Borsa
Istanbul.
D-Max has the largest share in sales. The sales of the Company rose by 13.3% to 537.3mn TL in
2012. D-Max has very successful year in 2012, forming 28% of total sales volume of the Company,
increasing the market share to 17%.
Figure 27: ASUZU Key Financials
Anadolu Isuzu (TL m n)
Revenues
growth
EBITDA
growth
EBITDA Margin
Net Profit
EV/Sales
EV/EBITDA
P/E
Net Debt to EBITDA
Equity
*MCAP
2008
497
5%
23
-41%
4.5%
0
0.1x
3.1x
0.4x
-0.2x
185
196
2009
256
-48%
-12
n.m.
-4.8%
-19
0.7x
-15.2x
0.4x
-2.8x
166
114
2010
340
33%
7
n.m.
2.1%
-5
0.8x
38.3x
0.5x
8.8x
162
163
2011
474
39%
28
287%
5.9%
13
0.6x
9.9x
0.5x
2.7x
175
238
2012
537
13%
14
-51%
2.6%
1
1.2x
47.0x
0.6x
8.6x
166
321
based on av erage Mcap during the y ear
*2011-2012 f igures are y early av erage, 2013 f igure is Y tD av erage
Source: Company, Is Investment
Adel Kalemcilik
Business overview. Established in 1969, Adel Kalemcilik (ADEL) services in stationary industry
with the brands Faber-Castell, Johann Faber and Adel brands with a wide product range and
exports to approximately 50 countries.
ADEL is the pioneer and leader of the Turkish writing instruments and stationery industry
with an approximate 35% share overall. The Company markets its products as well as some
imported products in Turkey through a strong and efficient distribution network and is the market
leader in its product range.
Figure 28: ADEL Key Financials
Adel Kalem cilik (TL m n)
Revenues
growth
EBITDA
growth
EBITDA Margin
Net Profit
EV/Sales
EV/EBITDA
P/E
Net Debt to EBITDA
Equity
*MCAP
2008
75
11%
21
27%
28.3%
14
0.2x
0.8x
0.5x
-0.4x
49
37
based on av erage Mcap during the y ear
*2011-2012 f igures are y early av erage, 2013 f igure is Y tD av erage
Source: Company, Is Investment
21
2009
88
17%
25
16%
28.0%
17
0.6x
2.1x
0.5x
-0.8x
61
46
2010
111
27%
32
29%
28.4%
22
1.2x
4.1x
1.0x
-0.9x
75
116
2011
136
22%
39
23%
28.6%
26
1.8x
6.4x
1.4x
-0.1x
92
196
2012
160
17%
41
6%
25.9%
24
2.1x
8.0x
1.7x
0.1x
105
277
Yazicilar Holding
Celik Motor
Business overview. Celik Motor is mainly involved in distribution of Kia-branded passenger and
commercial vehicles in Turkey. Besides that the Company also operates a leasing service with a
fleet of 13,000 as of 1Q13.
Increasing market share. The market share of the Company is increasing gradually in recent
years, reaching 2.1% as of 1Q13. The volume stands 12.295 vehicles (+%27 YoY) in 2012, while
the sales edged to TL584.5mn (+37%). Other than sales no other financial data are provided by the
Company as other unlisted companies in the portfolio.
Increasing share of fleet leasing operations. The Company has started to provide tailor-made
fleet leasing service, capturing higher share in operations with the fleet size edging to ca.13,000 as
of 1Q13.
Figure 29: Fleet Size & Volume
Figure 30: Revenue Growth (TL mn)
14,000
700
12,000
12,500
12,295
10,000
10,000
9,713
400
8,160
7,000
427
300
4,000
4,799
200
2,000
0
585
500
8,000
6,000
600
278
272
205
100
0
fleet size
0
volume
2009
2010
2011
2008
2009
2012
2010
Net Sales
2011
2012
Source: Company
Anadolu Motor
Business overview. Anadolu Motor manufactures single cylinder diesel engines under Antor brand
name and also imports and distributes various industrial engines and tractors, with brands
Lombardini, Honda, LS and Galignani.
Market leader in its segments. The Company is a leader in the diesel engine market with a 30%
share of Antor brand, in gas engine market with a 50% share of Honda brand and in gas motopompt
market with a 27% share of Honda brand as of 2012 year-end. The total sales are around
TL118.6m in 2012.
Figure 31: Revenue Growth (TL mn)
140
120
100
80
122
119
2011
2012
83
60
40
20
54
63
0
2008
2009
2010
Net Sales
Source: Company
22
Yazicilar Holding
McDonald’s
Business overview. Anadolu Endustri Holding acquired McDonald’s operations in 2005. Recently,
the Group has started operating McD Cafe’s with the first two openings in Istanbul in Sumer 2012.
