BİMEKS Initiation BUY

16 September 2015
16 September 2015
BİMEKS
Initiation
BMEKS
Electronics Retailer
Share Price
Target Price
Upside Potential
TL 2.12
TL 2.50
18%
Market Cap (mn)
$84
Market Cap (mn)
TL 254
EV (mn)
Free Float
TL 541
39%
Beta
0.52
EPS 15'e
TL 0.02
EPS 16'e
TL 0.03
Price Performance
TL
Rel to BIST-100
1 Month
2.4%
8.2%
Y to D
1.4%
18.8%
1 Year
30.1%
38.5%
52-week range
TL 2.41 - 1.63
12M Cumulative Foreign Inflow
$5.2
Ave. Daily Volume (12M) - mn
$1.5
Ave. Daily Foreign Trad. Vol. (12M) - mn
$0.1
BMEKS vs BIST-100 (rebased)
200.0
150.0
100.0
BMEKS
Financials (mn)
01/08/2015
01/06/2015
01/04/2015
01/02/2015
01/12/2014
01/10/2014
01/08/2014
01/06/2014
01/04/2014
01/02/2014
01/12/2013
01/10/2013
01/08/2013
01/06/2013
01/04/2013
01/02/2013
01/12/2012
01/10/2012
0.0
01/08/2012
50.0
Relative to BIST
2014
2015e
2016e
Revenues
TL 1,260.9
TL 1,590.6
TL 1,833.1
Adj. EBIT*
TL 41.9
TL 34.7
TL 44.1
Adj. EBITDA
TL 65.0
TL 57.2
TL 67.3
Net Income
TL 9.2
TL 2.5
TL 3.3
Revenues Δ y/y
81%
26%
15%
Adj. EBITDA y/y
204%
-12%
18%
Net Income Δ y/y
-24%
-73%
33%
Adj. EBITDA Margin
5.2%
3.6%
3.7%
Net Margin
0.7%
0.2%
0.2%
27.5x
102.7x
76.9x
EV/Adj EBITDA
6.7x
8.3x
7.5x
EV/Sales
0.3x
0.3x
P/E
BVPS
Dividend Yield
TL 1.2
0.3x
TL 1.3
0.0%
TL 1.3
0.0%
0.0%
* Adj EBIT: EBIT + other income/expense
Valuation Method
Weight
Target Value
DCF - mn
60%
TL 321
Peer Comparison - mn
40%
TL 273
Main Assumptions
Peer Metrics
RfR(TL): 10.0%
EV/EBITDA'15e: 7.5x
WACC(TL): 12.5%
EV/EBITDA'16e: 6.0x
TG: 4.5%
Beta: 0.52
Upside not too exciting in current environment!
We initiate coverage on BMEKS with TL2.50 per share 12-month
forward TP, indicating BUY recommendation. Market related upside
risks are higher than downside risks going forward as the worst
market conditions already occurred for the electronics retailers since
2014. However, because there is no clear strong turnaround in the
short term, our TP only suggests 18% upside, dragged down by peer
comparison method. BMEKS’ strength comes from realtime
inventory and product pricing management (allowing stores to be
used as warehouses for online sales deliveries) as well as putting
emphasis on higher profit margin products in the portfolio (such as
white goods, small appliances, accessories) – a strategy supported
by Electro World and Darty acquisitions.
Omni-channel business strategy is a strength if well managed... As
of 2015/06, BMEKS has 136 stores, of which 55 of them are
franchise stores. The upside of the franchise system is lower
personnel, rent and capex expenses in return for stable margins
(limiting upside in strong market conditions). Online sales, on the
other hand, makes up c.10% of revenues. Overall, we are in line
with 2015 revenue guidance yet below EBITDA margin guidance
(5.3%), whereas our estimate is 4.4% (similar to 1h15 margin). Our
forecasts imply 12% CAGR in revenues (34% CAGR for online sales),
c.3k sqm per annum growth and 4.5% average EBITDA margin for
the next five years. Fast growing online business will curb down
new store openings in the future, in our opinion.
Assumed 2.1% of GDP spending for the sector for 2015, 2.2% for
2016 & 2017, 2.3% afterwards... BMEKS’ market share in technical
consumer goods market (excluding PH & OE) was 3.5% in 2014,
2
2.3% in 2013, based on our estimates using GfK available data.
