8/17/2019 Turkey Strategy 280115 http://slidepdf.com/reader/full/turkey-strategy-280115 1/35 PREPARED AND PUBLISHED BY NON-US BROKER-DEALER(S): TEB INVESTMENT. IT IS BEING DISTRIBUTED IN TURKEY BY TEB INVESTMENT AND O UTSIDE TURKEY JOINTLY BY TEB INVESTMENT AND BNP PARIBAS. THIS MATERIAL HAS BEEN APPROVED FOR U.S. DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 32 A little love goes a long way We stick to our expectation of two opposite phases for 2015 divided into two unequal parts – an initial upbeat quarter followed by a down-cycle. Despite accelerated outperformance of the BIST100 over MSCI EM since October 2014, primarily on the back of the oil price downswing, the market is still not out of juice. Ceteris paribus, we are in anticipation of the BIST100 index reaching our 96.1k target – the level where we recommend investors start taking profits – in the next couple of months, predominantly as an indirect consequence of fixed-income inflows. Ex-post annual CPI is to contract 170bp m-m to 6.5% in January and then to as low as 5% levels mid-year on the back of lower commodity costs, less FX pass-through and high food price base getting out of time series. As there has hardly been a high real interest on top of backward looking inflation, we expect the benchmark bond yield to slide down in tandem with contracting CPI. Low rates improve consumer confidence, increase consumption and contribute to growth, and for the banks, they magnify spreads, improve asset quality, boost bond mark-to-market gains and contribute to volume expansion. Last but not least, low rates pull down CoEs pushing up price objectives. We are running models with 7.75% Rf, which provides a comfortable buffer over a 7% 10-year TRY bond yield. We are looking for a downbeat turnaround as we draw closer to mid-year as the Fed rate-hike pricing takes its tol l, paving the way for unwindi ng of the pro-Turkey trade that has been continuing since 2008. Turkey’s general elections will also take place concurrently with this tightening cycle in June 2015. Utility price hikes, regulatory burdens, possible tax increases and all other potential voter unfriendly moves are likely to set off afterwards. We will also be closely monitoring the political will of the next administration in delivering the 1,350-article structural reform package. Crude oil prices are likely to stabilise and start inching up as a stronger USD may eventually lead China and India to level up their commodity demand as US import appetite rises on the back of a stronger USD, eventually contributing to the expected downswing in TRY asset prices. Our equity investment strategy is to continue with overweight positioning in banks and interest-rate sensitive cyclical names for now, and to switch into defensive plays as we tap our Index target. We like companies that offer growth and turnaround stories accompanied by appealing valuations. Halkbank (HALKB TI), Turkcell (TCELL TI), Aselsan (ASELS TI), Tofas (TOASO TI), BIM (BIMAS TI) and Coca Cola Icecek (CCOLA TI) are our preferences for 2015. On the negative side of the trade we recommend avoiding Erdemir (EREGL TI), Turk Telekom (TTKOM TI)) and Akbank (AKBNK TI). 28 JANUARY 2015EQUITIES RESEARCHTURKEY STRATEGY Mete Yuksel [email protected]+90 216 6364536 Our research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. Please contact your salesperson for authorisation. Please see the important notice on the back page.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
PREPARED AND PUBLISHED BY NON-US BROKER-DEALER(S) TEB INVESTMENT IT IS BEING DISTRIBUTED IN TURKEY BY TEB INVESTMENT AND OUTSIDE TURKEY JOINTLY BY TEBINVESTMENT AND BNP PARIBAS THIS MATERIAL HAS BEEN APPROVED FOR US DISTRIBUTION ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT
APPENDIX ON PAGE 32
A little love goes a long way
We stick to our expectation of two opposite phases for 2015 divided into two
unequal parts ndash an initial upbeat quarter followed by a down-cycle Despite
accelerated outperformance of the BIST100 over MSCI EM since October 2014
primarily on the back of the oil price downswing the market is still not out of juice
Ceteris paribus we are in anticipation of the BIST100 index reaching our 961k
target ndash the level where we recommend investors start taking profits ndash in the nextcouple of months predominantly as an indirect consequence of fixed-income
inflows
Ex-post annual CPI is to contract 170bp m-m to 65 in January and then to as low
as 5 levels mid-year on the back of lower commodity costs less FX pass-through
and high food price base getting out of time series As there has hardly been a high
real interest on top of backward looking inflation we expect the benchmark bond
yield to slide down in tandem with contracting CPI Low rates improve consumer
confidence increase consumption and contribute to growth and for the banks they
magnify spreads improve asset quality boost bond mark-to-market gains and
contribute to volume expansion Last but not least low rates pull down CoEs
pushing up price objectives We are running models with 775 Rf which provides
a comfortable buffer over a 7 10-year TRY bond yield
We are looking for a downbeat turnaround as we draw closer to mid-year as the
Fed rate-hike pricing takes its toll paving the way for unwinding of the pro-Turkey
trade that has been continuing since 2008 Turkeyrsquos general elections will also take
place concurrently with this tightening cycle in June 2015 Utility price hikes
regulatory burdens possible tax increases and all other potential voter unfriendly
moves are likely to set off afterwards We will also be closely monitoring the
political will of the next administration in delivering the 1350-article structural
reform package Crude oil prices are likely to stabilise and start inching up as a
stronger USD may eventually lead China and India to level up their commodity
demand as US import appetite rises on the back of a stronger USD eventually
contributing to the expected downswing in TRY asset prices
Our equity investment strategy is to continue with overweight positioning in banks
and interest-rate sensitive cyclical names for now and to switch into defensive
plays as we tap our Index target We like companies that offer growth and
turnaround stories accompanied by appealing valuations Halkbank (HALKB TI)
Coca Cola Icecek (CCOLA TI) are our preferences for 2015 On the negative side
of the trade we recommend avoiding Erdemir (EREGL TI) Turk Telekom (TTKOM
TI)) and Akbank (AKBNK TI)
28 JANUARY 2015
EQUITIES RESEARCH
TURKEY STRATEGY
Mete Yukselmeteyukseltebcomtr
+90 216 6364536
Our research is available on Thomson One Bloomberg TheMarketscom Factset and on httpeqresearchbnpparibascomindex Please contact your salesperson forauthorisation Please see the important notice on the back page
Led by the oil ldquodividendrdquo Turkey has one of the best investment stories of the last
decade among emerging market countries The question we should be asking
ourselves is how much of this story is priced into BIST100 Turkeyrsquos main equity
index currently at 912k and only 2 from its all-time high
We see the following eight positives as pillars of the Turkish equity story
1 Inflows to Turkish fixed income instruments continuing after the sovereign bondbuying programme announced by the ECB
2 Disinflationary pressures with the supply overhang in oil markets
3 Improvement in current account deficit at a time when the Fed is getting ready tostart rate hikes
4 Macro problems in Russia and Central Europe make Turkey look relativelyattractive among CEEMEA
5 CBRT rate-cut cycle under way as disinflationary pressures and growth dynamics(consumer confidence hits five-year lows business confidence hits five-monthlows) dominate
6 Fiscal discipline
7 Political uncertainty out of the way until June 2015 elections
8 Governmentrsquos Kurdish Peace Process and structural reform packages aimed atstability and growth
While most of these positives are intertwined and well-known by the investing public
Turkeyrsquos re-rating from a market standpoint is still under way Since 2014 MSCI
Turkey has gained 23 and has outperformed the MSCI EM index by 24 In 2015
year-to-date the positive divergence is even more striking MSCI Turkey is gaining
5 and is the second-best performing MSCI EM component after India With this
outperformance MSCI Turkeyrsquos 12-month forward PE discount to MSCI EM now
stands at 5 Since Lehman this discount averaged 16 on an annual basis until
In order for the BIST re-rating to continue at current levels we need more macro
drivers Here are three ldquoBIST-friendlyrdquo scenarios that we believe are not being priced
in at the moment
One possible driver may be rating outlook upgrades Among the three major
credit rating agencies Moodyrsquos and SampP have Turkeyrsquos rating outlook at negative
whereas Fitch has a stable outlook for Turkey We believe that with the ECB
delivering on the quantitative easing front and the current account deficit
continuing to improve on oil supply dynamics all three agencies may raise Turkeyto a neutral or a positive outlook
SampP rates Turkey one notch below investment grade so we believe that a ratings
outlook upgrade by SampP in their 8 May review is more of a possibility than one by
Moodyrsquos (10 April) or Fitch (20 March) We do not expect an outright rating
upgrade as all three agencies might want to see the effect of the Fed rate hike
cycle on global liquidity conditions before making such a move
Another possibility for continued Turkish equity re-rating is a delay of a Fed lift-off
in rates MSCI Turkey has outperformed MSCI EM by 38 since the launch of
the first quantitative easing programme by the Fed on 26 November 2008
Turkeyrsquos equity sensitivity to global liquidity conditions remains high and any
delay in Fed rate-hike action should be considered a positive
EXHIBIT 2 MSCI TR vs MSCI EM
Sources Bloomberg TEB InvestmentBNP Paribas
In our base-case scenario we see the first rate hike in June 2015 But
dependent on macro data out of the US the Fed tightening cycle may be
postponed to 3Q15 or beyond There is a growing voice among economists that
says ldquoa strong USD will hamper US growthrdquo If this theory holds true and US
macro data deteriorates BIST interest-rate sensitive names may be the majorbeneficiaries
The extension of ambitious reform packages and success in their
implementation could anchor Turkeyrsquos re-rating story after the elections
Turkeyrsquos politicians have been handed a once-in-a-lifetime opportunity by oil
supply dynamics to implement structural reforms We know that the Turkish
government although slow to react is reform-minded and using every
opportunity to spur growth and lessen dependence on foreign energy After the
June 2015 elections we will enter a new era for these reforms as well as for the
Kurdish Peace process
