17/05/2010 TEB

Conference Highlights
Net Holding
Potential asset sales could crystallize value
17 May 2010
Not Rated
Conglomerate
NTHOL ($)
•
Inter Limousine: Net Holding also operates in limousine and luxury
car rental services with chauffeurs. They are also operating some
parking lots in Istanbul. Moreover, recently they inaugurated
operational fleet rental for small and mid-size enterprises.
According to the management, existing car park value stands
at USD4mn with its strong brand name recognition and strategic
position in niche market segment.
2) Duty Free Operations: Net Holding has an Italian partner in duty
free operations and the consortium name is Net/Nuance. The Group
has signed a new 17-year contract in June 2007 for the exclusive
operation of all duty free shops in Antalya Airport Terminals 1, 2, and
CIP and established Net-Urart JV for the operation of these duty free
shops. Net Holding has a 45% stake in Net-Urart where the Italian
Nuance Group has a 55% stake. Note that Nuance Group is the
world’s largest airport retailer and number one in duty free operations
globally. 50% of the Nuance Group is owned by Stefanel and the
remaining 50% by Gruppo PAM.
•
Terminal 1 and CIP sections have become operational in Sept
2007.
•
Terminal 2 has become operational in Sept 2009; hence in 2009
financials of Net Holding, we see the positive impact only in one
quarter. However, the significant positive impact coming from the
duty free operations in Terminal 2 will be recorded in full year 2010
financials. Note that 60% of the total potential comes from
Terminal 2, while 40% is coming from Terminal 1. The total sales
area in Antalya Terminals will reach c.6,500 sqm.
Apr-10
May-10
Mar-10
Jan-10
Feb-10
Dec-09
Oct-09
Jul-09
Nov-09
They have sold Bazaar 54 headquarter in 2009; but they still own 5
buildings (Istanbul, Sultankoy, Denizli, Antalya and Nevsehir) at
35K sqm sales area on 219K sqm land at strategic locations in
Turkey. Excluding the inventory value, the assets are valued at
conservative USD50mn according to the management. On top
of the buildings’ value, the most valuable inventory is gold in the
stock. The company has USD15mn bulk gold (with 2%
discount) plus USD10mn jewellery and carpet. The existing
inventory is expected to be depleted in 2010.
Sep-09
•
Aug-09
1) Touristic Retail: Net Holding is operating in an innovative, largescale and professionally managed touristic shopping center concept.
They sell hand-made carpets, jewellery, leather goods and souvenirs.
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Jun-09
Net Holding has 4 main operation lines: 1) Touristic Retail, 2) Duty
Free, 3) Hotel Management, and 4) Real Estate Development.
ISE 100 Relative (RHS)
0.70
0.65
0.60
0.55
0.50
0.45
0.40
0.35
0.30
0.25
0.20
May-09
Net Holding’s CFO Orlando Carlo Calumeno attended our
conference in London on May 11th, 2010. The major highlights:
Stock Data (as of May 17, 2010)
Bloomberg
NTHOL.TI
Close (TL)
0.94
Mkt cap (TLmn)
318
Free float (%)
59.02%
Asyanet Tourism
19.08%
Net Tourism 21.65%
Key Owners
International Ownership in
Free Float* (%)
1.92
Shares Outstanding
338,442,000
Avg. 6m Daily Vol. ($m)
7.79
ISE-100 (TRL)
55,442
*Matriks data
Performance
1M
3M
12M
Absolute (%)
-0.4
47.3
123.9
Relative (%)
8.5
39.3
32.0
Key Figures
2007
2008
2009
Revenue (TLmn)
66.6
70.4
69.8
Gross Profit
19.3
24.4
25.1
-12.7
-66.2
-40.2
EBITDA
-3.4
-55.8
-28.7
Net Income/(Loss)
76.5
-16.8
-4.0
28.9%
34.6%
36.0%
Operating Profit
Gross margin
Didem Ozatalar
[email protected]
+90 (216) 636 45 29
TEB Investment Institutional Sales
Direct: +90 (216) 636 45 05
Fax:
+90 (216) 636 61 00
Mail:
[email protected]
[email protected]
2H
1H
•
Net Holding consolidates the duty free business by equity pick-up hence
recognizes dividend income below the operational line in the other income
figure.
•
Net Holding is expected to generate total free cash flow of EUR255mn
over the 17-year concession period. In 2010, on management’s
conservative assumptions, Net Holding expects EUR15mn dividend
income from duty free operations. Tourist arrivals to Antalya are up by 25%
YoY; hence the company’s budget figures are so far achievable.
•
The consortium expects 150% YoY growth in the total turnover of the
business in 2010 and the robust sustainable growth is anticipated to
continue over the concession period of 17-years.