1h15 data implies further market share gain to 4.2%. BMEKS
foresee slight market share loss in 2h15 therefore we assumed
3.9% for 2015FY. We assumed BMEKS’ market share to stay flat
going forward.
A regulation change allowing the credit card instalment limits to
increase would be a strong BUY signal (which is unclear at the
moment)... Sector growth slowed down due to weaker consumer
sentiment and TL deprecation impact on end-prices. Technical super
store sales have slowed down more with the credit card setback and
have shown no strong pick up sign yet in 2015.
Key downside risks... Further increase in yields (our RfR is 10%),
further restrictions on credit cards (unlikely), further deterioration
in consumer sentiment (unlikely), TL depreciation to accelerate are
downside risks. Also 54% of rent is in Euro and 28% in USD; we
assumed 3% depreciation per annum after 2015 for USD and a
EURUSD parity of 1.10. Further TL depreciation is a risk to our
margin assumptions after 2017.
1
Please refer to end of report for important disclosure
BUY
GfK: http://www.gfk.com/tr
Ayse COLAK,CFA
[email protected]
+90 212365 1080
16 September 2015
FORECASTS
BMEKS at a glance
# of stores (year-end)
# of stores (begining of the year)
New Additions (net)
Franchise Stores
Sales Area (000 sqm)
Average Sales Area (000 sqm)
Sales Area per Store (sqm)
Sales Area Growth y/y
Average Store Growth y/y
Revenues MN TL
Retail Operations
E-Commerce
Revenue Per Average Store TLmn
Growth y/y
Revenue Per average NSA - TL
Growth y/y
Revenue Growth y/y
2014
140
106
34
55
131.3
129.8
937.8
36.8%
40.6%
1,261
1,164
97
2015e
140
140
0
55
127.3
125.8
909.5
-3.0%
13.8%
1,591
1,441
150
2016e
143
140
3
57
129.0
128.2
902.0
1.3%
1.1%
1,833
1,613
220
2017e
150
143
7
59
132.8
130.9
885.6
3.0%
3.5%
2,021
1,691
330
2018e
155
150
5
61
135.6
134.2
874.7
2.1%
4.1%
2,329
1,907
422
2019e
160
155
5
64
138.3
137.0
864.6
2.0%
3.3%
2,567
2,039
528
2020e
165
160
5
67
141.1
139.7
855.0
2.0%
3.2%
2,803
2,148
655
2021e
170
165
5
69
143.8
142.5
846.1
1.9%
3.1%
3,060
2,275
786
2022e
175
170
5
70
146.6
145.2
837.6
1.9%
3.0%
3,341
2,399
943
2023e
180
175
5
71
149.3
148.0
829.6
1.9%
2.9%
3,648
2,517
1,131
2024e
185
180
5
72
152.1
150.7
822.1
1.8%
2.8%
3,983
2,625
1,358
9.46 11.36 12.95 13.79 15.27 16.30 17.25 18.27 19.37 20.55 21.82
27.7% 20.1% 14.0%
6.5% 10.7%
6.7%
5.8%
5.9%
6.0%
6.1%
6.2%
8,970 11,313 12,506 12,729 14,062 14,743 15,228 15,816 16,364 16,854 17,263
-22.2% 26.1% 10.5%
1.8% 10.5%
4.8%
3.3%
3.9%
3.5%
3.0%
2.4%
385.6% 26.1% 15.2% 10.2% 15.3% 10.2%
9.2%
9.2%
9.2%
9.2%
9.2%
VALUATION
HISTORICAL CASH FLOWS
TL mn
Revenue
YoY Growth
Adj EBIT
Margin
Tax Rate (%)
Tax
NOPAT
Minority Interests
Margin
Capex
Margin
Depreciation & Amortization
Margin
Net Working Capital Change
Margin
Free Cash Flow
PROJECTED CASH FLOWS
2
3
4
5
6
7
8
2010
303.5
30.38%
19.0
6.27%
0.0%
19.0
2011
396.1
30.52%
26.1
6.58%
2.5%
(0.7)
25.4
2012
494.5
24.84%
20.4
4.12%
8.3%
(1.7)
18.7
2013
696.6
40.86%
6.2
0.89%
38.7%
(2.4)
3.8
2014
1,260.9
81.02%
41.9
3.32%
1.3%
(0.6)
41.3
2015
1,590.6
26.14%
34.7
2.18%
0.0%
34.7
2016
1,833.1
15.25%
44.1
2.41%
5.0%
(1.0)
43.1
2017
2,020.8
10.24%
42.6
2.11%
0.0%
42.6
2018
2,329.0
15.25%
60.1
2.58%
3.0%
(1.8)
58.3
2019
2,567.4
10.24%