Many market participants view Turkey as a ldquoliquidity storyrdquo and to an extent theyare right But if these reforms were to change Turkeyrsquos growth trajectory to
upward momentum at a time when the Fed is hiking rates this would be another
reason to own Turkish equities We believe it is too early to talk about this
possible scenario as we have to wait six months for the elections
Downside risks to our positive call for Turkish equities include
1 The Fed rate-hike cycle starting earlier than expected or the Fed rate hike cycle
being conducted at an accelerating pace as US growth picks up momentum
despite the strong USD
2 The ECB failing to end low European growth or inflation and markets losing faithin ECB effectiveness and starting to sell European periphery fixed income
3 EM ldquocontagionrdquo risks through RussiaUkraine or Chinese shadow -banking
practices leading to higher risk premiums and higher EM FX volatility
4 A rally in energy commodity markets
5 Geopolitical risk through the rise of Islamic State
These are all well-documented risks and we see no point in going over each one of
them However we want to highlight two risks (one macro-economic one political)
that have the potential to be the ldquoAchilles heelrdquo
We see rising risks to Turkeyrsquos tourism industry through lower oil prices The
potential loss of Russian and Middle Eastern revenues is one key negative For
exporters a rising USDfalling EUR creates balance sheet risk if unhedged Although
we view global FX and commodity market dynamics as positives in Turkeyrsquos
investment story these two may come to hurt us down the road in 2015
Another risk factor is changes in key economic posts or the CBRT laws after the
elections If pro-growth structural reforms continue under the leadership of a viable
ldquoeconomy-czarrdquo after the elections this risk factor has the potential to become a
strength Otherwise markets may get jittery We are also alarmed by the growing
voice in the government that wants to change the CBRT laws to include growth and
employment targets This might be perceived as a negative in terms of CBRTindependence
Trading strategy
We have a bottom up target for BIST100 of 961k representing 5 upside We
prefer to remain long BIST equities despite low upside potential
We would like to wait for a test of all-time highs at 934k As with most technical all-
time high prints we expect a 2-3 ldquoovershootrdquo to our 961k Index target as long as
TRY volatility remains in check and the 10-year US Treasury yield remains below
2
In 1H15 we would like to use any opportunities above our bottom-up target of 961kas profit-taking opportunities and wait for better entry points around 85k
While market multiples are higher than the historical average for the Turkish market
they cannot be deemed demanding compared to historical valuation
discountpremiums of peers The 112x 12-month forward looking PE of MSCI TR
points to a 5 discount to MSCI EM as compared to the 9 average discount for
the last five years Due to discrepancies in the weighting of banks in different stock
markets we prefer to use bank multiples in valuation comparisons Banks are always
trading with lower multiples than non-financials which might lead to themisperception of the Turkish market always trading at a discount to peer countries
due to the heavy 36 banking sector weighting in the BIST100 index As can be
seen in Exhibit 22 the banks in our coverage are trading at 104x 2015E PE at par
with the MSCI EM bank average While average Turkey bank PBV of 12x implies a
discount to the 14x EM EMEA average this is justifiable through the ROE
differential Instead of following a PBV vs ROE scatter tracking the PE is a more
straightforward way (PBROE=PE) In all rather than an across-the-board discount
for the whole banking sector we are recommending exposure in select names
offering valuation discounts as well as catalysts
EXHIBIT 3 12-month forward looking PE of MSCI Indices
Sources Bloomberg TEB InvestmentBNP Paribas
EXHIBIT 4 12 Month forward looking PE of MSCI Indices
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Led by the oil ldquodividendrdquo Turkey has one of the best investment stories of the last
decade among emerging market countries The question we should be asking
ourselves is how much of this story is priced into BIST100 Turkeyrsquos main equity
index currently at 912k and only 2 from its all-time high
We see the following eight positives as pillars of the Turkish equity story
1 Inflows to Turkish fixed income instruments continuing after the sovereign bondbuying programme announced by the ECB
2 Disinflationary pressures with the supply overhang in oil markets
3 Improvement in current account deficit at a time when the Fed is getting ready tostart rate hikes
4 Macro problems in Russia and Central Europe make Turkey look relativelyattractive among CEEMEA
5 CBRT rate-cut cycle under way as disinflationary pressures and growth dynamics(consumer confidence hits five-year lows business confidence hits five-monthlows) dominate
6 Fiscal discipline
7 Political uncertainty out of the way until June 2015 elections
8 Governmentrsquos Kurdish Peace Process and structural reform packages aimed atstability and growth
While most of these positives are intertwined and well-known by the investing public
Turkeyrsquos re-rating from a market standpoint is still under way Since 2014 MSCI
Turkey has gained 23 and has outperformed the MSCI EM index by 24 In 2015
year-to-date the positive divergence is even more striking MSCI Turkey is gaining
5 and is the second-best performing MSCI EM component after India With this
outperformance MSCI Turkeyrsquos 12-month forward PE discount to MSCI EM now
stands at 5 Since Lehman this discount averaged 16 on an annual basis until
In order for the BIST re-rating to continue at current levels we need more macro
drivers Here are three ldquoBIST-friendlyrdquo scenarios that we believe are not being priced
in at the moment
One possible driver may be rating outlook upgrades Among the three major
credit rating agencies Moodyrsquos and SampP have Turkeyrsquos rating outlook at negative
whereas Fitch has a stable outlook for Turkey We believe that with the ECB
delivering on the quantitative easing front and the current account deficit
continuing to improve on oil supply dynamics all three agencies may raise Turkeyto a neutral or a positive outlook
SampP rates Turkey one notch below investment grade so we believe that a ratings
outlook upgrade by SampP in their 8 May review is more of a possibility than one by
Moodyrsquos (10 April) or Fitch (20 March) We do not expect an outright rating
upgrade as all three agencies might want to see the effect of the Fed rate hike
cycle on global liquidity conditions before making such a move
Another possibility for continued Turkish equity re-rating is a delay of a Fed lift-off
in rates MSCI Turkey has outperformed MSCI EM by 38 since the launch of
the first quantitative easing programme by the Fed on 26 November 2008
Turkeyrsquos equity sensitivity to global liquidity conditions remains high and any
delay in Fed rate-hike action should be considered a positive
EXHIBIT 2 MSCI TR vs MSCI EM
Sources Bloomberg TEB InvestmentBNP Paribas
In our base-case scenario we see the first rate hike in June 2015 But
dependent on macro data out of the US the Fed tightening cycle may be
postponed to 3Q15 or beyond There is a growing voice among economists that
says ldquoa strong USD will hamper US growthrdquo If this theory holds true and US
macro data deteriorates BIST interest-rate sensitive names may be the majorbeneficiaries
The extension of ambitious reform packages and success in their
implementation could anchor Turkeyrsquos re-rating story after the elections
Turkeyrsquos politicians have been handed a once-in-a-lifetime opportunity by oil
supply dynamics to implement structural reforms We know that the Turkish
government although slow to react is reform-minded and using every
opportunity to spur growth and lessen dependence on foreign energy After the
June 2015 elections we will enter a new era for these reforms as well as for the
Kurdish Peace process
Many market participants view Turkey as a ldquoliquidity storyrdquo and to an extent theyare right But if these reforms were to change Turkeyrsquos growth trajectory to
upward momentum at a time when the Fed is hiking rates this would be another
reason to own Turkish equities We believe it is too early to talk about this
possible scenario as we have to wait six months for the elections
Downside risks to our positive call for Turkish equities include
1 The Fed rate-hike cycle starting earlier than expected or the Fed rate hike cycle
being conducted at an accelerating pace as US growth picks up momentum
despite the strong USD
2 The ECB failing to end low European growth or inflation and markets losing faithin ECB effectiveness and starting to sell European periphery fixed income
3 EM ldquocontagionrdquo risks through RussiaUkraine or Chinese shadow -banking
practices leading to higher risk premiums and higher EM FX volatility
4 A rally in energy commodity markets
5 Geopolitical risk through the rise of Islamic State
These are all well-documented risks and we see no point in going over each one of
them However we want to highlight two risks (one macro-economic one political)
that have the potential to be the ldquoAchilles heelrdquo
We see rising risks to Turkeyrsquos tourism industry through lower oil prices The
potential loss of Russian and Middle Eastern revenues is one key negative For
exporters a rising USDfalling EUR creates balance sheet risk if unhedged Although
we view global FX and commodity market dynamics as positives in Turkeyrsquos
investment story these two may come to hurt us down the road in 2015
Another risk factor is changes in key economic posts or the CBRT laws after the
elections If pro-growth structural reforms continue under the leadership of a viable
ldquoeconomy-czarrdquo after the elections this risk factor has the potential to become a
strength Otherwise markets may get jittery We are also alarmed by the growing
voice in the government that wants to change the CBRT laws to include growth and
employment targets This might be perceived as a negative in terms of CBRTindependence
Trading strategy
We have a bottom up target for BIST100 of 961k representing 5 upside We
prefer to remain long BIST equities despite low upside potential
We would like to wait for a test of all-time highs at 934k As with most technical all-
time high prints we expect a 2-3 ldquoovershootrdquo to our 961k Index target as long as
TRY volatility remains in check and the 10-year US Treasury yield remains below
2
In 1H15 we would like to use any opportunities above our bottom-up target of 961kas profit-taking opportunities and wait for better entry points around 85k
While market multiples are higher than the historical average for the Turkish market
they cannot be deemed demanding compared to historical valuation
