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Turkish Airlines THYAO Stock, Company News and Analysis

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14 Haziran 2016

Turkey stock market company, Turk Hava Yolları Turkish Airlines THYAO TI , read the latest news, updates, reports and analysis.

İŞ INVESTMENT – Turkish Airlines THYAO TI Company Report – 14.06.2016

OUTPERFORM Upside Potential 102%

THY May, 2016 Traffic: O&D continues to decline

Total pax number grew by 5% year-over-year (yoy) to 5.7mn in May, on the back of domestic and int-int transit pax growth rates of 1% and 10%, respectively. However, international O&D passenger number strongly declined 13.6%, due to geographical security concerns and political disputes with Russia which negatively effected Russian tourist numbers. ASK increased by 11% to 14.7bn, while RPK increased by 5% yoy to 10.9bn.
Passenger load factor (PLF) decreased by 4.3ppts to 73.8%. International PLF was down by 5.2ppts yet domestic PLF increased 1.7ppts. We expect ongoing negative trend in international PLF continues.
Total ATM rose by 4% yoy to 41.1k.
Business/Comfort Class figures declined by 2.2% in 5M16.
Cargo and mail carried in May increased by 6% to 68.9k tons. Please note that, THY introduced partnerships with several major Turkish shipping companies to further increase cargo volumes.
Total number of aircraft increased to 322 as of May 2016 (277 as of May 2015). The carrier has 82 wide-body (64 as of May 2015), 240 narrow-wide (226 as of May 2015) and 11 cargo aircraft.

In the 2Q16 point-to-point international passenger shrunk by 14%. We expect a double digit international yield contraction in the 2Q16 as well. For the rest of the year, we believe that the current headwinds are not likely to vanish in short-term, which will have negative impact on tourist numbers and financials.

DEUTCHE BANK- Turkish Airlines THYAO TI Company Report Summary – 27.04.2016

Headwinds ahead, but Buy for the long haul

Rising pressure on passenger yields and load factors results in significant stock price underperformance and a cut in our estimates

In 1Q16, faced with ever-weakening demand as a result of increased security concerns, and an acceleration in capacity growth, owing to the fleet purchase plan, THY appears to have become more aggressive in pricing than initially expected and potential gains from the low oil price have been washed away. We sense that this negative backdrop is likely to continue throughout 2Q, while a pick-up in oil prices poses an additional headwind. What’s more, year to date strength in the EUR and JPY has led to significant non-cash FX losses for THY (DBe: TRY714m in 1Q16). These adverse developments have led to the significant underperformance of the stock (down 24% ytd vs. BIST100), and lead us to cut our 2016 estimates and target price on the airline. We reiterate our fundamental Buy rating, but acknowledge the stock is likely to remain volatile in the short term.

However, late bookings and Expo2016 could improve traffic in the peak season However, we sense that if the security concerns do not rise further, a potential recovery in passenger traffic is likely in the peak season through not only late bookings (thanks to Turkey’s proximity advantage), but also Expo 2016, which will be held in Antalya. Note that Expo 2016, which is being hosted by Turkey for the first time, is expected to host 5m foreign visitors (estimate by Tourism Ministry) during Apr-Oct 2016.

Following a weak 1H16, THY may see years of strong margin expansion, as THY’s years of aggressive capacity growth comes to an end by end-2016 THY’s seat capacity has posted a CAGR of 15% over the past five years and is likely to grow by an additional 16% in 2016. In 2017, however, seat capacity will grow by mere 1% to be followed by 5% in 2018. We sense that, given the tough operating environment and bottleneck in airport capacities, THY may not revise the expansion programme materially and this may lead to substantial rises in load factors and profitability in the years to come. Coupled with the deleveraging process, this could lead to a significant rise in THY’s valuation.

Share buyback programme to limit further downside risks

THY’s share buyback programme, approved on 4 April – the first in its history (to buy up to TRY500m at a maximum of TRY20/sh), could limit downside risks.

Valuation and risks: potential delay in new airport, oil prices and geostrategics Trading at P/BV of 0.6x, THY has the lowest multple among its peers. Despite the cut in our target price from TRY11.5 to TRY9.10, we maintain Buy. We base our target price on EV/EBITDAR (at 6.0x target). Risks: macro/geostrategic instability and a sharp rise in oil prices.