71.8
2.80%
5.0%
(3.6)
68.2
2020
2,803.1
9.18%
82.9
2.96%
6.5%
(5.4)
77.5
2021
3,060.5
9.18%
94.5
3.09%
7.3%
(6.9)
87.5
2022
3,341.4
9.18%
106.0
3.17%
7.3%
(7.8)
98.2
2023
3,648.2
9.18%
103.5
2.84%
5.8%
(6.0)
97.5
2024
3,983.1
9.18%
115.7
2.90%
6.1%
(7.1)
108.6
0.0
(9.8)
3.23%
9.3
3.07%
18.1
5.97%
0.4
0.0
(17.5)
4.43%
10.9
2.75%
38.1
9.63%
(19.3)
0.0
(6.2)
1.25%
11.7
2.37%
10.9
2.20%
13.3
0.0
(14.1)
2.02%
15.2
2.18%
58.2
8.35%
(53.3)
0.0
(28.2)
2.24%
23.1
1.83%
115.3
9.14%
(79.0)
(13.3)
0.84%
22.5
1.42%
52.3
3.29%
(8.4)
(14.1)
0.77%
23.3
1.27%
44.4
2.42%
7.8
(19.5)
0.96%
24.2
1.20%
20.3
1.00%
27.0
(19.9)
0.85%
25.1
1.08%
40.9
1.76%
22.6
(19.5)
0.76%
25.9
1.01%
21.1
0.82%
53.5
(22.0)
0.78%
26.8
0.96%
23.9
0.85%
58.5
(24.6)
0.80%
27.9
0.91%
31.9
1.04%
58.8
(27.6)
0.83%
29.0
0.87%
41.9
1.25%
57.7
(29.8)
0.82%
30.3
0.83%
45.8
1.25%
52.3
(32.3)
0.81%
31.7
0.80%
50.0
1.25%
58.0
PV of Cashflow
0
0
1
78
8
24
18
38
37
33
29
23
23
Our long term EBITDA margin average is 4.6%; our gross margin assumption is 16% after 2017 (in line with
company guidance) however our EBITDA margin forecast is below company guidance. Personnel expenses
make up around 3.4% over the forecast period in average (3.6% in 2015e); the reason for the relative decline is
the increasing weight of e-commerce sales as well as franchising growth model. We use adjusted EBIT (EBIT
plus other operating income minus other operating expenses) in our DCF analysis. Other operating income
mostly consists of term sales interest income and FX gains related to operations. Similarly other operating
expenses mostly consists of term purchases interest expense and FX losses. 2016 prospects could change if
there would be a regulation change relaxing instalments on credit cards. As for capex, an average of 25% of
total capex we estimated between 2015 and 2024 comes from intangible assets (license, software etc). Based
on our calculations BMEKS’ c.6% of capex in 2014 was intangible investments, which increased to 41% in 1h15.
Valuation Table
Base
DCF: WACC: 13.1% ; Terminal Growth:4.5%
PEER: EV/EBITDA'15e & EV/EBITDA'16e: 7.5x& 6.0x
Target mcap - mn
Target price per share
Current price per share
Upside potential
Weight
60%
40%
(per share)
Upside
Target price
TL 2.67
TL 2.28
Potential
26%
8%
TL 300
TL 2.50
TL 2.12
17.9%
2|P a g e
16 September 2015
ABOUT BIMEKS
Bimeks is the first Technology Retailer (Technology Superstores - TSS) of Turkey, established in a
small store in Istanbul in 1989. As of 2014/12, Bimeks operates 140 stores (55 of them franchise
stores) in 58 provinces of Turkey with a total sales area of 131,000 square meters areas and online
store (www.bimeks.com.tr), offering a wide range of products to consumers, from IT products to
Consumer Electronics (CE), from home appliances to personal care and accessories. Shares began
trading on the Borsa Istanbul Stock Exchange in 2011. Bimeks acquired two technology retailer
chains in 2013 and 2014. Electro World of Dixons Retail of UK and Darty of Darty France, operating in
Turkey since 2008, were acquired. As a result, Bimeks is now the second largest Technology SuperStore (TSS) chain in Turkey with c.4% market share in technical consumer goods sector (excluding PH
& OE).