discountpremiums of peers The 112x 12-month forward looking PE of MSCI TR
points to a 5 discount to MSCI EM as compared to the 9 average discount for
the last five years Due to discrepancies in the weighting of banks in different stock
markets we prefer to use bank multiples in valuation comparisons Banks are always
trading with lower multiples than non-financials which might lead to themisperception of the Turkish market always trading at a discount to peer countries
due to the heavy 36 banking sector weighting in the BIST100 index As can be
seen in Exhibit 22 the banks in our coverage are trading at 104x 2015E PE at par
with the MSCI EM bank average While average Turkey bank PBV of 12x implies a
discount to the 14x EM EMEA average this is justifiable through the ROE
differential Instead of following a PBV vs ROE scatter tracking the PE is a more
straightforward way (PBROE=PE) In all rather than an across-the-board discount
for the whole banking sector we are recommending exposure in select names
offering valuation discounts as well as catalysts
EXHIBIT 3 12-month forward looking PE of MSCI Indices
Sources Bloomberg TEB InvestmentBNP Paribas
EXHIBIT 4 12 Month forward looking PE of MSCI Indices
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
In order for the BIST re-rating to continue at current levels we need more macro
drivers Here are three ldquoBIST-friendlyrdquo scenarios that we believe are not being priced
in at the moment
One possible driver may be rating outlook upgrades Among the three major
credit rating agencies Moodyrsquos and SampP have Turkeyrsquos rating outlook at negative
whereas Fitch has a stable outlook for Turkey We believe that with the ECB
delivering on the quantitative easing front and the current account deficit
continuing to improve on oil supply dynamics all three agencies may raise Turkeyto a neutral or a positive outlook
SampP rates Turkey one notch below investment grade so we believe that a ratings
outlook upgrade by SampP in their 8 May review is more of a possibility than one by
Moodyrsquos (10 April) or Fitch (20 March) We do not expect an outright rating
upgrade as all three agencies might want to see the effect of the Fed rate hike
cycle on global liquidity conditions before making such a move
Another possibility for continued Turkish equity re-rating is a delay of a Fed lift-off
in rates MSCI Turkey has outperformed MSCI EM by 38 since the launch of
the first quantitative easing programme by the Fed on 26 November 2008
Turkeyrsquos equity sensitivity to global liquidity conditions remains high and any
delay in Fed rate-hike action should be considered a positive
EXHIBIT 2 MSCI TR vs MSCI EM
Sources Bloomberg TEB InvestmentBNP Paribas
In our base-case scenario we see the first rate hike in June 2015 But
dependent on macro data out of the US the Fed tightening cycle may be
postponed to 3Q15 or beyond There is a growing voice among economists that
says ldquoa strong USD will hamper US growthrdquo If this theory holds true and US
macro data deteriorates BIST interest-rate sensitive names may be the majorbeneficiaries
The extension of ambitious reform packages and success in their
implementation could anchor Turkeyrsquos re-rating story after the elections
Turkeyrsquos politicians have been handed a once-in-a-lifetime opportunity by oil
supply dynamics to implement structural reforms We know that the Turkish
government although slow to react is reform-minded and using every
opportunity to spur growth and lessen dependence on foreign energy After the
June 2015 elections we will enter a new era for these reforms as well as for the
Kurdish Peace process
Many market participants view Turkey as a ldquoliquidity storyrdquo and to an extent theyare right But if these reforms were to change Turkeyrsquos growth trajectory to
upward momentum at a time when the Fed is hiking rates this would be another
reason to own Turkish equities We believe it is too early to talk about this
possible scenario as we have to wait six months for the elections
Downside risks to our positive call for Turkish equities include
1 The Fed rate-hike cycle starting earlier than expected or the Fed rate hike cycle
being conducted at an accelerating pace as US growth picks up momentum
despite the strong USD
2 The ECB failing to end low European growth or inflation and markets losing faithin ECB effectiveness and starting to sell European periphery fixed income
3 EM ldquocontagionrdquo risks through RussiaUkraine or Chinese shadow -banking
practices leading to higher risk premiums and higher EM FX volatility
4 A rally in energy commodity markets
5 Geopolitical risk through the rise of Islamic State
These are all well-documented risks and we see no point in going over each one of
them However we want to highlight two risks (one macro-economic one political)
that have the potential to be the ldquoAchilles heelrdquo
We see rising risks to Turkeyrsquos tourism industry through lower oil prices The
potential loss of Russian and Middle Eastern revenues is one key negative For
exporters a rising USDfalling EUR creates balance sheet risk if unhedged Although
we view global FX and commodity market dynamics as positives in Turkeyrsquos
investment story these two may come to hurt us down the road in 2015
Another risk factor is changes in key economic posts or the CBRT laws after the
elections If pro-growth structural reforms continue under the leadership of a viable
ldquoeconomy-czarrdquo after the elections this risk factor has the potential to become a
strength Otherwise markets may get jittery We are also alarmed by the growing
voice in the government that wants to change the CBRT laws to include growth and
employment targets This might be perceived as a negative in terms of CBRTindependence
Trading strategy
We have a bottom up target for BIST100 of 961k representing 5 upside We
prefer to remain long BIST equities despite low upside potential
We would like to wait for a test of all-time highs at 934k As with most technical all-
time high prints we expect a 2-3 ldquoovershootrdquo to our 961k Index target as long as
TRY volatility remains in check and the 10-year US Treasury yield remains below
2
In 1H15 we would like to use any opportunities above our bottom-up target of 961kas profit-taking opportunities and wait for better entry points around 85k
While market multiples are higher than the historical average for the Turkish market
they cannot be deemed demanding compared to historical valuation
discountpremiums of peers The 112x 12-month forward looking PE of MSCI TR
points to a 5 discount to MSCI EM as compared to the 9 average discount for
the last five years Due to discrepancies in the weighting of banks in different stock
markets we prefer to use bank multiples in valuation comparisons Banks are always
trading with lower multiples than non-financials which might lead to themisperception of the Turkish market always trading at a discount to peer countries
due to the heavy 36 banking sector weighting in the BIST100 index As can be
seen in Exhibit 22 the banks in our coverage are trading at 104x 2015E PE at par
with the MSCI EM bank average While average Turkey bank PBV of 12x implies a
discount to the 14x EM EMEA average this is justifiable through the ROE
differential Instead of following a PBV vs ROE scatter tracking the PE is a more
straightforward way (PBROE=PE) In all rather than an across-the-board discount
for the whole banking sector we are recommending exposure in select names
offering valuation discounts as well as catalysts
EXHIBIT 3 12-month forward looking PE of MSCI Indices
Sources Bloomberg TEB InvestmentBNP Paribas
EXHIBIT 4 12 Month forward looking PE of MSCI Indices
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
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Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
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Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Downside risks to our positive call for Turkish equities include
1 The Fed rate-hike cycle starting earlier than expected or the Fed rate hike cycle
being conducted at an accelerating pace as US growth picks up momentum
despite the strong USD
2 The ECB failing to end low European growth or inflation and markets losing faithin ECB effectiveness and starting to sell European periphery fixed income
3 EM ldquocontagionrdquo risks through RussiaUkraine or Chinese shadow -banking
practices leading to higher risk premiums and higher EM FX volatility
4 A rally in energy commodity markets
5 Geopolitical risk through the rise of Islamic State
These are all well-documented risks and we see no point in going over each one of
them However we want to highlight two risks (one macro-economic one political)
that have the potential to be the ldquoAchilles heelrdquo
We see rising risks to Turkeyrsquos tourism industry through lower oil prices The
potential loss of Russian and Middle Eastern revenues is one key negative For
exporters a rising USDfalling EUR creates balance sheet risk if unhedged Although
we view global FX and commodity market dynamics as positives in Turkeyrsquos
investment story these two may come to hurt us down the road in 2015
Another risk factor is changes in key economic posts or the CBRT laws after the
elections If pro-growth structural reforms continue under the leadership of a viable
ldquoeconomy-czarrdquo after the elections this risk factor has the potential to become a
strength Otherwise markets may get jittery We are also alarmed by the growing
voice in the government that wants to change the CBRT laws to include growth and
employment targets This might be perceived as a negative in terms of CBRTindependence
Trading strategy
We have a bottom up target for BIST100 of 961k representing 5 upside We
prefer to remain long BIST equities despite low upside potential
We would like to wait for a test of all-time highs at 934k As with most technical all-
time high prints we expect a 2-3 ldquoovershootrdquo to our 961k Index target as long as
TRY volatility remains in check and the 10-year US Treasury yield remains below
2
In 1H15 we would like to use any opportunities above our bottom-up target of 961kas profit-taking opportunities and wait for better entry points around 85k
While market multiples are higher than the historical average for the Turkish market
they cannot be deemed demanding compared to historical valuation
discountpremiums of peers The 112x 12-month forward looking PE of MSCI TR
points to a 5 discount to MSCI EM as compared to the 9 average discount for
the last five years Due to discrepancies in the weighting of banks in different stock
markets we prefer to use bank multiples in valuation comparisons Banks are always
trading with lower multiples than non-financials which might lead to themisperception of the Turkish market always trading at a discount to peer countries
due to the heavy 36 banking sector weighting in the BIST100 index As can be