Targets to open 26 stores in 2013. The Company operates 206 stores as of YE2012. In parallel to
guidance the Company has 29 stores opening in 2012 and targets to open additional 26 stores in
2013. There are 5 store openings in 1Q13. The net sales increased 21.3% in 2012, edging
TL402.7mn.
Figure 32: Number of Stores
Figure 33: Revenue Growth (TL mn)
500
240
232
220
200
206
400
180
300
332
177
160
200
156
140
134
120
100
403
211
251
255
2008
2009
277
100
116
104
0
80
2007
2008
2009
2010
2011
2012
1Q13 2013E
2010
2011
2012
Net Sales
# of stores
Source: Company
Ana Gida
Business overview. Ana Gida, one of the leading edible oil manufacturers in Turkey, produces
sells and exports olive oil, corn oil, and sunflower oil under the brand names of "Kirlangic”, “Madra”
and “Komili”. The Company is a JV between Anadolu Group and SEEF Foods S.A.R.L (controlled
by Bedminster Capital Management, with respective shares of 55.25% and 44.75%. SEEF Foods
raised €25mn capital to acquire %44,75 of the Company back in March 2009.
Leader of the retail olive oil market in Turkey. The Company has dominant position in Turkey
with Komili and Kirlangic brands, capturing a total market share of 31% as of YE2012. The olive oil
sales volume increased by 30% in 2012, up to 16.3mn liters, while the net sales increased by %18
to TL84.1mn. The total sales volume in 2012 increased by %7, reaching TL54.3mn liter, while the
overall sales increased by 13.7% to TL243.7mn.
Figure 34: Revenue Growth (TL mn)
300
240
244
214
180
120
158
158
2008
2009
139
60
0
2010
Net Sales
Source: Company
23
2011
2012
Yazicilar Holding
Figure 35: Financial Summary
Sum m ary of Key Financials (TL m n)
2
3
4
5
Incom e Statem ent (TL m n)
2011A*
2012A*
2013E
2014E
Revenues
1,718
2,311
1,595
1,721
EBITDA
277
457
219
232
Depreciation & Amortisation
44
64
68
71
EBIT
233
393
149
159
Other income (expense), net
(107)
519
(3)
(2)
Financial expenses, net
(64)
(38)
(18)
(18)
Minority Interests
32
116
65
60
Income before tax
190
1,059
1,141
406
Taxation on Income
(18)
(35)
(16)
(18)
Net income
140
908
1,059
328
Cash Flow Statem ent (TL m n)
Net Income
140
908
1,059
328
Depreciation & Amortisation
44
64
68
71
Indemnity Provisions
6
11
1
1
Change in Working Capital
(15)
(56)
(169)
(46)
Cash Flow from Operations
175
242
190
355
Capital Expenditure
242
277
149
174
Free Cash Flow
(66)
(36)
41
181
Rights Issue
0
0
0
0
Dividends Paid
40
40
40
40
Other Cash Inflow (Outflow )
519
(194)
(390)
(213)
Change in net cash
413
(270)
(390)
(73)
Net Cash
817
548
158
85
Balance Sheet (TL m n)
Tangible Fixed Assets
553
746
846
948
Other Long Term Assets
1,091
1,205
28
32
Intangibles
14
33
15
17
Goodw ill
35
35
0
0
Long-term financial assets
2,320
3,559
3,162
3,406
Inventories
134
154
192
214
Trade receivables
113
169
306
343
Cash & equivalents
1,137
1,347
897
915
Other current assets
3,780
4,579
183
205
Total assets
9,178
11,828
5,630
6,080
Long-term debt
174
291
319
358
Other long-term liabilities
635
566
49
55
Short-term debt
146
509
420
472
Trade payables
89
108
114
128
Total Debt
320
800
739
830
Other short-term liabilities
5,598
6,878
146
164
Total liabilities
6,642
8,352
1,049
1,177
Minority Interest
544
662
586
620
Total equity
1,992
3,476
4,581
4,903
Paid-in capital
160
160
160
160
Total liabilities & equity
9,178
11,828
5,630
6,080
Ratios
ROE (%)
7.4
33.2
26.3
6.9
ROIC (%)
16.0
15.7
6.9
9.4
Invested Capital
1,816
2,199
1,273
1,426
Net debt/EBITDA (x)
-3.0
-1.2
-0.7
-0.4
Net debt/Equity (%)
-41.0
-15.8
-3.4
-1.7
Capex/Sales (%)
14.07
12.01
9.36
10.14
Capex/Depreciation (x)
5.5
4.3
2.2
2.5
EBITDA Margin
16.1
19.8
13.8
13.5
EBIT Margin
13.6
17.0
9.3
9.2
Net Margin
8.2
39.3
66.4
19.1
Valuation Metrics
EV/Sales (x)
0.5x
0.9x
2.8x
2.6x
EV/EBITDA (x)
2.8x
4.4x
20.6x
19.5x
EV/IC (x)
0.4x
0.9x
3.6x
3.2x
P/E (x)
12.9x
2.3x
3.8x
12.1x
FCF yield (%)
-4%
-2%
1%
5%
Dividend yield (%)
2%
2%
0.9%
1.0%
*based on average Mcap during the year
**based on new IFRS standards, and includes the affects of the stake sale at Abank and Alease
Source: Company, IS Investment
24
6
2015E
1,855
244
75
168
(2)
(18)
54
463
(22)
387
387
75
1
(60)
403
190
213
0
40
(191)
(18)
67
1,061
35
19
0
3,616
240
384
944
230
6,530
378
58
499
135
877
174
1,244
655
