Darkest just before dawn?
A weak Q114 consolidated net profit for Is Ansa Yatirim Holding (IS:ANSA) reflects a period of weakness and uncertainty for Turkish financial markets, negatively affecting trading and commission income. A decisive local election result at the end of March has subsequently seen equities, bonds and the currency strengthening. Trading conditions in Q2 appear much brighter and we have left our full-year forecasts unchanged, anticipating an improved trend for the balance of the year.
Q1 weak but markets recovering
Q1 saw consolidated net profit fall to TRY5.0m (Q113 TRY11.6m and Q413 TRY18.2m). Revenue was 6% lower year-on-year with many important investment banking revenue lines affected by market weakness and low activity levels. Management reports a significant improvement in revenue trends post Q1, following a recovery in financial markets. The same trend will also support Is Investment Trust and Is Asset Management, while Efes NPL Asset management revenues should also accelerate from Q1. We are leaving our full-year forecast (TRY62.1m consolidated net income) unchanged and note that management has similarly confirmed (though not quantified) its full year expectations.
Local elections have eased uncertainty
Since March 2014 lows, the equity market has risen by nearly 25% (in local currency terms) and market interest rates have declined (the two-year government bond yield by more than 200bp from a high of c 11.5%). The currency has continued the recovery that set in since official interest rates were sharply increased in January (from c TRY2.34/US$ to c TRY2.08/US$). A decisive showing by the ruling AKP party in local elections on 30 March has calmed markets ahead of a presidential election in the autumn and a general election in 2015. Meanwhile, the challenge of maintaining economic growth (4.0% in 2013) while reducing above target inflation (9.4% in April) remains.
Valuation: Implied risk premium persists
ISY is trading on an FY15e P/E of 5.1x (broader European universal bank group: 8.9x) and a dividend yield of 6.4% (broader group: 4.5%) and is on a lower P/BV multiple (2015e: 0.6x versus the broader group on 0.8x) despite being forecast to generate a higher ROE (12.4% in FY15e versus a consensus for the broader group of 9.2%). The market continues to attach an increased risk premium to Turkish investment despite recent improvements in markets and sentiment.
To Read the Entire Report Please Click on the pdf File Below