Bimeks’ business strategy focuses on increasing online sales with omni-channel strategy
(establishing each store as a fulfilment centre for online sales and striving for same-day delivery from
all stores), increasing geographical access/penetration with Store-based Partnership model (SbP) (a
franchising model developed by Bimeks), multi-format stores management (geographically
optimized product portfolio by store clusters) and algorithmic management of inventory and
product price (relies on in-house software development). Online store is of particular importance
aiming to derive c.18% of revenues from online sales by 2017 (currently 9%). In our model, online
sales make up 23% of revenues by 2020 and 28% by 2022. In terms of geographical reach, BMEKS
currently operates in 57 cities (there are 81 cities in Turkey).
BMEKS is focusing on alternative product categories to improve/maintain margins. BMEKS expects TSS share to
increase sharply in overall domestic white goods and small appliances (MDA+SDA) market in five years. In their
product breakdown, BMEKS expects MDA+SDA sales to make up 20-25% of their revenues in five years, up from
current 15%.
Products with lower margin include CE (TV&Home
Theater, sound), IT (laptops, notebook, PC, USB, e-books,
web cam), and Mobile. Products with higher margin
include white goods, small appliances, accessories,
service and convenience packages, personal care
products).
Source: Bimeks presentation
After the credit card setback limiting instalments, BMEKS implemented a payment system to customers, named
“Bi imza”. This payment method allows customers to purchase products with payments up to 24-month
instalments without requiring a credit card or bank loan (the receivables are secured by an insurance company).
In the first five months of 2015, BMEKS sales through this channel reached TL55mn, approximately 8% of
revenues. In addition, Bimeks uses pre-approved loans to its clients by Isbank to be used exclusively in its stores.
3|P a g e
16 September 2015
SHAREHOLDING STRUCTURE
SPV Bilisim ve Dis Ticaret
Mehmet Murat Akgiray*
Other
TOTAL
Nominal (MN TL)
38.66
22.22
59.12
120.00
Share (%)
32.22%
18.52%
49.26%
Source: Bimeks
* Mehmet Murat Akgiray owns 51.46% including indirect stakes
Privilege: A Type shares (not traded) has 100 votes for each
share in General Assembly (total 3mn shares).
Treasury Shares: None (the portion of shares that a company
keeps in their own treasury. Treasury shares may have come
from a repurchase or buyback from shareholders). However,
BMEKS has decided to initiate a share buyback program for
maximum number of shares to be purchased according to
regulations, which is up to 10% of paid in capital. Share buyback
program will be subject to approval from AGM. We think buyback program is premature as the Company already has
relatively high leverage; spending cash for buy-back program
would only increase financial leverage, which is unnecessary in
our opinion in an environment with increasing interest rates and
subdued domestic demand.