İŞ INVESTMENT – Turkish Airlines THYAO TI Company Report – 14.04.2016

THY March, 2016 Traffic: Declining tourism figures will hit 1Q financials

Total pax number grew by 8% year-over-year (yoy) to 5.0mn in March, on the back of domestic and int-int transit pax growth rates increasing by 9% and 24%, respectively. However, international point-to-point passenger number strongly declined 9.5%, due to geographical security concerns and increased tension with Russia which negatively effected Russian tourist numbers. ASK increased by 17.5% to 13.7bn, while RPK increased by 13.7% yoy to 10.3bn.
Passenger load factor (PLF) decreased by 2.6ppts to 75.4%. International PLF down by 2.9ppts yet domestic PLF stayed flattish. Ongoing declining trend in international PLF continues.
Total ATM rose by 8% yoy to 37.6k.
Business/Comfort Class figures grew by 1.9% in 3M16.
Cargo and mail carried in February increased by 8% to 67.0k tons. Please note that, THY introduced partnerships with several major Turkish shipping companies to further increase cargo volumes.
Total number of aircraft increased to 306 as of March 2016 (268 as of March 2015). The carrier has 76 wide-body (56 as of March 2015), 220 narrow-wide (203 as of March 2015) and 10 cargo aircraft.

In the 1Q16 international transit passenger compensated declining passenger figures. In the 1Q16 point-to-point international passenger shrunk by 5%. We expect a double digit international yield contraction in the 1Q16 as well. For the rest of the year, we believe that the current headwinds are not likely to vanish in short-term, which will have negative impact on tourist numbers.

İŞ INVESTMENT – Turkish Airlines THYAO TI Company Report – 15.03.2016

THY February, 2016 Traffic: Transit passenger growth supports international operations

Total pax number grew by 15% year-over-year (yoy) to 4.5mn in February, thanks to strong domestic and int-int transit pax growth rates increasing by 16% and 28%, respectively. However, international point-to-point passenger number declined 1.3%, due to geographical security concerns and increased tension with Russia which negatively effected Russian tourist numbers. ASK increased by 25% to 12.4bn, while RPK increased by 19% yoy to 9.0bn.
Passenger load factor (PLF) decreased by 3.9ppts to 72.4%. International PLF down by 4.4ppts but domestic PLF stayed flat. Ongoing declining trend in international PLF continues.
Total ATM rose by 16% yoy to 34.5k.
Business/Comfort Class figures grew by 5.8% in 2M16.
Cargo and mail carried in February increased strongly by 21% to 59.5k tons. Please note that, THY introduced partnerships with several major Turkish shipping companies to further increase cargo volumes.
Total number of aircraft increased to 302 as of February 2016 (263 as of February 2015). The carrier has 74 wide-body (55 as of February 2015), 218 narrow-wide (199 as of February 2015) and 10 cargo aircraft.

Despite adverse effects of geographic events, security concerns and Russian crisis causing tourist numbers to decline, THY achieved strong 15% growth yoy in February. However, current headwinds are not likely to vanish in short-term, which will have negative impact on tourist numbers. Also decreasing point to point flights will have a negative impact on yields.

İŞ INVESTMENT – Turkish Airlines THYAO TI Company Report – 16.02.2016

THY January, 2016 Traffic: Not a bad start

Total pax number grew by 8% year-over-year (yoy) to 4.7mn in January despite adverse weather conditions and flight cancelations. Thanks to strong domestic and int-int transit pax growth rates increasing by 15%, THY achieved 7% international growth rate. However, international point-to-point passenger number declined 2.5%, due to geographical concerns. ASK increased by 16% to 13.1bn, while RPK increased by 11% yoy to 9.6bn.
Passenger load factor (PLF) decreased by 2.2ppts to 74.2%. International PLF down by 2.4ppts but domestic PLF increased by 0.4ppt.
Ongoing declining trend in international PLF continues.
Total ATM rose by 8% yoy to 35.8k.
Business/Comfort Class figures grew by 3.5% in January.
Cargo and mail carried in November increased by just 9% to 64.0k tons. Please note that, THY introduced partnerships with several major Turkish shipping companies to further increase cargo volumes.
Total number of aircraft increased to 298 as of January 2016 (262 as of January 2015). The carrier has 73 wide-body (55 as of January 2015), 215 narrow-wide (198 as of January 2015) and 10 cargo aircraft.

Despite harsh weather conditions and declining number of tourist, THY achieved 8% growth yoy in January. However, current headwinds are not likely to vanish in short-term, which will have negative impact on tourist numbers.

Bank of America Merrill Lynch – Turkish Airlines THYAO TI Company Report Highlights – 09.02.2016

Reiterating Buy, PO of TRY 13.15 offers c90% upside

We expect THY to leverage its globally leading network, boasting most number of countries served, to grow pax by 15% in 16E despite geopolitical headwinds putting pressure on direct pax traffic growth. We expect relatively low fuel hedging of c40% for 16E and weak TRY to further support EBITDAR growth of 10% in 16E and 14% in 17E, leading to CAGR 21% growth in 14A-17E vs. global peers average of 13%. We reiterate our Buy rating for THY since despite offering superior EBITDAR growth, at 4.9x/4.3x our 16E/17E EV/EBITDAR estimates, it trades at 16%/26% discount to global legacy airlines average. Our PO of TRY13.15 (previously TRY13.6) offers upside of 91%.