5,285
160
6,530
7.6
8.9
1,605
-0.3
-1.3
10.26
2.6
13.2
9.0
20.9
2.4x
18.5x
2.8x
10.3x
5%
1%
Yazicilar Holding
Appendix
YAZIC 1Q13 Earnings Review
The bottom-line significantly deteriorated YoY on pro-forma basis. Yazicilar Holding posted
TL741.1mn net income in its 1Q13 consolidated financial statements, including TL769mn one off
non-operational income resulting mainly from the change in the consolidation method of CCI under
Anadolu Efes. The Holding had posted TL702.4mn net income in the same period a year ago, which
also included TL686mn one off gain on stake sale of Anadolu Efes to SABMiller. Adjusted with
these figures 1Q13 net profit would be at TL21.2mn, worse than last year’s net income of TL61.2mn
(the figures are also adjusted with minority interest). The drop in net income stemmed from lower
profit of automotive segment and weaker bottom-line performance of AEFES.
The revenues grew by 12% YoY in 1Q13, which is mainly driven by the retail segment. The
Holding posted TL339.4mn net revenues in 1Q13, up by 12% from TL302.2mn in the same period
last year on pro-forma basis. The retail segment grew by 21% up to TL162.6mn, thanks to strong
revenues of Anadolu Restaurant, while automotive segment’s growth was limited at 5%, reaching
TL155.1mn, mainly due to the weak performance of Anadolu Motor. In automotive segment, sales
volume of Celik Motor decreased by 5.9% to 1.977, yet revenues increased to TL121.9mn, up by
14% YoY. Anadolu Motor, on the other hand posted TL28.4mn net revenues, down by 22% YoY. In
retail segment, Anadolu Restaurant reported TL95.1mn net revenues in 1Q13 up by 13% YoY,
thanks to new store openings, edging up to 211 stores as of end of March, 2013. Lastly, Ana Gida
also displayed a very strong YoY sales growth at 50%, edging up to TL80.3mn in 1Q13.
The EBITDA increased by 8% YoY in pro-forma basis thanks to the retail segment. The
EBITDA came in as TL28mn in 1Q13, mainly driven by the retail segment, which reports TL11.2mn,
quadrupling TL2.8mn reported in the same period last year. On the other hand, the contribution of
automotive segment decelerated in 1Q13 to TL21.6mn, 12% down from TL24.6mn in 1Q12. The
EBITDA margin of automotive segment stands at 13.9%, 2.7pp down from 16.6% recorded in 1Q12,
whereas the retail segment’s EBITDA margin stands at 6.9% EBITDA, corresponding 4.8pp YoY
improvement.
Stable solo cash position. The solo net cash position of the Holding stands at TL53mn as of
1Q13, compared to TL52mn YE2012.
Financial Sum m ary (qrt TL m n)
Revenues
Gross Margin
Operating Profit
Operating Margin
EBITDA
EBITDA Margin
Net Financial Expenses
Net Profit
Net Margin
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
345
431
444
498
290
836
607
577
326
32.9%
35.3%
34.7%
30.9%
22.4%
41.1%
37.9%
26.6%
22.0%
36
69
67
62
11
202
130
49
12
10.4%
15.9%
15.0%
12.4%
3.9%
24.2%
21.4%
8.5%
3.7%
49
75
78
75
23
220
146
67
28
14.2%
17.4%
17.6%
15.0%
8.1%
26.4%
24.1%
11.6%
8.6%
-8
-15
-35
-6
-2
-10
-13
-12
-6
28
68
38
7
702
110
89
6
741
8.1%
15.7%
8.5%
1.4%
241.8%
13.2%
14.6%
1.1%
227.2%
Source: Company, IS Investment
25
Yazicilar Holding
This report has been prepared by “İş Yatırım Menkul Değerler A.Ş.” (İş Investment) solely for the information of clients of İş Investment.
Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services
are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies,
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supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be
suitable for all investors. Investors must make their decisions based on their specific investment objectives and financial positions and
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The information presented in this report has been obtained from public institutions, such as Istanbul Stock Exchange (ISE), Capital
Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of
Turkey (CBT); various media institutions, and other sources believed to be reliable but no independent verification has been made, nor is
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This research report can also be accessed by subscribers of Capital IQ, a division of Standard & Poor's.
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