seen in Exhibit 22 the banks in our coverage are trading at 104x 2015E PE at par
with the MSCI EM bank average While average Turkey bank PBV of 12x implies a
discount to the 14x EM EMEA average this is justifiable through the ROE
differential Instead of following a PBV vs ROE scatter tracking the PE is a more
straightforward way (PBROE=PE) In all rather than an across-the-board discount
for the whole banking sector we are recommending exposure in select names
offering valuation discounts as well as catalysts
EXHIBIT 3 12-month forward looking PE of MSCI Indices
Sources Bloomberg TEB InvestmentBNP Paribas
EXHIBIT 4 12 Month forward looking PE of MSCI Indices
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
While market multiples are higher than the historical average for the Turkish market
they cannot be deemed demanding compared to historical valuation
discountpremiums of peers The 112x 12-month forward looking PE of MSCI TR
points to a 5 discount to MSCI EM as compared to the 9 average discount for
the last five years Due to discrepancies in the weighting of banks in different stock
markets we prefer to use bank multiples in valuation comparisons Banks are always
trading with lower multiples than non-financials which might lead to themisperception of the Turkish market always trading at a discount to peer countries
due to the heavy 36 banking sector weighting in the BIST100 index As can be
seen in Exhibit 22 the banks in our coverage are trading at 104x 2015E PE at par
with the MSCI EM bank average While average Turkey bank PBV of 12x implies a
discount to the 14x EM EMEA average this is justifiable through the ROE
differential Instead of following a PBV vs ROE scatter tracking the PE is a more
straightforward way (PBROE=PE) In all rather than an across-the-board discount
for the whole banking sector we are recommending exposure in select names
offering valuation discounts as well as catalysts
EXHIBIT 3 12-month forward looking PE of MSCI Indices
Sources Bloomberg TEB InvestmentBNP Paribas
EXHIBIT 4 12 Month forward looking PE of MSCI Indices
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
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services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
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services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Banks will be the centre of attention for the whole year firstly as the key beneficiaries
of sliding rates early in the year through such means as spread enhancement asset
quality revival and volume expansion and then on the opposite side of the trade as
the rate trajectory moves upwards with the Fed rate hike kicking in For the year as a
whole we recommend staying with selective non-cyclical names in telecoms
beverage food retailing and defense For autos we have mixed feelings depending
on company-specific issues Recent sizeable declines in product prices on slowingglobal demand growth and surplus production capacity in steel prompt us to avoid
Erdemir While we do not have any aviation stock among our preferences for 2015
the lower oil price story should keep investor interest high
Since end-3Q14 the benchmark bond rate has come down by a significant 330bp
However given the CBRTrsquos tightening stance coupled with banksrsquo window-dressing
efforts TRY deposit costs did not follow the benchmark While sliding rates should
result in a surge in the trading lines of most banks as they have been trading their
in-the-money available-for-sale securities YTD q-q spread accretion is unlikely for
1Q15 due to inflated TRY deposit costs predominantly on the portfolios raisedtowards the end of 2014 Due to the tight liquidity stance of the CBRT as well as a
stretched LTD of 118 for the system deposit prices are set to make a lighter
downward move compared to bond yields the spread impact for which can be
observed not earlier than 2Q15
EXHIBIT 10 Tight monetary policy led to higher depositcosts EXHIBIT 11 NIM evolution
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Lower CPI linker yields will also weigh on margins throughout the year The banks
that benefited the most on CPI-linked bond exposure in 2014 (from an unexpected
spike in inflation triggered initially by drought then by floods on unprocessed foodprices utility price hikes and finally by a TRY depreciation pass-through) should put
additional efforts into compensating for NII pressure in 2015 as seen in the charts
below With moderation in weather conditions a high base and continued decline in
soft commodity prices globally inflation is set to ease in 2015 For 2015 our macro
team expects Oct-Oct CPI to come down by 391bp y-y which is the base for CPI-
linked bonds All in all the banks that enjoyed high CPI linker yields back in 2014
should face a harder time compensating for the lost portion this year
EXHIBIT 14 NIM impact of lower CPI ndash (2015E) EXHIBIT 15 NII impact of lower CPI ndash (2015E)
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
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Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
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South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
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Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
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Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
EXHIBIT 16 Momentum justifies up to 15 loan growth EXHIBIT 17 Sector capitalization is resilient ndash 3Q14
Sources BRSA TEB InvestmentBNP Paribas Source Company financials
In this environment asset quality is another concern of ours that we think is being
overlooked by the market Although asset quality was better than the market feared
in 2014 except for a couple of large ticket items we are dubious regarding 2015prospects Unemployment keeps increasing ndash for the fourth consecutive year since
the 85 trough at the end of 2011 Given the Fedrsquos expected rate hike cycle
interest rates will increase and TRY will lose value against hard currencies Both of
these factors will weigh on consumer confidence leading to ultimately deteriorating
asset quality in the second half of the year Lower consumer confidence not only
increases delinquencies but also pulls down NPL recoveries All of these suggest
that risks are to the upside on our 5bp estimated increase in specific CoR
EXHIBIT 18 NPL ratio of the banking sector EXHIBIT 19 Seasonally-adjusted unemployment
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
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services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
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Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
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Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
in NIM and fee income growth Trading at a mere 93x 2015E earnings and 094x
book the stock offers a good entry point in our view
With the widest branch network among its listed peers and a relatively high portion of
these branches in rural areas Isbank has more room to limit NIM erosion when
interest rates go up thanks to its less interest-rate-sensitive deposit customers We
keep our positive view on Isbank taking into consideration the potential divestment
of its remaining Avea (non-listed) stake due to the share sale option between TTNet
(TTKOM TI) and Isbank better margin evolution and 2015E PB and PE multiplesthat are the lowest among private peers Increasing transparency more investor
support and questioning what they can do to improve corporate governance should
help reduce the historical valuation discount of the bank to its peer group mean We
maintain our BUY recommendation
We like Yapi Kredi Bank fundamentally we believe in the ambitious growth strategy
there and expect the above-sector growth to continue Although we maintain our
BUY call we acknowledge there are also some drawbacks Despite managementrsquos
successful margin management during aggressive growth periods it is inevitable that
margins get suppressed cost growth accelerates and thus ROE generation slows
Another hurdle might be Yapi Kredirsquos 109 Tier-1 ratio which is the lowest among
the big six banks We think the likelihood of the bank going for a rights issue is
increasing should it stick to the ambitious growth plan
Akbank is trading at a premium to peers that we consider unjustified Its CAR is no
longer the largest among our coverage but fourth The bank has the highest bond
share in its assets being predominantly in CPI linkers which is set to hamper
earnings momentum as we are looking for a 391bp decline in October-October
inflation y-y for 2015 Asset quality issues have been hurting the PL for two quarters
in a row We maintain our HOLD recommendation on Akbank
Although we like Garanti fundamentally and we credit managementrsquos realistic 2015
budget Garanti Bank is by far the most overvalued name in our coverage universe
with 17x 2015E PB and 126x PE multiples We have 2 downside to our target
price and maintain our HOLD recommendation
We think TSKB is the most defensive name among the banks in our coverage thanks
to its unique business model Its sustained long-term financing from supranational
institutions at relatively low costs affords the bank an important competitive edge
Moreover the bank does not collect any deposits and thus is immune to the cost
problems from which other banks suffer We believe that management can achieve
its 16-17 ROE target in 2015 which is in line with our estimates We maintain our
BUY recommendation on TSKB
Its unique business model of participation banking (Islamic banking based on
profitloss sharing principles) sets Albaraka apart After lagging the other three
participation banks in organic growth for almost a decade Albaraka management
has now put an aggressive growth plan into action We think profitable growth isachievable by the bankrsquos agile management while Albarakarsquos 138 CAR is also at
quite a supportive level for further growth We maintain our BUY recommendation
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
MSCI WORLD BANKS 3333567 na - 101 102 097 na 1093 994 67 93 98 291 99 - -
MSCI EMRG MKT BANKS 1509253 na - 124 116 105 na 845 751 145 70 98 53 126 - -
Data as of 26 Jan 2015 1758 GMT+2 Czech Rep Hungary Poland Russia Egypt Morocco South Africa Turkey China Indonesia India Malaysia Philippines South Korea Taiwan Thailand Brazil Chile Colombia Mexico Peru Brazil Chile China Colombia Czech Republic Egypt Hungary India Indonesia South Korea Malaysia Mexico Morocco Peru Philippines Poland Russia South Africa
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
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South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
We believe that the change in the composition of mobile subscribers is more
