Turkey stock market company, Sabanci Holding SAHOL TI , read the latest news, updates, reports and analysis.
İŞ INVESTMENT – Sabanci Holding Company Update – Report 2Q16 – 11.08.2016
Company Update Upside Potential 36%
Significant EBITDA growth is expected in 2H16 at Enerjisa
NI is in-line with estimates. Sabanci Hol di ng announced TL712mn of net profit (+25% YoY, +11% QoQ) in its consolidated 2Q16 financials in line with consensus call of TL715mn. The YoY improvement is attributable to robust YoY contribution of banking and energy segments.
Enerjisa’s operational profit grew by 22% in 2Q16. As the largest unlisted asset in the portfolio Enerjisa posted TL550mn of adjusted EBITDA in 2Q16, up by %22 YoY. The increasing RAB (Regulated Asset Base) and utilization of feed-in-tariff are the main drivers of the growth.
Accordingly, 6M16 adjusted EBITDA reached to TL1,126mn, up by 25% YoY. The adjusted bottom-line of Enerjisa increased to TL27mn of net profit from TL23mn of net loss in the same period a year ago mainly due to the improved operational profitability.
The Management revised up operational growth guidance for Enerjisa. Despite only 25% YoY growth in 1H16, the Management revised up its energy business’ operational profit growth guidance for 2016 to 45-55% from 40-50%. The Management’s revised guidance implies a significant 75% of growth in the second half of the year over 2H15. The further increasing RAB, utilization of feed-in-tariff, dispatched opportunities of hydro’s and increase in capacity will be the main drivers of the growth.
We raise our valuation for Enerjisa. We revise our valuation for Enerjisa to US$3.3bn, up by 6%. The revision mainly came from the additional contribution of hydro PPs dispatched mechanism and utilization of lignite incentive for Tufanbeyli TPP (450MW). We now expect Enerjisa to post TL2,260mn of EBITDA in 2016, implying 50% growth YoY (previous: +40%) and also signalling 85% YoY growth in 2H16. We also forecast Enerjisa’s consolidated EBITDA to show a CAGR of 23% until 2020. The utilization of feed-in-tariff mechanism in generation and the announcement of 3rd regulatory period (2016-2020) in distribution&retail significantly increased the visibility of operational profitability for this period. Please see our recent energy sector report: Facing a capacity glut (June’16).
Accordingly, we slightly increase our 12M TP for SAHOL to TL12.65 from TL12.5. Our revised TP offers 36% upside potential to the current price vs 20% upside potential to our bottom-up BIST Index target of 95k, therefore we reiterate our OURPERFORM recommendation for the shares.
The current NAV discount of the Holding and its relative value against its major asset Akbank signal a buying opportunity. The Conglomerate currently trades at a 36% discount to its current NAV, higher than its oneyear and 3Y averages of 33% and 29%. Making roughly half of the NAV, Akbank is also a good proxy for SAHOL shares. Currently, the shares trade at a 43% premium to its stake in Akbank, much lower than its one year average of 50% and three year average of 54%. Re-rating of Akbank on the back of ROE expansion caused the valuation gap of the two to narrow. Note that Akbank is still one of our cherry-pick name in the banking space. On the other hand, we expect a very strong operational performance for its largest unlisted asset Enerjisa in the second half of the year as discussed earlier.
The possible IPO of Enerjisa in 2017-2018 period (or partial divesture earlier) will crystalize the value, further improve the operational and financial position of the asset and increase the transparency of the portfolio, which is likely to lower the NAV discount attached to the Holding by the market in our view.
