Dogus Otomotiv - Is Investment

Equity / Mid Cap. / Auto part
09/04/2013
Dogus Otomotiv
Outlook
Bloomberg: DOAS TI
MARKETPERFORM
Reuters: DOAS IS
Upside Potential*
Market share gain in 1Q unlikely to be sustained
Investment Positives
Main beneficiary of the macro environment in 2013. As a sole domestic
player, DOAS is the main beneficiary of the expected rebound in the
domestic demand in 2013, supported by lower interest rates and improved
consumer confidence. 1Q retail sales volumes point to a 35% Y-o-Y growth,
implying a 18.2 % market share (compared with 15.1% in 1Q2012). The
market share gain is unlikely to be sustained during the remainder of the
year, due to the new product launches from competitors. We factor in 14.55
market share projection for 2013, compared to 2012 figure at 15.3%, in our
projections.
Stock Data
-1%
*excludes dividend yield
TRY
US$
Price at 08 04 2013
11.55
6.45
12-Month Target Price
11.40
6.40
Mcap (mn)
2,541
1,419
Float Mcap (mn)
648
No. of Shares Outstanding
362
220 mn
Free Float (%)
25.52
Avg.Daily Volume (3M, mn)
4.4
2.5
Market Data
TRY
ISE 100
83,347
US$ Spot Rate
1.7913
One of the highest dividend payers in BIST. The company will pay 86%
of its profits as dividends in 2013, implying to a yield of 8.7%. The average
dividend payout ratio of the company over the past years was 45%.
US$ 12-Month Forw ard
1.8654
Investment Negatives
TRY
US$
Relative to ISE-100
Volatility in exchange rates is the major risk for the profitability. Being
a sole importer, DOAS is open to local market risks including recession, rise
in interest rates and taxes and especially volatility in the f-x rates. Before
consolidation adjustments, import & distribution accounts for c.70% of total
revenues. Additionally, c.80% of DOAS’ new vehicle sales prices are TL
based while their cost structure is € based.
High leverage. In order to avoid fluctuations in f/x rates, company’s
payment method on imported vehicles is cash in advance instead of cash in
documents, benefiting from favorable interest rates. Thus, rise in interest
rates to push up financial expenses may overshadow the bottom-line in
upcoming years.
Price Performance (%) 1 Mn
14.0
161
161
91
TRY
Relative
500
400
10.0
8.0
300
6.0
200
4.0
Top-line increase despite lower sales volume estimate. The company
projects to reach TL5.2bn – TL5.4bn revenues in 2013 compared to
TL5.1bn in 2012 despite lower sales volume estimate, pointing out higher
average selling prices. Cap-ex is projected as TL65mn-TL100mn in 2013
and TL40mn in 2014 mainly related to the construction for Kartal-Istanbul
showroom. However, the company gave an annual cap-ex guidance of TL
25-30mn after 2015.
0.0
1
28
27
25
12.0
2.0
Please refer to important disclaimer at the end of this report.
12 Mn
Price / Relative Price
Outlook and Valuation
Marketperform maintained. Our sum of the part approach valuation for
DOAS incorporates all business lines based on DCF method. To be on
conservative side for valuation, we have not included DOAS’ 3.75% stake
Dogus Holding in our valuation which has a value of US$294mn based on
its appraisal value in DOAS’ 2012 financials. However, the company may
liquidate its share at Dogus Holding to finance its investments in the future.
In this sense, its stake at Dogus Holding might be considered as a hidden
financial resource for DOAS. Our PT of TL11.40 offers 8% total return
potential including 8.7% dividend yield. Higher than expected 4% domestic
auto market growth in 2013 is the upside risk for our valuation.