HISTORICAL FINANCIALS & KPIs
BMEKS at a glance
# of stores (year-end)
# of stores (begining of the year)
New Additions (net)
Franchise Stores
Number of Provinces
Sales Area (000 sqm)
Average Sales Area (000 sqm)
Sales Area per Store (sqm)
Sales Area Growth y/y
Average Store Growth y/y
Revenues MN TL
Retail Operations
E-Commerce
Revenue Per Average Store - TLmn
Growth y/y
Revenue Per average NSA - TL
Growth y/y
Revenue Growth y/y
Source: Bimeks, TERA
2009
29
30
1
0
0
19.1
18.9
659.1
-71.5%
-233
226
7
7.65
-11,979
---
2010
36
29
7
3
22
22.6
20.9
627.6
18.2%
10.2%
304
293
11
9.01
17.7%
14,045
17.2%
30.4%
2011
69
36
33
20
35
34.8
28.7
503.6
53.8%
61.5%
396
380
16
7.24
-19.6%
13,263
-5.6%
30.5%
2012
69
69
0
33
42
39.9
37.3
578.2
14.8%
31.4%
495
470
25
6.81
-6.0%
12,588
-5.1%
24.8%
2013
106
83
23
44
51
96.0
56.2
905.5
0.0%
0.0%
260
0
0
2.75
0.0%
4,617
0.0%
-47.5%
2014
140
106
34
55
58
131.3
129.8
937.8
36.8%
40.6%
1,261
1,164
97
9.46
27.7%
8,970
-22.2%
385.6%
1q15
134
140
-6
53
57
124.3
131.0
927.9
4.1%
17.1%
399
365
34
2.67
23.1%
2,788
-16.6%
46.1%
2q15
136
134
2
55
57
125.1
128.8
920.1
-6.6%
2.3%
397
317
46
2.35
21.4%
2,465
-4.9%
35.3%
BMEKS took advantage of general sector trend towards TSS channels as well as two major acquisitions in
growth (Electro World and Darty). The Company’s market share in TCG sector increased to 2.3% in 2013 and
3.6% in 2014 with Elektroworld and Darty additions from 1.85% in 2011. Sales per sqm revenues took a hit in
2014 as a result of acquisitions impact (average sales area sqm climbed from 41k sqm in 3q13 to 130k sqm in
4q14) as well as because of credit card regulation’s direct impact and TL depreciation’s negative sentiment and
buying power impact on consumers. In 2015, sales per sqm are stabilizing as the new store growth is subdued
(129sqm latest sales area).
4|P a g e
16 September 2015
BİMEKS MN TL
Revenues
Gross Profit
Gross Margin
EBIT
EBIT Margin
Depreciation
EBITDA
EBITDA Margin
Adj EBITDA
Adj EBITDA Margin
Pre-tax Profit
Net Income
NET Margin
Net Cash (Debt)
Capex
Free Cash Flow
Gross Dividend TL MN
DPR
2010/12
303.5
60.5
19.9%
16.7
5.5%
9.3
26.0
8.6%
28.3
9.3%
1.1
0.9
0.3%
-53.5
-48.1
0.4
0.0
0%
2011/12
396.1
87.4
22.1%
25.2
6.4%
10.9
36.1
9.1%
37.0
9.3%
4.0
4.0
1.0%
-32.2
-17.5
-19.3
0.0
0%
2012/12
494.5
88.8
18.0%
16.1
3.3%
11.7
27.8
5.6%
32.1
6.5%
3.2
1.9
0.4%
-11.4
-6.2
13.3
0.0
0%
2013/12
696.6
119.4
17.1%
11.7
1.7%
15.2
26.9
3.9%
21.4
3.1%
14.3
12.2
1.7%
-75.3
-14.1
-53.3
0.0
0%
2014/12
1,260.9
243.2
19.3%
45.0
3.6%
23.1
68.1
5.4%
65.0
5.2%
9.0
9.2
0.7%
-181.8
-28.2
-79.0
0.0
0%
4YR CAGR/Average
52.6%
56.8%
19.3%
115.9%
4.1%
37.6%
68.2%
6.5%
65.6%
6.7%
n.m.
n.m.
0.8%
47.3%
5.2%
Source: Bimeks, TERA
Average gross margin is 19.3% since 2010; however Bimeks acquired two technology retailer chains in 2013
and 2014: Electro World of Dixons Retail of UK and Darty of Darty France. Therefore the acquisitions distorted
financials. For instance, based on our calculation, 2013 gross margin would have been 19.8% vs. 17.1% if it
wasn’t for Elektroworld. Similarly, EBIT margin would be 4.1%, not 1.7% and net margin would be 0.5%, not
1.7%. Net debt is increasing over the years as a result of acquisitions and working capital. Financial expenses
are around 50% of EBITDA in 2014, which came down from 61% in 2013 and 2012.