•
Key highligts on Antalya Airport: Recently, the arrival of passengers from
Russia has drastically changed the profile of Antalya Airport as Antalya
has become the second prime destination of vacation and summer
residences for Russian tourists. Note that Russian tourists’ share in total
spending in departures has increased to more than 35% from 20% levels.
Antalya Airport is expected to attract c.35mn tourists by 2024 compared to
current 15mn level.
•
Dalaman and Bodrum Airport tenders: Net Holding will bid for the tenders
of duty free operations in Dalaman and Bodrum Airports’ which are
expected to be held in Sept 2010 and 2011, respectively.
3) Hotel Management: Net Holding’s subsidiary Net Turizm owns Merit Nicosia
(Lefkosa), and Net Holding directly owns Merit Crystal Cove, Merit Cyprus
Garden and Merit Green Karmi in the Turkish Republic of Northern Cyprus
(TRNC). Moreover, the company has 2 more hotels in Turkey. Total real estate
value is estimated at USD250mn according to the management under
current situation.
Net Holding, 17 May 2010
•
Net Holding is considered to be the unique Cyprus play in the ISE with
potential to develop further going forward. Therefore Net Holding allows
investors to capitalize on possible full integration and/or possibility of start
of direct flights to TRNC.
•
Currently, Net Holding has a dominant presence on the TRNC with its 4
hotels at c.4mn sqm of land with c. 4K beds capacity. There are also 3
casinos in Cyprus placed in these hotels which are owned by Net Holding.
Total casino income is expected to be 15-20% higher than 2009. Moreover
the Group has 2 duty free shops in Ercan Airport. Total net income from
the segment is expected to stand at USD12mn in 2010 whilst it stood at
USD10mn in 2009.
•
Potential investors to acquire Merit Lefkosa: Russian investors are
especially interested in acquisitions of hotels and casino complexes in
Cyprus as the casinos in their country have been shut down in 2009. Net
Group’s Merit Lefkosa which has a 240 bed capacity at USD45mn
appraisal value by TSKB is a direct target by those Russian investors
among others. Note that Net Group’s asking price for Merit Lefkosa
hotel and casino complex stands at USD80mn. The management plans
to complete Merit Afrodit and Merit Mare Monte (Kyrenia) with the potential
cash inflow coming from the sale of Merit Lefkosa.
•
Net Holding’s management plans to merge Net Turizm (other listed
company of the Group) into Net Holding and complete the transaction in
3Q 2010 to eliminate the cross ownership. Later, they plan to separate
gaming & leisure business from Net Holding. Currently, Gulf countries are
considering long-term relationship with Net Holding. According to the
2
management, following the disposal of casino & leisure from Net Holding,
gulf countries are likely to be interested in investing in Net Holding.
4) Real Estate Development: Net Holding has several real estate development
projects. The Group has large and diversified real estate portfolio waiting to be
unfolded. According to the management, total real estate portfolio is valued at
USD350mn.
•
Bodrum-Milas Project: The place of the project is 4-hour flying distance
covering all of Europe, Scandinavian countries, all of Russia, Gulf
countries and mid-Africa. Direct scheduled and charter flights available to
Bodrum International Airport through all major carriers. The 9.2mn sqm
land is located 8km from the Bodrum International Airport, adjacent to
Bodrum Highway. The slope of the land offers a sea view from all points,
surrounded by the Aegean Sea and a breathtaking channel uniting with
natural lagoon. The project is split into two sites, namely site A&B,
covering respectively 4.75mn sqm and 4.45mn sqm. The project is
considered to be the widest one-piece project not only in Turkey but also in
the EMEA region. It includes golf & country club, hotels, villas, apart units,
commercial areas, social center, recreational – sports & reserve green
areas.
•
Net Holding, 17 May 2010
There are several possibilities on Bodrum Project. These are: 1)
Agaoglu Insaat could start sales on the project and Net Holding
begins to collect 19% of the turnover. 2) Agaoglu Insaat could
consider selling its stake in the project and the new partner could
begin the construction and sales. 3) Agaoglu Insaat and Net Holding
together could sell the project to a third party and cash injection
could occur earlier.
•
Baku-Azerbaijan: Net Holding has a construction permit for 38K sqm land
in the downtown area of Baku which could be used to build residential
flats, offices and shopping malls. Moreover, the Group has also acquired
30K sqm land for development which is located close to Baku Airport. Net
Holding has already been operational in Baku since 1994 with a travel
agency and Baku Entertainment Center which is the leading leisure,
restaurant and entertainment company of Baku. Net Holding is about to
rent its entertainment center to an international company for an annual rent
of USD1.5mn (monthly USD125,000). According to an expertise of a
company based in Azerbaijan, Net Holding’s total property in Baku is
valued at USD75.5mn.
•
Bomonti land, Istanbul: Net Tourism has an 18K sqm land in Bomonti,
Istanbul where lately important projects are developed for residences,
office buildings and hotels. The land is valued at USD2K-3K per sqm.