7
8
8
3 Mn
100
DOAS
Relative to ISE 100
0
02-11 08-11 03-12 10-12 05-13
52 Week Range (Close TRY)
2.57
11.70
Esra Suner
[email protected]
+90 212 350 25 72
Dogus Otomotiv
Conservative budget figures for 2013. Dogus Otomotiv conservatively expects domestic
automotive market (including HCVs) to be around 830K units in 2013, implying a 2% growth over
2012. Additionally, the company budgets to sell 117K units (including Krone trailer & Meiller
dampers) in 2013 down from 126K units in 2012, representing a market share of 13.9% in 2013
down from 15.5% in 2012. The conservative market share estimation for 2013 is explained by
intense competition from rivals’ new model launches in 2013 following a quiet 2012 when bestselling PC models of Renault—Symbol and Fiat - Albea completed their life product cycles.
However, the company also mentioned that sales volume guidance might be revised up to 128K
units during the year, if the momentum observed in domestic auto market during the first three
months is sustained.
Similar dividend pay-out in 2013. Dogus Otomotiv announced to distribute an eye catching
TL220mn gross dividends from its 2012 net earnings (TL1.0 per share), corresponding to a dividend
yield of 8.7% and a 86% dividend pay-out ratio. A similar attractive dividend pay-out seems to be on
cards in 2013.
Will VW establish a production facility in Turkey? Turkish government officials are in close
negotiations with German car maker VW in order to persuade it to establish a production facility in
Turkey considering the advantages of recent attractive incentive package provided to automotive
industry in Turkey and Group’s strong presence in the Turkish market. Dogus Otomotiv’s
management believes that a potential VW production facility for LCVs might be advantageous for
the Group’s sales in Turkey, lowering the selling prices and increasing the brand’s competitiveness.
VW Group is currently evaluating conditions in Turkey. However, VW is likely to invest alone, rather
than establishing a JV with a local partner.
International Peer Comparison. DOAS currently trades at premium with 2013E EV/EBITDA of
9.6x compared to its international peers’ median of 2013E EV/EBITDA of 7.9x. However, since
TUVTURK-Istanbul & TUVTURK North & South, Krone and Meiller operations are consolidated
using the equity pick up method, it will not affect DOAS’ EBITDA but contribute the bottom-line.
Thus, P/E multiples will be more meaningful for comparison. DOAS trades at slightly premium based
on 2013E P/E of 10.3x compared to its international peers’ median of 2013E P/E of 10.2x.
Valuation: Sum of the Parts
Value for DOAS
US$m n
% in Total DOAS
Valuation
947
DOAS
Stake
100%
947
67%
352
25%
Valuation
Methodology
Total Value
US$m n
Core Business
DCF
MVIS Business, total
DCF
TUVTURK North & South
DCF
852
33.3%
284
TUVTURK Istanbul
DCF
DCF
205
37
33.3%
Meiller
68
18
1%
Krone
VDF
DCF
Int.P/B multiples
155
27
49%
76
13
5%
1%
Target Value for DOAS - US$ m n
49%
48%
1,408
2
Dogus Otomotiv
2
3
Sum m ary of Key Financials (TL m n)
Incom e Statem ent (TL m n)
2011A* 2012A*
Revenues
4,808
5,132
EBITDA
273
325
Net income
142
256
Cash Flow Statem ent (TL m n)
Net Income
142
256
Depreciation & Amortisation
20
24
Change in Working Capital
(200)
(42)
Cash Flow from Operations
(33)
243
Capital Expenditure
136
91
Free Cash Flow
(169)
152
Balance Sheet (TL m n)
Tangible Fixed Assets
372
437
Cash & equivalents
48
37
Total assets
1,905
2,223
Short-term debt
467
495
Total Debt
591
592
Total equity
870
1,187
Ratios
Net debt/EBITDA (x)
2.0
1.7
EBITDA Margin
5.7
6.3
Net Margin
2.9
5.0
Valuation Metrics
EV/Sales (x)
0.2x
0.5x
EV/EBITDA (x)
4.4x
7.5x
EV/IC (x)
1.3x
2.3x
P/E (x)
7.4x
4.7x
FCF yield (%)
-16%
13%
Dividend yield (%)
0%
10%
*based on average Mcap during the year
4
5
2013E 2014E
5,235 5,453
322
325
246
245
6
Company Overview
2015E
Import
and distribution of VW brand PCs and
5,659
345 LCVs, Scania brand HCVs, production of
265 Krone trailers and Meiler tippers, aftersales
and retail services and other automotive
265 related services such as Motor Vehicle
28 Inspection business.
(22)
271
45
226
246
26
16
288
76
212
245
27
(24)
248
43
204
489
74
2,337
587
669
1,213
505
77
2,404
586
681
1,248
522
80
2,464
544
668
1,305
1.8
6.2
4.7
1.9
6.0
4.5
1.7
6.1
4.7
0.6x
9.6x
2.4x
10.3x
8%
9%
0.6x
9.5x
2.3x
10.4x
8%
8%
0.5x
9.0x
2.2x
9.6x
9%
8%
Shareholder Structure
0.0%
30.3%
35.2%
12M Trailing Historic Multiples
20.0
EV/EBITDA
34.5%
Dogus Holding A.S.
15.0
Free Float
10.0
Dogus Arastirma Gelistirme ve Musavirlik Hizmetleri
A.S.
Diger Dogus Grubu Sirketleri
5.0
03/2013
Max.
01/2013
11/2012
09/2012
Min.
07/2012
05/2012
03/2012
Median
01/2012
11/2011
09/2011
07/2011
05/2011
03/2011
01/2011
DOAS Enterprise Value/EBITDA
0.0
Foreign Ownership (%)
31/12/2012
26/03/2013
YTD change
62.48
59.34
-5%
Peer Multiple Comparison
Bloom berg Estim ates
Com pany
FORD OTOMOTIV
DOGUS OTOMOTIV S
TURK TRAKTOR VE
TOFAS-TURK OTOMO
PEUGEOT SA
RENAULT SA
VOLKSWAGEN AG
BAYER MOTOREN WK
DAIMLER AG
TATA MOTORS LTD
FIAT INDUSTRIAL
DAIHATSU MOTOR
TOYOTA MOTOR
KIA MOTORS CORP
HYUNDAI MOTOR
*Is Investment Estimates
Median -All Com paniesMedian -TurkeyMedian -Other CountriesTurkey's discount prem ium
2013E
10.4 10.7*
9.8 9.6*
9.4 8.9*
7.7 7.8*
11.2
8.8
6.9
7.8
8.9
3.9
9.0
4.9
14.0
6.8
4.9
8.6
9.8
7.9
22%
9.6
9.6*
EV/EBITDA
2014E
8.3 8.8*
9.3 9.5*
8.8 8.2*
7.1 7.1*
8.7
7.9
6.2
7.6
8.0
3.2
8.3
4.5
10.2
6.8
4.6
7.2
8.8
6.9
28%
8.8
8.8*
2015E
7.6 7.6*
9.4 9.0*
8.2 7.7*
6.9 6.6*
7.1
7.2
5.9
7.8
6.9
2.8
7.8
4.3
9.3
n.a
n.a
6.9
8.2
6.3
22%
3
7.7
7.7*
2013E
12.2 11.3*
10.9 10.3*
12.0 10.3*
12.4 12.3*
n.a
6.1
6.8
8.5
8.7
8.1
9.5
10.2
18.7
4.9
5.4
P/E
2014E
10.4 11.4*
10.8 10.4*
11.2 9.5*
11.3 12.2*
n.a
4.8
5.9
8.2
7.6
6.5
8.2
9.8
12.6
4.5
5.0
2015E
9.8 10.1*
11.5 9.6*
10.8 8.8*
10.6 11.5*
3.1
3.8
5.3
7.9
6.5
5.8
7.8
9.3
10.9
5.1
4.8
Country
11.1 11.3
12.2 11.3*
10.2
10%
10.3 11.4
11.2 11.4*
8.9
28%
9.3 10.1
10.8 10.1*
7.8
28%
TURKEY
TURKEY
TURKEY
TURKEY
FRANCE
FRANCE
GERMANY
GERMANY
GERMANY
INDIA
ITALY
JAPAN
JAPAN
SOUTH KOREA
SOUTH KOREA
Dogus Otomotiv
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Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services
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Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of
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