2Q15 & 1H15 RESULTS
BMEKS- MN TL
Net Sales
Gross Profit
Gross Margin
EBITDA
EBITDA Margin
Adj EBITDA
Adj EBITDA Margin
Financial Inc. (Exp.) Net
Pre-tax Profit
Net Income
NI Margin
2015/2Q
2014/2Q
Δ Y/Y
2015/1Q
Δ Q/Q
2015/06
2014/06
Δ Y/Y
397.4
66.7
16.8%
16.6
4.2%
13.8
3.5%
-9.9
-1.1
2.3
0.6%
293.7
64.4
21.9%
16.1
5.5%
15.3
5.2%
-3.7
5.7
5.5
1.9%
35%
4%
-5.1pp
3%
-1.3pp
-9%
-1.7pp
n.m.
n.m.
-57%
-1.3pp
399.2
62.6
15.7%
18.4
4.6%
12.8
3.2%
-6.3
1.4
2.5
0.6%
0%
7%
1.1pp
-10%
-0.4pp
8%
0.3pp
n.m.
n.m.
-8%
0.0pp
796.6
129.4
16.2%
35.0
4.4%
26.6
3.3%
-16.2
0.3
2.3
0.3%
566.9
109.6
19.3%
25.8
4.6%
26.1
4.6%
-12.8
1.9
1.7
0.3%
41%
18%
-3.1pp
36%
-0.2pp
2%
-1.3pp
n.m.
-84%
35%
0.0pp
Source: Bimeks, TERA
E-commerce maintained strong growth with 110% y/y increase in 1h15 to TL 80mn (c.10% of revenues).
Consolidated topline recorded 41% y/y growth thanks to higher market share vis-à-vis stabilizing per sqm sales.
EBITDA margin was 4.4% in 1h15, implying a slight decline over the same period last year due mainly to lower
gross margin. It appears as though end-prices are not fully reflecting cost increases (as a result of TL
depreciation and volatility); in turn the Company has gained market share by partly sacrificing margins.
However cost control on the opex line (especially personnel expenses) made up for some of the lost gross
margin.
5|P a g e
16 September 2015
Capex was TL5.5mn in 2q15 and TL6.2mn in 1h15. Around 40% of 1h15 capex was intangible related
investments.
BMEKS recorded minus TL87mn free cash flow in 1h15 based on our estimates mainly due to increase in net
working capital (mostly inventory related). Net cash was TL182mn at the end of 2014/12, which climbed to
TL286mn as of 2015/06.
TL mn
Revenue
YoY Growth
Adj EBIT
Margin
Tax Rate (%)
Tax
NOPAT
Minority Interests
Margin
Capex
Margin
Depreciation & Amortization
Margin
Net Working Capital Change
Margin
Free Cash Flow
2015/06
797
40.51%
15.3
1.93%
0.8%
(0.1)
15.2
2014/06
567
0.00
(6.23)
0.78%
11.2
1.41%
107
13.45%
(86.9)
0.00
(19.99)
3.53%
11.5
2.02%
88
15.61%
(83.9)
14.7
2.59%
10.9%
(1.6)
13.1
6|P a g e
16 September 2015
TECHNICAL CONSUMER GOODS SECTOR
TCG market reached around TL36.2bn in
2014 ($16.6bn) in Turkey (2.1% of GDP);
growth is not impressive in 2014...
According to GfK survey company, Technical Consumer Goods
(TCG) market reached around TL36bn in 2014 ($16.6bn) in
Turkey, 2.1% of GDP. The market grew by 17% y/y in TL terms
yet the growth was limited to 2% y/y in USD terms in 2014. As
many products are imported and therefore local prices are
periodically adjusted to currency differentials, growth in USD
term indicates that 2014 was a lacklustre year compared to
16% growth in USD terms in 2013.
1h15 growth was 16% y/y in TL terms yet down 2% in USD
terms, therefore the growth pace is not getting stronger.
We have adopted a top-down approach
and assumed 2.1-2.3% of GDP spending
for the sector...
High sensitivity to regulations affecting
consumer demand...