important than the change in the total number of subscribers for the mobile
operators as post-paid subscribers generate significantly higher ARPU than pre-paid
subscribers Mobile subscribers switched from pre-paid to post-paid contracts on theback of declining post-paid tariffs making it more affordable increasing data usage
and smartphone penetration We expect the share of post-paid subscribers to reach
462 in 2015 up from 405 in 2013 and 204 in 2008 Our forecasts indicate
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
14 CAGR in post-paid subscribers for 2008-15 while pre-paid subscribers are
expected to contract by 4 CAGR in the same period
EXHIBIT 26 Mobile subscriber breakdown EXHIBIT 27 Mobile revenue breakdown
Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates Sources Information and Communications Technologies Authority amp TEBInvestmentBNP Paribas estimates
Parallel to the change in subscriber composition the revenue sources of the mobile
operators also changed significantly in the same period Mobile operators have more
balanced revenue structures as they manage to diversify revenue sources The
weight of voice revenue once the major contributor of revenues has gradually
declined especially in the last couple of years as mobile data revenues surged
substantially We expect the trend to continue in 2015 as the growth in mobile data is
supported by 1) increasing smartphone penetration 2) change in consumer
preference toward non-voice channels in social and business communications 3)
increasing post-paid subscribers and 4) increasing availability and affordability of
data services We expect the share of data revenues to rise to 285 in 2015 from
19 in 2013 and the share of voice revenue to decline to 586 in 2015 from 656in 2013
The government is planning to start the tender process for 4G licenses in 2015 We
believe that with the availability of 4G services growth in mobile data revenues will
accelerate further as 4G services will allow users to enjoy significantly faster data
communication while making 3G services more affordable We believe that Turkcell
is the best prepared mobile operator in Turkey for 4G services in terms of
infrastructure sufficiency and investment capacity Recall that Turkcell obtained the
3G license with 40 MHz bandwidth for EUR358m in 2008 while Vodafone paid
EUR250m for 35 MHz bandwidth and Avea paid EUR214 for 30 MHz bandwidth
EXHIBIT 28 3G licenses in Turkey (2008-23)
Size Appraisal Value Acquisition Value
(Mhz) (EUR m) (EUR m)
Turkcell 40 285 358
Vodafone 35 250 250
Avea 30 214 214
Sources Information and Communications Technologies Authority
We think that Turkcell is well positioned to benefit from the expected growth in the
mobile data segment and the 4G licence tender will provide Turkcell with a valuable
opportunity to increase its competitive advantage over its competitors in providing
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
In our view weak economic activity and high food inflation undermined consumer
sentiment in Turkey in 2014 In our view consumers have traded down in Turkey in
2014 and will probably remain cautious in 2015 as well
We believe BIMAS is placed to be the least affected by Turkeyrsquos adverse
environment We believe that recovery in the companyrsquos profit margins will continue
as inflation calms down Recovery in profit margins should continue into 2015 as new
stores come online to generate revenues and the company feels less inflationary
pressure (current inflation is running at around 9 compared with as low as 6 for
mid-2015) Lower fuel expenses should help consumer budgets and tame
inflationary pressure We think the market has misinterpreted BIMrsquos aspirations to
expand into supermarkets We donrsquot think it is related to the maturation of the
discount channel but is more to do with potential opportunities in the supermarketchannel after years of bleeding profitability and subpar growth due to relentless
competition from the discount channel BIM has benefited from trading down as
consumers try to make the most out of their budgets in 2014 High food inflation
while increasing the top line has had a negative impact on margins BIM has been
successful in passing on cost pressures while accelerating growth (adding 500 new
stores a year in Turkey from 2014)
Migros was able to maintain its high margins by focusing on growth and efficiency
The company has developed a new store format which lives up to changing
consumer demand and supports long-term organic growth However the new format
requires more time for testing before being deemed successful and sustainable given
ever-rising competition in the supermarket segment The main challenge has beennegative LFL growth due to lower in-store inflation and low traffic growth in
hypermarkets However the company has been able to deal with this challenge by
increasing supply-chain efficiency and improving product assortment Despite high
competition from the discount segment the company focused on differentiation in
price-quality mix utilizing its strong knowledge base
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
In 2014 restrictions on credit card instalments hit the revenues of Bizim severely In
addition weak consumer sentiment and a tough competitive environment further hurt
revenue Despite the reversal of restrictions on corporate credit cards and acquisitionof the soft franchise system the company struggled to increase revenues due to
ongoing weak business activity In our view the HORECA segment will suffer as
tourism may come under pressure due to economic turmoil in Russia a major
market for the Turkish tourism industry
In this environment CCOLA is the most affected consumer name Because of a
strong base in 1H14 we expect weak y-y growth figures for CCOLA in the Turkish
market Except for Pakistan CCOLArsquos other markets (Iraq Kazakhstan Azerbaijan
etc) are adversely affected by low oil prices Hence growth rates will come under
pressure Moreover its strong base in international operations (9M14 +156) on the
back of strong growth in Kazakhstan (+20) puts further pressure on y-y growth
rates in international operations in 9M15 However low oil prices should provide
support for profit margins (lower distribution expenses and resin prices) Hence the
stock lacks a short-term catalyst though we believe that the long-term growth story
for the stock remains intact
In our view Ulker has a better growth outlook in 2015 and we expect a 5 increase
in unit sales on the back of growth in domestic consumption and new product
launches However ongoing problems in Iraq and other export markets pose a risk to
growth in unit sales We expect an around 7 increase in unit prices The acquisition
of international operations (Egypt and Saudi Arabia) is to be completed in 1Q15 We
expect roughly TRY300m in revenue from international operations for FY15
Moreover we expect a recovery in margins at Ulker to 124
Despite the attractive valuation of Anadolu Efes we believe downside risks are stillhigh in international operations Recall that beer consumption in Russia has
contracted by 4-5 on an annual basis since 2008 Moreover ongoing political
problems in Ukraine and slowdown in economic activity in Kazakhstan will continue
to hurt beer consumption High excise taxes and the governmentrsquos regulatory
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
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Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
At the beginning of 2014 markets were very volatile on the back of political tension
the 550bp CBRT policy rate hike in January and benchmark bond yields climbing to
12 levels The CBRT rate cuts in 2Q14 and 3Q14 helped the real estate market by
increasing affordability Home sales figures remained elevated and reached their
highest quarterly figures in 4Q14 Overall in a year like 2014 home sales figures
exceeded FY13 figures which was a historic year in terms of low interest rates and
high annual sales figures The fundamentals of the residential real estate sector ndashnamely a young population increasing urbanization decreasing household size and
urban transformation projects ndash remain supportive for coming years and these
fundamentals showed their strength in 2014 as home sale figures reached the same
levels as 2013 although average mortgage rates were around 2ppt higher than in
2013
EXHIBIT 34 Monthly home sales vs Interest rates EXHIBIT 35 Quarterly home sales vs Interest rates
Sources Turkstat CBRT Sources Turkstat CBRT
Mortgage uptake plays an important part in total home sales and low interest rates
are the key in higher usage ratios In June 2013 average mortgage rates declined to
a record low of 83 and mortgage usage increased to 454 The lowest rates in
2014 were around 107 in October and mortgage usage increased to one of its
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Sources Automotive Manufacturers Association BNP ParibasTEB Investment estimates
On the other hand we expect the positive outlook in export markets to continue in2015 especially in Europe The ECBrsquos recently announced QE programme should
benefit consumers from a bank lending perspective and improve consumer
confidence levels
EXHIBIT 43 Global peer comparison
--------------------- EVEBITDA --------------------- --------------------------- PE ---------------------------
Company Country BBG code 2014E 2015E 2016E 2014E 2015E 2016E
(x) (x) (x) (x) (x) (x)
Kia Motors Corporation South Korea 000270 KS 39 35 33 55 53 49
Hyundai Motor Co South Korea 005380 KS 63 61 58 53 51 49
Qingling Motors China 1122 HK 191 149 144 112 103 96
Tan Chong Motor Holdings Malaysia TCM MK 110 83 69 201 121 93
Great Wall Motor Company China 2333 HK 110 83 71 129 98 83
Dongfeng Motor Hong Kong 489 HK 436 386 353 64 61 54
Mahindra amp Mahindra India MM IN 117 126 105 185 189 149
Emerging markets median 110 83 71 112 98 83
Ford Motor Co US F US 49 34 31 135 93 79
Volkswagen Ag Germany VOW GR 82 75 68 92 85 77
Renault Sa France RNO FP 102 91 82 108 80 63
Peugeot Sa France UG FP 97 79 72 - 145 101
Fiat Spa Italy FCA IM 35 30 27 266 115 80
Nissan Motor Co Ltd Japan 7201 JP 113 96 86 116 94 82
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
We forecast Turkish aviation will grow 10 in terms of passenger numbers in 2015
driven by 10 growth in international passengers This will again significantly exceed
our Turkish GDP growth rate expectation of 3 while it represents a slight slowdown
from 11 in 2011 We estimate the slight easing of the growth rate will mainly come
from the slowdown in domestic passenger growth given the vastly increased number
of domestic passengers in Turkey since 2003 Please see our report on Pegasus Airlines of 10 October 2014 Rapid and competitive growth for further details
We expect growth in scheduled air travel will again significantly exceed that in
charter air travel due to the increasing competitiveness of scheduled air travel in
