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Turkcell Iletisim (TKC) Message Board

  • chiefofthechief chiefofthechief May 8, 2008 9:17 PM Flag

    Recent research from goldman sachs

    Turkcell (ADR) (TKC): Broadly in-line 4Q07 results; maintain Buy March 04, 2008

    What's changed

    Turkcell reported 4Q07 results (February 28) which were close to what we expected and brought no surprise, while the announced payout was slightly lower than we expected (40% of net income vs. our expectation of 50%). However, on the conference call, management expressed awareness of the regulatory pressure on the pricing policy (prohibiting Turkcell from setting on-net calls prices below the interconnect rates). For 2008, the company expects a double-digit TRY-denominated revenue growth rate (anticipating a growth slowdown compared to 2007) and a decline in EBITDA profitability.


    Implications


    We have updated our model to reflect 4Q07 results. We have increased our voice yield outlook for Turkey to reflect the regulatory pressure to raise on-net tariffs, but we also decreased MOUs growth forecast since cheap on-net calls were a key strategy for usage stimulation. Our estimates for Ukraine are almost unchanged. Under our conservative assumptions, we forecast 11.7% TRY revenue growth for 2008, which is at the low-end of the management projection. We still believe that Turkcell is inexpensive on a relative basis and there may well be positive surprises (taxation revision or a change in payout given its US$3.1 bn cash holding) in the medium term, and reiterate our Buy rating on the stock.


    Valuation


    Our 12-month, SOTP-based price target for Turkcell is US$30. The stock trades at 2008E EV/EBITDA of 5.7x, a discount to the sector average of 6.8x, supporting our Buy rating.


    Key risks


    The main risks to our view and price target are an increase in competition, regulatory changes and macroeconomic deterioration.

    Recent Research from Goldman Sachs

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