Y/Y Growth Figures
Credit Card
Spending
(Electronics)
BMEKS Revenue
Growth*
TKNSA Revenue
Growth
2011
30.7%
30.5%
29.2%
2012
33.7%
24.8%
39.8%
2013
17.6%
29.2%
26.7%
2014
2.8%
81.0%
2.0%
2015/06
6.8%
45.9%
-0.1%
Source: BKM, Tera, Company Reports
* 2013 growth for BMEKS exclude Elektroworld acquisition impact
* 2014 growth of BMEKS is distorted due to elektroworld acquisiton and merger as well as
Darty asset transfer (stores)
Demand in electronics is consumer driven; therefore
regulations by authorities on supporting or curbing consumer
demand through various mechanisms is very influential for the
whole electronics retails sector as witnessed in 2014.
Credit card regulations that came into effect in February
2014 eliminated the option of purchasing telecommunication
products with credit card instalment payments and limited the
number of instalments to nine for other electronic products.
Credit card spending growth in electronics averaged 27% per
annum between 2011-2013 which dropped to 3% in 2014.
1h15 spending has picked up only slightly.
If the regulation changes and allows for the credit card
instalment limits to increase, then that would be a strong
BUY signal, in our opinion.
Source: BRSA, Tera
7|P a g e
16 September 2015
Based on sales channels, Consumer
Electronics Stores (CES) still has the
highest market share albeit declining...
The market share of Technical Super Stores (TSS) and Telecom
Specialists (TCR) are increasing in the last 6 years.
Teknosa (TKNSA), Bimeks (BMEKS), Mediamarkt, Gold and
Vatan are classified under TSS; Turkcell, Vodafone, Avea under
TCR. In 2014, credit card regulation increased TCR share
whilst decreasing TSS share.
Sector growth will come from
demographics (c.1% per annum growth
and young population) as well as further
shift to technology products within the
final consumption allocation...
Household final consumption expenditure per
capita (constant 2005 US$)
North America
High income: OECD
OECD members
Euro area
European Union
Europe & Central Asia (all income levels)
High income: nonOECD
Turkey
World
Latin America & Caribbean (all income levels)
Latin America & Caribbean (developing only)
Europe & Central Asia (developing only)
East Asia & Pacific (all income levels)
Upper middle income
Middle income
Low & middle income
East Asia & Pacific (developing only)
Lower middle income
2012
29,822
22,043
19,520
18,168
16,944
11,525
6,057
5,755
4,599
4,088
3,805
3,151
3,015
2,148
1,387
1,275
1,173
749
2013
30,295
22,258
19,705
18,002
16,889
11,557
6,273
5,975
4,658
4,171
3,872
3,303
3,108
2,238
1,446
1,327
1,243
787
Source: World Bank, TERA
Age
Population - 2014
0-9
12,610,161
10-14
6,252,269
15-24
12,782,381
25-34
12,789,496
35-44
11,428,673
45-64
15,639,962
65+
6,192,962
Total
77,695,904
Source: TUIK, TERA
Breakdown
16%
8%
16%
16%
15%
20%
8%
100%
Tablets, smartphones and LCD TVs will
remain the key driving forces of growth...
Compared to the segment Turkey is in, household final
consumption expenditure per capita is already very high in
Turkey (upper middle income group based on World Bank
statistics; constant 2005 US$).
Based on WB data, Turkey is almost the highest spender per
capita within this group.
Therefore we do not foresee a strong upside in terms of
higher weight in per capita spending. Turkey is already
spending c.68% of income on household final consumption.
Household final consumption expenditure per capita (private
consumption per capita) is calculated using private
consumption in constant 2005 prices and World Bank
population estimates. Household final consumption
expenditure is the market value of all goods and services,
including durable products (such as cars, washing machines,
and home computers), purchased by households.
Having said that, demographics is in favour of Turkey. 41% of
the population is under age of “25”. 57% of the population is
under age of “35”. Given the fact that younger generations
are the primary target for TCG products, Turkey’s advantage is
obvious. Therefore we think TCG weight in consumer spending
will increase gradually hence our higher weight forecasts in
GDP.
In Turkey, telecommunications closed 1h15 as one of the
best-growing sub-segment and resulting in 23% y/y growth.
Media tablets grew by 5.3% y/y (source: GfK). On the
consumer electronics side, 1q15 growth was 13% y/y.
Globally, there is a continued shift towards economy-priced
models, which is pressuring prices.