terms of fares and number of destinations and quickly increasing capacities Listed
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
between 2003 and 2012 but growth slowed to 7 in 2013 (accounting for nearly 50
of world steel production of 16b tonnes) and an estimated 4 in 2014 on our
estimates on a slowdown in domestic demand growth This has led to major
declines in steel making raw material prices especially in 1H14 when combined with
new major capacity being brought online by large mining companies especially for
Chinese consumption With the cost advantage coming from substantially lower raw
material prices Chinese steel producers increasingly turned to export markets in
2H14 registering an around 70 y-y increase in exports in tonnes and putting major
downward pressure on world steel prices We expect Chinese steel producers willincrease their exports 30-40 y-y in 2015 after the 50 y-y increase in 2014 and
continue applying significant downward pressure to world steel prices as well as the
margins of Turkish steel producers
We prefer Kardemir (KRDMD TI BUY CP TRY205 TP TRY238) over Erdemir
(EREGL TI HOLD CP TRY481 TP TRY423) given its favourable valuation and
our expectation that it will be able to increase its earnings and maintain its margins
despite the downward pressure of lower steel prices We expect Kardemir will be
able to defend its EBITDA margin on unit sales rising c20 y-y on increased
capacity and additional savings from higher energy self-sufficiency We foresee only
a 3 y-y increase in Erdemirrsquos unit sales in 2015 and a 20 decline in net profit
Please see our report of 15 December 2014 Tailwinds turning to headwinds for
further details
EXHIBIT 47 Steel equities multiple comparison
Mkt capNet debtEBITDA ----------- PE ----------- ------ EVEBITDA ------ ----- Net Margin ----- --- EBITDA margin ---
Company Business 2013 lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E lsquo14E lsquo15E lsquo16E
Priced at close of 23 Jan 2015Multiples for Erdemir and Kardemir may slightly differ from those elsewhere in this report as they are based on USD and calculated based on year-end balance sheet positionsrather than averages Mcap and multiples for Kardemir only for D-class share
Sources TEB InvestmentBNP Paribas estimates for Kardemir and Erdemir and Bloomberg for the rest
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
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Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
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entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Halkbank has the most appealing valuation among the large-cap banks in our
coverage as well as the highest ROE among peers despite solid catalysts The stockis oversold on the large-ticket NPL issue This in our view was a specific case with a
high likelihood of recovery in 2016 We are not in anticipation of further large-size
NPLs from the bank this year
We expect the bank to complete the divestiture of its insurance subsidiary in 2Q15 at
rich multiples On the way to the subsidiary sale news flow regarding due diligence
preliminary bids and the announcement of shortlist are set to keep investor interest
high on Halk
Financial intermediation of Halk between Turkey and Northern Iraq as well as Iran
seems set to continue for the foreseeable future Waivers to Iran have been
extended until June 2015 and more time could be granted as long as Iran continues
taking constructive steps
On core operational performance management is looking for a sector-topping
budget of 20bp NIM enhancement y-y in 2015 while we are looking for a slight drop
in our estimates 20-22 ROE guidance is also the highest among those banks that
have announced ROE guidance 7ppt of which should stem from the divestiture of
insurance subsidiaries in our view 16-18 loan growth guidance is parallel to peersrsquo
budgets for 2015 while our expectation is at the lowest end of this range
Managementrsquos fee income expectation of 10 and opex growth expectation of 11-
13 are parallel to our expectations Management expects a solid improvement in
asset quality with a 32-34 NPL ratio versus 37 at end-3Q14 and 70-80bp
specific CoR corresponding to a remarkable 20bp improvement y-y For next year
we expect 14 ROE while management guides for 20-22 including the 100provisioning of the large-scale NPL in 2Q15 and one-off profit items like the
insurance sale that is to take place in the same quarter
Even on our current conservative estimates 2015E 11x PBV and 82x PE multiples
are at the low end of the peer group range and could get even more appealing if the
In line with the profitable growth strategy Turkcell remained focused on expanding
the post-paid customer base (from 375 in 2012 to 43 in 3Q14) and increasing
smartphone penetration (from 18 in 2012 to 37 in 3Q14) Both mobile data andfibre broadband segments continue to be the main drivers of revenue growth In
3Q14 these segments posted 38 y-y growth and accounted for 27 of
consolidated revenues up from 21 in 3Q13 We expect mobile and fibre
broadband segments to drive growth in Turkcellrsquos revenues in 2015 with expected
y-y growth of 25 and 15 respectively
The company is expecting to reach a more balanced revenue structure benefiting
from high growth rates in mobile broadband and fibre broadband revenues Currently
mobile broadband accounts for 17 of total revenues and is growing more than 30
a year Its share is expected to reach 30-35 in the medium term Fibre broadband
accounts for 10 of revenues is growing at high rates and is expected by the
company to make a 20 contribution in the medium term We expect Turkcellrsquosoperations to be resilient to the volatility in GDP growth as GDP sensitivity of mobile
communication is not very high We also think that Turkcell is well protected from the
fluctuations in interest rates and TRY thanks to its cash-rich balance sheet (TRY52b
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
The shareholdersrsquo dispute that blocked the dividend payment since 2010 has ended
following Cukurovarsquos payment to Alfa This has raised expectations for the
distribution of the long-awaited dividend Additionally CMB holds the right to
intervene and decide for a dividend distribution after 31 March 2015 if Turkcell fails
to convene its General Assembly Our base-case scenario indicates a TRY190 per
share cash dividend distribution from the aggregated earnings between 2010 and
2014 which implies a 131 dividend yield
At 127x 2015E PE Turkcell is trading at a 3 discount its global peer group Whenadjusted for the dividend Turkcellrsquos 2015E PE drops to 110x which implies a 16
We think that sizeable prospective contracts such as a long-range air defence
missile system and Altay tank serial production are on the horizon which could bring
an additional USD15b order backlog to the company Although the possibility of the
blacklisted (by the US) Chinese company CPMIEC (a state-owned enterprise)
winning the long-range air defence system tender is still on the table we expect the
government to cancel its negotiations with CPMIEC and choose EUROSAM (not
listed) or Raytheon (RTN US) on this tender In addition to the above protection ofthe Strategic Targets tender and Stand-Off Jammer projects should be watched
closely in 2015 and 2016 respectively Delivery schedules on these projects are
crucial to our valuation and pose upside risk
We believe Aselsanrsquos SPO (secondary placement offering) decision which is
awaiting the result of this long-range missile deal is an opportunity for the company
to increase its daily trading volume and lift market capitalisation as the SPO is
planned to be a restricted rights issue
Aselsan generates 97 of its revenue from defence contracts vs about 60 for its
global peers Management plans to expand its focus on civilian contracts in sectors
such as energy and transportation to increase its growth opportunities We welcome
this strategy as a civilian focus should enhance growth prospects in addition to the
bright defence revenue outlook
Management has been putting hard work into new collaboration agreements on both
civilian and non-Turkey defence projects and signed a couple of MoU agreements
with several companies such as IBM (development of metal-air batteries) Durmazlar
(supply and development of electronic systems for trains) and Eurofighter Typhoon
(development of engine control systems) whose benefits we expect to see in the
medium to long term
The nature of the defence business allows Aselsan to benefit from TRY depreciation
as 83 of its revenue is denominated in FX vs 60 of costs
Tofas Otomobil (TOASO TI BUY CP TRY174 TP TRY1880)(Toygun Onaran +90 216 636 4533 toygunonarantebyatirimcomtr )
The recovery in domestic light vehicle sales in the second half of 2014 was better
than our expectations We have seen a significant recovery in LCV demand thanks
to a 75 reduction in K license fees effective from July 2014 In December 2014 LV
sales increased 13 y-y to 147K bringing cumulative sales to 768k units in 2014
indicating 10 y-y contraction Thanks to the superior sales performance in the last
month of the year 2014 domestic LV sales exceeded our estimate of 700K units by a
wide margin Following a 25 contraction in 1H14 domestic demand improved
significantly in the second half as LV sales grew by 2 in 2H14 We expect the
upbeat demand to continue in 1H15 and forecast an around 10 y-y increase in LV
sales given the low base impact of 1H14
The completion of Doblo US investment will help Tofas to diversify its export markets
starting from 4Q14 Tofas will export at least 175k units of Doblo to the US until 2021
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
We expect US exports to be 45k units in 2014 and 15-20k annually starting from
2015 With the contribution of US Doblo sales Doblo capacity increased to 190k
units (up from 160k) with 150k under take-or-pay agreement
Tofas is planning to complete a new passenger car a compact sedan model to be
built on a new platform investment by 2H15 Tofas will also develop compact
hatchback and station wagon versions of this model by 2016 Accordingly with the
completion of these model investments Tofasrsquo PC production capacity will be 160k
units annually starting from 2016 Renewal of the Minicargo model will be on thetable in 2015 where the main focus will be on the content of the take-or-pay
agreement We expect the Minicargo capacity to be limited to 50k (down from 165k)
starting from 2016
We expect 2014 and 2015 EBITDA margins to be strong at 122 and 117
respectively benefiting from weak TRY and positive contribution of take-or-pay
agreements We believe Tofas is well positioned to benefit from the recovery in
domestic demand especially in LCVs Additionally new PC models will provide a
more balanced product portfolio for Tofas and increase the companyrsquos
competitiveness in both domestic and export markets