Net Tourism has won the court case regarding this land and currently is
waiting for the Appeal Hearing where the file is expected to be resolved.
3
Summary: All in all, Net Holding stands as the Turkey’s tourism conglomerate with outstanding tourism
operations and precious real estate portfolio, values of which are expected to be unfolded in the near term.
The Group’s efforts to restructure the holding structure by write-offs, asset sales, elimination of the cross
ownerships, and mergers to simplify the operational structure and targets to bid for upcoming National
Lottery and duty free tenders could be the catalysts and should enhance the Group’s corporate governance
and transparency going forward. Note that the Group plans to finalize the major potential asset sales in
2010. Moreover, being a unique tourism and real estate conglomerate, Net Holding’s stock will be included
in the MSCI small cap index starting from May 26th. All in all, the aforementioned positive developments
coupled with potential asset sales which are likely to be announced in the near-term could narrow the NAV
discount. Moreover, Net Holding plans to pay cash dividends at 10% yields in 2011.
Current NAV
Valuation Methodology
Net Holding NAV Table
17/05/2010
Assets
%
Stake
Net Turizm * (NTTUR)
41.8%
Market Cap.
136
57
Antalya Duty Free Business
45.0%
@ 2010E P/E of ISE-100
225
101
Real Estates
Bodrum-Milas Real Estate Development Project
Land in Baku-Azerbaijan
Bazaar 54
Inter Limousine
Assets (hotels) in Cyprus and Turkey
19.0%
100.0%
100.0%
100.0%
100.0%
Estimated Value of the Project (@ 50% discount)
Expertise Value (@ 30% discount)
Estimated Asset Value (@ 30% discount)
Estimated Asset Value
Appraisal Value (@ 30% discount)
1,100
53
53
4
175
209
53
53
4
175
Total
NAV of Listed Stakes
NAV of Unlisted Stakes
Net Cash (Debt) - Holding only
Total NAV
Market Cap.
Premium / (Discount) %
Value
(USDmn)
Stake Value
(USDmn)
647
57
590
-34
614
209
-66%
* listed company
Source: Company data
Net Holding, 17 May 2010
4
TEB Investment Macro Estimates
TRY/US$ (average; CB Bid rate)
TRY/US$ (end of period;CB Bid rate)
O/N borrowing rate (end of period; %)
CPI (annual-end of period; %)
GDP growth rate (%)
2008
1.2944
1.5218
15.0
10.1
0.7
2009
1.5469
1.4873
6.5
6.5
-4.7
2010E
1.5424
1.5915
9.3
7.5
3.9
2011E
1.6335
1.6762
12.3
8.0
3.9
TEB Investment: Stock Rating Definitions
TEB Rating
Definition
Outperform
The stock's return including dividends is expected to be higher
than the ISE-100 index over the next 12 months.
1 year
Marketperform
The stock's return including dividends is expected to be similar to
the ISE-100 index over the next 12 months.
1 year
Underperform
The stock's return including dividends is expected to be less than
the ISE-100 index over the next 12 months.
1 year
Net Holding, 17 May 2010
Investment Horizon
5
TEB Investment
TEB Kampüs D Blok Saray Mahallesi Küçüksu Caddesi Sokullu Sokak No:7 34768 Ümraniye / İstanbul
Phone : +90 (216) 636 44 44
Fax: +90 (0216) 631 44 00
Trading
Bulent Levi
Director
[email protected]
+90 (216) 636 45 00
Kurt Atay
Manager
[email protected]
+90 (216) 636 45 27
Inci Kalkavan
Assistant Manager
[email protected]
+90 (216) 636 45 15
+90 (216) 636 45 39
Institutional Sales
Ali Kerim Akkoyunlu
Assistant General Manager
[email protected]
Tunc Ural
Director
[email protected]
+90 (216) 636 45 06
Hasan Sevket Colakoglu
Director
[email protected]
+90 (216) 636 45 09
Henza Tukel
Associate
[email protected]
+90 (216) 636 45 18
Research
Selim Yazici
Co-Head of Research, Banks
[email protected]
+90 (216) 636 45 33
Fazil Zobu
Co-Head of Research, Strategy
[email protected]
+90 (216) 636 45 35
Kenan Cosguner
Logistics & Aviation, Food &
Beverage, Fertilizers, Media
[email protected]
+90 (216) 636 45 31
Didem Ozatalar
Automotive, Retail, Durables,
Conglomerates
[email protected]
+90 (216) 636 45 29
Ozkan Ozkaynak
Quantitative Research
[email protected]
+90 (216) 636 45 30
Cagdas Dogan
Banks, Strategy
[email protected]
+90 (216) 636 45 38
Ozgur Guler
Telecoms, Cement
[email protected]
+90 (216) 636 45 32
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