8|P a g e
16 September 2015
Income Statement (TL mn)
Revenues
EBITDA
Depreciation
EBIT
Financial income, net
Profit before tax
Profit from continuing operations
Minority interest
Reported net earnings
Adj EBITDA
Reported EPS (TL)
2013
696.6
26.9
15.2
11.7
-16.4
14.3
12.2
0.0
12.2
21.4
0.101
2014
1,260.9
68.1
23.1
45.0
-33.5
9.0
9.3
0.0
9.3
65.0
0.077
2015E
1,590.6
70.4
22.5
47.9
-36.4
0.5
2.5
0.0
2.5
57.3
0.021
2016E
1,833.1
82.5
23.3
59.2
-43.1
3.3
3.3
0.0
3.3
67.4
0.028
2017E
2,020.8
83.5
24.2
59.3
-46.5
-1.4
-1.4
0.0
-1.4
66.8
-0.012
2015/6M
796.6
35.0
11.2
23.7
-16.2
0.3
2.3
0.0
2.3
26.6
0.020
2013
40.9%
-3.2%
536.9%
2014
81.0%
152.9%
-23.8%
2015E
26.1%
3.5%
-72.5%
2016E
15.2%
17.1%
30.1%
2017E
10.2%
1.3%
-143.7%
2015/6M
40.5%
35.5%
35.2%
Balance Sheet (TL mn)
Cash & cash equivalents
Trade receivables & Inventory
Tangibles & Intangibles
Goodwill
Real Estate Investments
Other Assets
Total Assets
Financial borrowing
Trade payables
Other liabilities
Minority Interest
Shareholders' Equity
Net Debt
2013
70
321
108
0
1
22
522
145
224
19
0
135
75
2014
68
428
118
0
1
27
643
249
220
39
0
148
182
2015E
73
616
110
0
1
38
839
296
360
31
0
152
223
2016E
79
625
102
0
1
43
851
331
328
36
0
156
252
2017E
85
726
98
0
1
46
957
352
410
39
0
155
267
2015/6M
61
516
114
0
0
33
724
283
258
27
0
155
223
Cash Flow Summary (TL mn)
Adj EBIT
Tax
NOPAT
Minority Interests
Capex (net)
Depreciation & Amortization
Net Working Capital Change
Free Cash Flow
DPS
Key financial ratios
ROE
Adj EBITDA margin
Net Margin
Net debt/Equity
Net debt/EBITDA
Equity/Total Assets
Leverage
Interest coverage
Cash dividend pay-out
2013
6
-2
4
0
-14
15
58
-53
0.00
2013
9.0%
3.1%
1.7%
0.56x
2.80x
25.8%
2.88x
0.72x
0.00%
2014
42
-1
41
0
-28
23
115
-79
0.00
2014
6.2%
5.2%
0.7%
1.22x
2.67x
23.1%
3.43x
1.34x
0.00%
2015E
35
0
35
0
-13
23
52
-8
0.00
2015E
1.7%
3.6%
0.2%
1.47x
3.17x
18.1%
4.53x
1.32x
0.00%
2016E
44
-1
43
0
-14
23
44
8
0.00
2016E
2.1%
3.7%
0.2%
1.62x
3.06x
18.3%
4.46x
1.37x
0.00%
2017E
43
0
43
0
-19
24
20
27
0.00
2017E
-0.9%
3.3%
-0.1%
1.72x
3.20x
16.2%
5.16x
1.28x
0.00%
2015/6M
15
0
15
0.0
-6
11
107
-87
-2015/6M
2.0%
3.3%
0.3%
1.43x
1.59x
21.4%
3.66x
1.47x
--
Growth
Sales
EBITDA
Net earnings
Source: Bimeks, TERA estimates
9|P a g e
16 September 2015
TERA MENKUL RATING
BUY
NEUTRAL
SELL
* Current estimated CoE: 15.5%
Upside potential more than estimated CoE*
Upside potential between 0% and estimated CoE*
No upside potential
Tera Menkul Degerler A.S. Eski Buyukdere Cad. Iz Plaza Giz Floor 8 Maslak, Istanbul
Tel: +90 212 365 1000
www.terabrokers.com
[email protected]
Disclaimer
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10 | P a g e