Bim Birlesik Magazalar (BIMAS TI BUY CP TRY5015 TP TRY57)
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities companies or issuers mentioned in this report and (ii) no partof the compensation of the analyst(s) was is or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst herein Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp and are not registered qualified pursuant to NYSEandor FINRA regulations
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONSBNP Paribasrdquo is the marketing name for the global banking and markets business of BNP Paribas Group No portion of this report was prepared by BNPParibas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711 The following disclosures relate torelationships between companies covered in this research report and the BNP entity identified on the cover of this report BNP Securities Corp and otherentities within the BNP Paribas Group (collectively BNP Paribas)
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated andor recommended in thisreport
Company Ticker Disclosure (as applicable)
NA NA NA
BNP Paribas represents that1 Within the past year it has managed or co-managed a public offering for this company for which it received fees2 It had an investment banking relationship with this company in the last 12 months3 It received compensation for investment banking services from this company in the last 12 months4 It expects to receive or intends to seek compensation for investment banking services from the subject companyies in the next 3 months5 It beneficially owns 1 or more of any class of common equity securities of the subject company6 It makes a market in securities in respect of this company7 The analyst(s) or an individual who assisted in the preparation of this report (or a member of hisher household) has a financial interest position in
securities issued by this company The financial interest is in the common stock of the subject company unless otherwise noted8 The analyst (or a member of hisher household) is an officer director or advisory board member of this company or has received compensation from the
company
IMPORTANT DISCLOSURES REQUIRED IN KOREAThe disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated andorrecommended in this report
Company Ticker Price (as of 26-Jan-2015 closing price) Interest
NA NA NA NA
1 The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co Ltd (ldquoBNPPSKrdquo) by means ofpayment guarantees endorsements and provision of collaterals andor taking over the obligations
2 BNPPSK owns 1100 or more of the total outstanding shares issued by the Company3 The Company is an affiliate of BNPPSK as prescribed by Item 3 Article 2 of the Monopoly Regulation and Fair Trade Act4 BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5100 of the total asset of the Company or the total number of outstanding shares5 BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year6 With regards to the tender offer initiated by the Company based on Item 2 Article 133 of the Financial Investment Services and Capital Market Act
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company provided that this provisionshall apply only where tender offer has not expired
7 The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of enteringinto arrangement for public offering or underwriting-related agreement for issuance of stocks
8 The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation9 The Company is recognized as having considerable interests with BNPPSK in relation to No1 to No 810 The analyst or hisher spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc contracts) the
following securities or rights (hereinafter referred to as ldquoSecurities etcrdquo in this Article) regardless of whose name is used in the trading1) Stocks bond with stock certificate and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited2) Stock options of the Company whose securities dealings are being solicited3) Individual stock future stock option and warrants that use the stocks specified in Item 1) as underlying
GENERAL DISCLAIMERThis report was produced by TEB Investment BNP Paribas JV member company(ies) of the BNP Paribas GroupThis report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person withoutour prior written consent By accepting this report the recipient agrees to be bound by the terms and limitations set forth hereinThis report does not constitute a personal recommendation or take into account the particular investment objectives financial situations or needs ofindividual clients Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
trading activity This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this reportInformation and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipientrsquos own independent verification or taken in substitution for the exercise of judgment by the recipient Additionally the products mentioned in thisreport may not be available for sale in certain jurisdictions As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest which are resolved under applicable legal provisions andinternal guidelines You should be aware however that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in thisdocument either for its own account or for the account of its clients
Australia This report is being distributed in Australia by BNP Paribas Sydney Branch registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000 BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no 238043 andtherefore subject to regulation by the Australian Securities amp Investments Commission in relation to delivery of financial services By accepting this document
you agree to be bound by the foregoing limitations and acknowledge that information and opinions in this document relate to financial products or financialservices which are delivered solely to wholesale clients (in terms of the Corporations Act 2001 sections 761G and 761GA Corporations Regulations 2001division 2 reg 7118 amp 7119) andor professional investors (as defined in section 9 of the Corporations Act 2001)
Canada The information contained herein is not and under no circumstances is to be construed as a prospectus an advertisement a public offering anoffer to sell securities described herein or solicitation of an offer to buy securities described herein in Canada or any province or territory thereof Any offeror sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevantCanadian securities regulators and only by a dealer properly registered under applicable securities laws or alternatively pursuant to an exemption from thedealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made The information contained herein is underno circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient To the extentthat the information contained herein references securities of an issuer incorporated formed or created under the laws of Canada or a province or territoryof Canada any trades in such securities must be conducted through a dealer registered in Canada No securities commission or similar regulatory authority inCanada has reviewed or in any way passed judgment upon these materials the information contained herein or the merits of the securities described hereinand any representation to the contrary is an offence
Hong Kong This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition disposal or holding of securities whether as principal or agent BNP Paribas Securities (Asia) Limited a subsidiary of BNPParibas is regulated by the Securities and Futures Commission for the conduct of dealing in securities advising on securities providing automated trading
services dealing in futures contacts and advising on corporate finance For professional investors in Hong Kong please contact BNP Paribas Securities (Asia)Limited for all matters and queries relating to this report
India In India this document is being distributed by BNP Paribas Securities India Pvt Ltd (BNPPSIPL) having its registered office at 5 th floor BNP ParibasHouse 1 North Avenue Maker Maxity Bandra Kurla Complex Bandra (East) Mumbai 400 051 INDIA (Tel no +91 22 3370 4000 6196 4000 Fax no +91 226196 4363) BNPPSIPL is registered with the Securities and Exchange Board of India (ldquoSEBIrdquo) as a stockbroker in the Equities and the Futures amp Optionssegments of National Stock Exchange of India Ltd and BSE Ltd (SEBI Regn Nos INBINF231474835 INBINF011474831 CIN U74920MH2008FTC182807Website wwwbnpparibascoin )
Indonesia This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s) including marketingsalesperson to its client PT BNP Paribas Securities Indonesia having its registered office at Menara BCA 35th floor Grand Indonesia JL MH Thamrin No1 Jakarta 10310 Indonesia is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no 8 year 1995 a holder of broker-dealer andunderwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa KeuanganOJK) PT BNP Paribas SecuritiesIndonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK) Neither this report nor any copy hereof may bedistributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations This report is notan offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance whichconstitutes an offering within the meaning of Indonesian capital market laws and regulations
Japan This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas notregistered as a financial instruments firm in Japan to certain financial institutions defined by article 17-3 item 1 of the Financial Instruments and ExchangeLaw Enforcement Order BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments andExchange Law of Japan and a member of the Japan Securities Dealers Association the Financial Futures Association of Japan and the Type II FinancialInstruments Firms Association BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japanaffiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited Some of the foreign securities stated on this report are notdisclosed according to the Financial Instruments and Exchange Law of Japan
Malaysia This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd The views and opinions in this research report are our own as ofthe date hereof and are subject to change BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this researchreport This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd This publication isbeing provided to you strictly on the basis that it will remain confidential No part of this material may be (i) copied photocopied duplicated stored orreproduced in any form by any means or (ii) redistributed or passed on directly or indirectly to any other person in whole or in part for any purposewithout the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd
Philippines This report is being distributed in the Philippines by BNP Paribas Manila Branch an Offshore Banking Unit (OBU) of BNP Paribas whose headoffice is in Paris France BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No 1034 (PD 1034) and regulated bythe Bangko Sentral ng Pilipinas This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034 and is qualified in its
