Worries (demand, margins, fx losses)
continue, but we think a better picture
for next 12 months is not yet priced in
􀀗 Upgrade Turcas to OW (V) (from UW
(V)), TP up to TRY4.25, given reduced
concerns on credit squeeze and its
overly pessimistic market value
􀀗 Reiterate OW (V) on Aygaz (TP: TRY3.2)
and Tupras (TP cut to TRY21.4), which
should benefit from a recovery. We also
upgrade Petkim to N (V) from UW (V)
(TP up to TRY5.2)
Q1 results could be the last period for losses
A weak economic environment has reduced the world’s appetite
for oil consumption and led to huge oversupply. A particularly
harsh outlook on the Turkish economy has put Turkish oil
companies out of favour. We believe oil demand could return to
growth territory in 2010 and estimate that the almost 60%
decline (on average) in the share prices of Turkish oil
companies over the last 12 months implies that the market is
still not factoring in a recovery scenario. On the credit side, we
see fewer risks owing to low gearing and defensive cash flows.
We argue that Q1 losses will be much lower than in Q4 and
that, from Q2, we can look forward to a better 12-month
period in terms of demand, margins, fx and inventory losses.
Against this backdrop, five stocks under our coverage look
attractive in terms of valuation. We favour Tupras (OW (V))
for its better positioning to weather the refining downcycle.
We believe Aygaz (OW (V)) offers good value at current
levels. We upgrade Turcas to OW (V) which looks attractive
on valuation but remain cautious about developments on the
petrochemical sector. However, we upgrade Petkim to N (V)
from UW (V) based on its attractive valuation. We are
uncertain of Petrol Ofisi’s (UW (V)) fortunes and expect
contingent risks from the parent group’s unfavourable terms
with the government to weigh on the shares and limit upside.