entirety to the products and services allowed under PD 1034Singapore This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd (BNPPSSL) and may be distributed in Singapore only to an Accredited or Institutional Investor each as defined under the Financial Advisers Regulations (FAR) and the Securities and Futures Act (Chapter 289) ofSingapore as amended from time to time In relation to the distribution to such categories of investors BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore regarding the disclosure of certain interests in orcertain interests in the acquisition or disposal of securities referred to in this report For Institutional and Accredited Investors in Singapore please contactBNP Paribas Securities (Singapore) Ptd Ltd (company registration number 199801966C address 10 Collyer Quay 34F Ocean Financial Centre Singapore049315 tel (65) 6210 1288 fax (65) 6210 1980) for all matters and queries relating to this report
South Africa In South Africa BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ldquoBNPP Cadizrdquo)are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial ServicesBoard BNPP Cadiz does not expressly or by implication represent recommend or propose that the financial products referred to in this report areappropriate to the particular investment objectives financial situation or particular needs of the recipient
South Korea BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES ANDCAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission This document does not constitute an offer tosell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South KoreaSwitzerland This report is intended solely for customers who are ldquoQualified Investorsrdquo as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Acton Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22November 2006 (CISO) ldquoQualified Investorsrdquo includes among others regulated financial intermediaries such as banks securities dealers fund managementcompanies and asset managers of collective investment schemes regulated insurance companies as well as pension funds and companies with professionaltreasury operations This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to QualifiedInvestors For specification purposes a ldquoSwiss Corporate Customerrdquo is a Client which is a corporate entity incorporated and existing under the laws ofSwitzerland and which qualifies as ldquoQualified Investorrdquo as defined above BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity
Federal Market Supervisory Authority FINMA BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No CH-270-3000542-1 BNPParibas (Suisse) SA is incorporated in Switzerland with limited liability Registered Office 2 place de Hollande CH-1204 Geneva
Taiwan Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co Ltd Such information is for your reference onlyThe reader should independently evaluate the investment risks and is solely responsible for their investment decision Information on securities that do nottrade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities BNP ParibasSecurities (Taiwan) Co Ltd may not execute transactions for clients in these securities This publication may not be distributed to the public media orquoted or used by the public media without the express written consent of BNP Paribas
Thailand Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (ldquoBNPPrdquo) and FinansiaSyrus Securities Public Company Limited (ldquoFSSrdquo) FSS International Investment Advisory Securities Co Ltd (ldquoFSSIArdquo) prepares and distributes research underthe brand name ldquoBNP PARIBASFSSrdquo BNPP is not an affiliate of FSSIA or FSS FSS also publishes a different research product under the brand nameldquoFINANSIA SYRUSrdquo which is prepared by research analysts who are not part of FSSIA and who may cover the same securities issuers or industries that arethe subject of this report
The ratings recommendations and views expressed in this report may differ from the ratings recommendations and viewsexpressed by other research analysts or research teams employed by FSS This report is being distributed outside Thailand by members of BNP Paribas
Turkey This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER AS Teb Kampus D Blok Saray Mah Kucuksu CadSokullu Sok No7 34768 Umraniye Istanbul Turkey Trade register number 358354 wwwtebyatirimcomtr ) and outside Turkey jointly by TEB Investmentand BNP Paribas Information comments and suggestions on investment given in this material are not within the scope of investment consulting Theinvestment consulting services are rendered tailor made for individuals by competent authorities considering the individuals 991257 risk and return preferencesHowever the comments and recommendations herein are based on general principles These opinions may not be consistent with your financial status aswell as your risk and return preferences Therefore making an investment decision only based on the information provided herein may not bearconsequences in parallel with your expectations This material issued by TEB Yat
983345
r983345
m Menkul Değ
erler AŞ
for information purposes only and may bechanged without any prior notification All rights reserved No part of this material may be copied or reproduced in any manner without the written consentof TEB Yat983345 r 983345 m Menkul De ğ erler AŞ Although TEB Yat 983345 r 983345 m Menkul De ğ erler AŞ gathers the presented material that is current as possible it does notundertake that all the information is accurate or complete nor should it be relied upon as such TEB Yat 983345 r983345 m Menkul De ğ erler AŞ assumes no responsibilitywhatsoever in respect of or arising out or in connection with the content of this material to third parties If any third party chooses to use the content of thismaterial as reference heshe accepts and approves to do so entirely at hisher own risk
United States This report may be distributed in the United States only to US Persons who are ldquomajor US institutional investorsrdquo (as such term is defined inRule 15a-6 under the Securities Exchange Act of 1934 as amended) and is not intended for the use of any person or entity that is not a ldquomajor USinstitutional investorrdquo US persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp a US-registered broker dealer and member of FINRA SIPC NFA NYSE and other principal exchanges
Certain countries within the European Economic Area This document may only be distributed in the United Kingdom to eligible counterparties andprofessional clients and is not intended for and should not be circulated to retail clients (as such terms are defined in the Markets in Financial InstrumentsDirective 200439EC (ldquoMiFIDrdquo)) This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas LondonBranch a branch of BNP Paribas SA whose head office is in Paris France BNP Paribas SA is incorporated in France with limited liability with its registeredoffice at 16 boulevard des Italiens 75009 Paris BNP Paribas London Branch (registered office 10 Harewood Avenue London NW1 6AA tel [44 20] 7595 2000 fax [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autoriteacute de Controcircle Prudentiel et de Reacutesolution (ACPR) BNP ParibasLondon Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authorityand PRA Details about the extent of our authorisation and regulation by the PRA and regulation by the Financial Conduct Authority are available from us onrequest This report has been approved for publication in France by BNP Paribas a credit institution licensed as an investment services provider by the ACPRwhose head office is 16 Boulevard des Italiens 75009 Paris France This report is being distributed in Germany either by BNP Paribas London Branch or byBNP Paribas Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuumlr Finanzdienstleistungsaufsicht (BaFin)
Other Jurisdictions The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law and persons intowhose possession this report comes should inform themselves about and observe any such restrictions By accepting this report you agree to be bound by
the foregoing instructions This report is not directed to or intended for distribution to or use by any person or entity that is a citizen or resident of orlocated in any locality state country or other jurisdiction where such distribution publication availability or use would be contrary to law or regulation
All research reports are disseminated and available to all clients simultaneously through our internal client websites For all research available on aparticular stock please contact the relevant BNP Paribas research team or the author(s) of this report
Additional DisclosuresTarget price history stock price charts valuation and risk details and equity rating histories applicable to each company rated in this report is available inour most recently published reports available on our website httpeqresearchbnpparibascom or you can contact the analyst named on the front of thisnote or your BNP Paribas representative
All share prices are as at market close on 26 January 2015 unless otherwise stated
RECOMMENDATION STRUCTURE
Stock RatingsStock ratings are based on absolute upside or downside which we define as (target price - current price) current priceBUY (B) The upside is 10 or moreHOLD (H) The upside or downside is less than 10
REDUCE (R) The downside is 10 or moreUnless otherwise specified these recommendations are set with a 12-month horizon Thus it is possible that future price volatility may cause atemporary mismatch between upsidedownside for a stock based on market price and the formal recommendation In most cases the target price will equal the analysts assessment of the current fair value of the stock However if the analyst doesnt think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts then the target price may differ from fair value In most cases therefore our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value
Industry RecommendationsImproving ( ) The analyst expects the fundamental conditions of the sector to be positive over the next 12 monthsStable (previously known as Neutral) ( ) The analyst expects the fundamental conditions of the sector to be maintained over the next 12monthsDeteriorating ( ) The analyst expects the fundamental conditions of the sector to be negative over the next 12 monthsCountry (Strategy) RecommendationsOverweight (O) Over the next 12 months the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equityNeutral (N) Over the next 12 months the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equityUnderweight (U) Over the next 12 months the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations index returns relative to the regional benchmark index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity