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Turkish Airlines

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Turkish Airlines Company Valuation

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Turkish Airlines

  1. 1. Turkish AirlinesTeam ITU Research PartnersTilbe Gizem BircanAlper TopkayaOsman ÖztekinM. Çağhan EraymanErman DemirTeam MentorTolga Kotan
  2. 2. 0246810Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13Target Price: TL 8.30Current Market Price: TL 6.68BUYInvestment Summary and Company OverviewCurrent PriceTL 6.68Upside Potential24%Target PriceTL 8.30Promising Aviation Market Ready to BenefitRising Profitability Further Improvement
  3. 3. Business Description
  4. 4. Market Profile01020304050602006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 EDomestic Market Growth (mn)304050607080902006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 EInternational Market Growth (mn)
  5. 5. Why BUYWHY BUY ?AggressiveGrowthHigh Profit YieldPotentialCompellingValuationFurther GrowthPotential
  6. 6. Aggressive GrowthSalesForecastTemporalRegressionScenerioForecastsFunctionalRegression0%10%20%30%40%50%60%70%80%90%100%0400080001200016000200002007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 ESales Revenue Sales Growth RateSales Revenue (mn)17% CAGR
  7. 7. Future Market Potential01020304050607080901002012 E 2013 E 2014 E 2015 E 2016 E 2017 EInternational Market Forecast01020304050602012 E 2013 E 2014 E 2015 E 2016 E 2017 EDomestic Market ForecastPax (mn)Aggressive GrowthMarket GrowthHigh Sales Revenue GrowthPax (mn)
  8. 8. Aggressive Growth0102030405060702009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 EPAX ( mn )70%75%80%85%040801201602002009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 EASK RPK Load FactorTraffic Data ( mn )Market GrowthHigh Sales Revenue GrowthTHYAviation Figures
  9. 9. Why BUYAggressiveGrowth RateHigh Profit YieldPotentialAccurateValuationPromisingPotentialsWHY BUY ?
  10. 10. 3.9 4.0 3.9 3.84.0 3.94.13.52462006 2007 2008 2009 2010 2011 9M11 9M12Personnel/ASK($ Cent)Effective Personel Cost ManagementHigh Profit Yield Potential048SAS DL UA AF-KL LH AY IAG LAN SQ* TKPersonel/ASK($ Cent)Benefical AffiliatesEffective Cost Hub-to-Point & Youngest Fleet Age
  11. 11. ‘’Optimum Supply Chain Management’’High Profit Yield PotentialBenefical AffiliatesEffective Cost Hub-to-Point & Youngest Fleet Age
  12. 12. 6.512.710139.7048121620TA LH AF BA KLMHigh Profit Yield PotentialHub-to Point Strategy Youngest Fleet AgeBenefical AffiliatesEffective Cost Hub-to-Point & Youngest Fleet Age
  13. 13. Benefical Affiliates High Profit ExpectationsIncome Statement ( Margin ) 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 FEBITDAR 22.3% 20.2% 22.9% 16.6% 14.0% 16.9% 16.4% 16.6% 17.5% 17.0% 16.9%EBITDA 17.9% 16.8% 17.5% 11.0% 9.8% 13.7% 13.5% 13.9% 15.0% 14.8% 14.9%EBIT 10.4% 12.1% 10.9% 5.5% 2.9% 7.8% 7.5% 8.1% 9.2% 8.8% 8.9%Net Income (NI) 5.5% 18.5% 8.0% 3.4% 0.2% 6.7% 6.8% 6.8% 7.7% 7.3% 7.3%2%4%6%8%10%12%7%9%11%13%15%17%101112E13E14E15E16E17EEBITDA EBIT0.00.20.40.60.81.01.2789101112E13E14E15E16E17EHigh Profit Yield PotentialHub-to-Point & Youngest Fleet Age
  14. 14. Why BUYAggressiveGrowth RateHigh Profit YieldPotentialCompellingValuationFurther GrowthPotentialWHY BUY ?
  15. 15. Further Growth Potential3rd Airport 150 mn. Passenger Capacity First phase in 2016Merger with LH : All is possible Second biggest airline company Impressive hub network Economy of scale Increasing bargaining powerFurther Growth Potential
  16. 16. Why BUYAggressiveGrowth RateHigh Profit YieldPotentialCompellingValuationFurther GrowthPotentialWHY BUY ?
  17. 17. Weighted Calculation DCF MultiplesTarget Price of THYAOTL 8.30DCF( Discounted Cash Flow)Peer Comparison(P/E, EV/EBITDA, EV/EBITDAR)Long Term Drivers Short Term Drivers65% 35%Compelling ValuationTL 8.10 TL 8.67
  18. 18. DCF ComponentsTL 8.105- Year ProjectedCash FlowsTL 2.42Terminal Value ofCash FlowsTL 5.68Cost of EquityWACC 6.5 %Cost of Equity 9.0 %Terminal Valueg2.0 %(1970-2012*)High Correlation with GDP growth.Weighted Calculation DCF MultiplesCompelling Valuation
  19. 19. Weighted Calculation DCF MultiplesP/E EV/EBITDA2012 E 2013 E 2012 E 2013 EGrand Average of Aviation Market 11.8 (x) 10.3 (x) 7.9 (x) 7.6 (x)Turkish Airlines 8.1 (x) 6.5 (x) 7.7 (x) 6.8 (x)Discount Rate -31% -37% -7% -25%Current Price TL 6.68Target Price TL 9.73 TL 10.53 TL 7.16 TL 8.33Compelling Valuation
  20. 20. Potential RisksFuel Price VolatilityAirport CapacityCurrency Exchange RateIncreasing CompetitivenessImpactProbabilityHighHighRisks FactorsSwap and Option Based DerivativesNew Airport with 150 Million PassengerCapacityNatural HedgingCost Advantage by using Group StrategyShields for Risk Factors
  21. 21. Potential RisksSensitivity of Risk FactorsSource: Team’s Estimates0%2%4%6%8%10%12%14%1% Load Factor 1% Pax Yield 1% Currency 1% Oil 1% StaffEBITDAR EPS
  22. 22. Potential RisksMonte Carlo00.511.522.533.54Buy78%Hold17%FrequencyPrice (TA Group)Sell5%DCF Price Target Sensitivity to“g 2 %”
  23. 23. ConclusionSummary of ClaimReady for Market PenetrationAttractive ValuationHigh Profit PositionStrong Market Growth24 % Upside Potential
  24. 24. Table of AppendicesAppendix 1: Income StatementAppendix 2: Balance SheetAppendix 3: Statement of Cash FlowAppendix 4: Income Statement (Vertical Analysis)Appendix 5: Balance Sheet (Vertical Analysis)Appendix 6: Key Financial RatiosAppendix 7: Multiple Peer ValuationAppendix 8: Discounted Cash Flow (FCFF) ValuationAppendix 9: Sensitivity of EBITDAR and EPSAppendix 10: Regression Based ForecastsAppendix 11: Regression Based ForecastsAppendix 12: Scenerio Based ForecastAppendix 13: SWOT AnalysisAppendix 14: Subsidiaries and AffiliatesAppendix 15: Utilization of AffiliatesAppendix 16: Risk AssesmentAppendix 17: Revenue and PAX StructureAppendix 18: Company’s Cost Per ASKAppendix 19: Corporate Governance and Social ResponsibilityAppendix 20: Annual GDP Growth ExpectationsAppendix 21: Aviation Factor Estimations
  25. 25. Income StatementBack upIncome Statement (In Millions $) 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 FTotal Revenues 3734 4718 4556 5440 7019 8388 9708 11311 12980 15522 18670Cost of Sales & Service -2326 -3117 -2817 -3694 -5030 -5789 -6660 -7799 -8831 -10688 -12827Fuel Cost -904 -1427 -990 -1406 -2395 -2812 -3311 -3852 -4340 -5100 -6237Personnel Cost -782 -909 -782 -1141 -1339 -1384 -1602 -1866 -2129 -2794 -3267Other Cost -640 -781 -1045 -1147 -1296 -1594 -1748 -2081 -2362 -2794 -3323Gross Profit 1408 1601 1739 1746 1989 2599 3048 3512 4149 4834 5843Operating Expense -574 -647 -694 -845 -1004 -1184 -1371 -1597 -1852 -2223 -2668EBITDAR 834 954 1045 901 986 1414 1678 1915 2297 2611 3175Rental Expense -164 -162 -249 -305 -296 -268 -283 -303 -325 -338 -373EBITDA 670 792 796 596 690 1146 1394 1612 1972 2273 2802Depr. & Amort. -281 -221 -301 -297 -486 -496 -573 -661 -744 -925 -1107EBIT 389 571 495 299 204 650 821 951 1229 1348 1695Other Income 166 -118 -25 13 -141 47 47 47 47 47 47Others Operating Income 174 44 57 91 95 154 178 207 238 284 342Others Operating Expenses -8 -162 -82 -79 -236 -95 -109 -128 -145 -175 -210Non- Operating Income (Financial Related) -270 553 8 -75 27 0 0 0 0 0 0Earnings Before Taxes (EBT) 285 1006 478 237 89 698 868 998 1276 1395 1742Tax Expenses -81 -132 -115 -51 -76 -140 -174 -200 -255 -279 -348Net Income (NI) 204 874 363 185 13 558 695 799 1021 1116 1394Source: Team’s Estimates and Company’s Annual Report
  26. 26. Back upBalance SheetBalance Sheet 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 FCash and Equivalents 412 334 724 526 820 1258 1456 1697 1947 2328 2800Net Trade Receivables 211 231 295 374 403 525 543 702 727 991 1064Inventory 97 65 99 111 133 178 180 239 236 339 351Other Current Assets 557 1103 740 1247 799 1246 1327 1413 1505 1603 1707Total Current Assets 1277 1733 1858 2258 2155 3208 3507 4051 4415 5261 5922Net Fixed Assets 2777 3343 3195 4168 5873 6668 7646 7823 8161 9003 9666Other Long Term Assets 173 156 639 462 657 1065 1602 2165 2801 3627 4537Total Long Term Assets 2950 3499 3834 4630 6530 7733 9248 9988 10962 12630 14203Total Assets 4227 5232 5692 6888 8685 10941 12755 14039 15376 17891 20125Short-Term Lease Obligations 193 277 274 319 418 487 538 580 611 689 776Trade Payables 313 288 371 476 529 703 805 949 1067 1301 1551Other Liabilities 513 529 648 848 1144 1292 1429 1588 1747 1974 2238Short Term Liabilities 1019 1094 1293 1643 2091 2482 2772 3117 3425 3963 4564Long Term Lease Obligations 1347 1850 1711 2384 3771 5026 5840 5962 5949 6785 6999Other Liabilities 274 313 400 437 440 454 470 489 510 535 560Long Term Liabilities 1621 2163 2111 2821 4211 5481 6310 6451 6459 7320 7559Total Liabilities 2640 3257 3404 4464 6302 7963 9082 9567 9884 11283 12123Shareholders Equity & Capital 151 116 581 647 635 672 672 672 672 672 672Other Components of Equity 1436 1859 1707 1777 1748 2306 3001 3799 4820 5936 7330Total Shareholders Equity 1587 1975 2288 2424 2383 2978 3673 4471 5492 6608 8002Total Liab. & SHE 4227 5232 5692 6888 8685 10941 12755 14039 15376 17891 20125Source: Team’s Estimates and Company’s Annual Report
  27. 27. Back upStatement of Cash FlowCash Flow Statement 2012 F 2013 F 2014 F 2015 F 2016 F 2017 FCash flow from Operation 368 884 914 1313 1233 1941Net Income 558 695 799 1021 1116 1394Depreciation 496 573 661 744 925 1107Trade Receivables -122 -18 -159 -25 -264 -73Inventory -45 -2 -59 4 -103 -12Trade Payables 174 102 145 117 234 250Other Operating Act. -693 -465 -472 -547 -675 -725Cash flow from Investing -1291 -1551 -837 -1082 -1767 -1770Net CAPEX -1291 -1551 -837 -1082 -1767 -1770Fixed Asset -795 -978 -176 -338 -842 -663Cash flow from Financing 1361 865 163 19 914 301Short Term Lease 69 52 41 31 78 87Long Term Lease 1255 813 122 -13 836 214Issue of Stock 37 0 0 0 0 0Net Cash Change 438 198 240 250 381 472Beginning Cash 820 1258 1456 1697 1947 2328Ending Cash 1258 1456 1697 1947 2328 2800Source: Team’s Estimates and Company’s Annual Report
  28. 28. Back upIncome Statement (Vertical Analysis)Income Statement 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 FTotal Revenues 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%Cost of Sales & Service -62,3% -66,1% -61,8% -67,9% -71,7% -69,0% -69,6% -69,6% -68,4% -69,4% -69,9%Fuel Cost -24,2% -30,2% -21,7% -25,8% -34,1% -33,5% -34,1% -34,1% -33,4% -32,9% -33,4%Personnel Cost -20,9% -19,3% -17,2% -21,0% -19,1% -16,5% -16,5% -16,5% -16,0% -17,5% -17,5%Other Cost -17,1% -16,6% -22,9% -21,1% -18,5% -19,0% -19,0% -19,0% -19,0% -19,0% -19,0%Gross Profit 37,7% 33,9% 38,2% 32,1% 28,3% 31,0% 30,4% 30,4% 31,6% 30,6% 30,1%Operating Expense -15,4% -13,7% -15,2% -15,5% -14,3% -14,1% -14,0% -13,9% -14,1% -13,7% -13,2%EBITDAR 22,3% 20,2% 22,9% 16,6% 14,0% 16,9% 16,4% 16,6% 17,5% 17,0% 16,9%Rental Expense -4,4% -3,4% -5,5% -5,6% -4,2% -3,2% -2,9% -2,7% -2,5% -2,2% -2,0%EBITDA 17,9% 16,8% 17,5% 11,0% 9,8% 13,7% 13,5% 13,9% 15,0% 14,8% 14,9%Depr. & Amort. -7,5% -4,7% -6,6% -5,5% -6,9% -5,9% -5,9% -5,8% -5,7% -6,0% -5,9%EBIT 10,4% 12,1% 10,9% 5,5% 2,9% 7,8% 7,5% 8,1% 9,2% 8,8% 8,9%Other Income 4,5% -2,5% -0,5% 0,2% -2,0% 0,6% 0,5% 0,4% 0,4% 0,3% 0,2%Others Operating Income 4,7% 0,9% 1,3% 1,7% 1,4% 1,8% 1,8% 1,8% 1,8% 1,8% 1,8%Others Operating Expenses -0,2% -3,4% -1,8% -1,5% -3,4% -1,1% -1,1% -1,1% -1,1% -1,1% -1,1%Non- Operating Income (Financial Related) -7,2% 11,7% 0,2% -1,4% 0,4% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%Earnings Before Taxes (EBT) 7,6% 21,3% 10,5% 4,3% 1,3% 8,3% 8,0% 8,5% 9,6% 9,1% 9,2%Tax Expenses -2,2% -2,8% -2,5% -0,9% -1,1% -1,7% -1,6% -1,7% -1,9% -1,8% -1,8%Net Income (NI) 5,5% 18,5% 8,0% 3,4% 0,2% 6,7% 6,4% 6,8% 7,7% 7,3% 7,3%Source: Team’s Estimates and Company’s Annual Report
  29. 29. Back upBalance Sheet (Vertical Analysis)Balance Sheet 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 FCash and Equivalents 9,7% 6,4% 12,7% 7,6% 9,4% 11,5% 11,6% 12,5% 13,1% 13,5% 14,5%Net Trade Receivables 5,0% 4,4% 5,2% 5,4% 4,6% 4,8% 4,4% 5,2% 4,9% 5,8% 5,5%Inventory 2,3% 1,2% 1,7% 1,6% 1,5% 1,6% 1,5% 1,7% 1,6% 2,0% 1,9%Other Current Assets 13,2% 21,1% 13,0% 18,1% 9,2% 11,4% 10,4% 10,1% 9,8% 8,9% 8,4%Total Current Assets 30,2% 33,1% 32,6% 32,8% 24,8% 29,3% 28,0% 29,5% 29,4% 30,1% 30,2%Net Fixed Assets 65,7% 63,9% 56,1% 60,5% 67,6% 61,0% 59,4% 55,1% 52,4% 49,7% 47,5%Other Long Term Assets 4,1% 3,0% 11,2% 6,7% 7,6% 9,7% 12,6% 15,4% 18,2% 20,1% 22,3%Total Long Term Assets 69,8% 66,9% 67,4% 67,2% 75,2% 70,7% 72,0% 70,5% 70,6% 69,9% 69,8%Total Assets 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%Short-Term Lease Obligations 4,6% 5,3% 4,8% 4,6% 4,8% 4,4% 4,2% 4,1% 4,0% 3,8% 3,8%Trade Payables 7,4% 5,5% 6,5% 6,9% 6,1% 6,4% 6,5% 7,0% 7,2% 7,6% 8,2%Other Liabilities 12,1% 10,1% 11,4% 12,3% 13,2% 11,8% 11,3% 11,5% 11,6% 11,3% 11,3%Short Term Liabilities 24,1% 20,9% 22,7% 23,9% 24,1% 22,7% 22,1% 22,7% 22,8% 22,7% 23,3%Long Term Lease Obligations 31,9% 35,4% 30,1% 34,6% 43,4% 45,9% 45,8% 42,4% 38,6% 37,6% 34,4%Other Liabilities 6,5% 6,0% 7,0% 6,3% 5,1% 4,2% 3,7% 3,5% 3,3% 3,0% 2,7%Long Term Liabilities 38,3% 41,3% 37,1% 41,0% 48,5% 50,1% 49,5% 45,9% 41,9% 40,6% 37,1%Total Liabilities 62,5% 62,3% 59,8% 64,8% 72,6% 72,8% 71,6% 68,6% 64,7% 63,3% 60,4%Shareholders Equity & Capital 3,6% 2,2% 10,2% 9,4% 7,3% 6,1% 5,3% 4,8% 4,4% 3,7% 3,3%Other Components of Equity 34,0% 35,5% 30,0% 25,8% 20,1% 21,1% 23,1% 26,6% 30,9% 33,0% 36,3%Total Shareholders Equity 37,5% 37,7% 40,2% 35,2% 27,4% 27,2% 28,4% 31,4% 35,3% 36,7% 39,6%Total Liab. & SHE 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%Source: Team’s Estimates and Company’s Annual Report
  30. 30. Back upKey Financial RatiosKey Financial Ratio 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 FLiquidity RatiosCurrent Ratio (x) 1,3 1,6 1,4 1,4 1,0 1,3 1,3 1,3 1,3 1,3 1,3Cash Ratio (x) 0,4 0,3 0,6 0,3 0,4 0,5 0,5 0,5 0,6 0,6 0,6Quick Ratio (x) 1,2 1,5 1,4 1,3 1,0 1,2 1,2 1,2 1,2 1,2 1,2Efficiency RatiosInventory Turnover (x) 24,0 38,5 34,4 35,1 41,1 37,2 37,2 37,2 37,2 37,2 37,2Fixed Asset Turnover (x) 1,3 1,4 1,4 1,3 1,2 1,9 2,0 2,4 2,6 2,6 2,7A/R Turnover (x) 19,2 21,3 17,3 16,3 18,1 18,1 18,2 18,2 18,2 18,1 18,2Average Collection Period (days) 18,7 16,9 20,8 22,1 19,9 20,2 20,1 20,1 20,1 20,2 20,1Average Payment Period (days) 30,3 32,8 35,1 31,4 30,2 44,0 44,1 44,1 44,1 44,0 44,1Total Asset Turnover (x) 0,9 0,9 0,8 0,8 0,8 0,8 0,8 0,8 0,8 0,8 0,8Debt RatiosDebt Ratio (%) 62% 62% 60% 65% 73% 73% 71% 68% 64% 63% 60%Debt to Equity (x) 1,7 1,6 1,5 1,8 2,6 2,7 2,5 2,1 1,8 1,7 1,5Equity Multiplier (x) 0,4 0,4 0,4 0,4 0,3 0,3 0,3 0,3 0,4 0,4 0,4Long-Term Debt Ratio 0,4 0,4 0,4 0,4 0,5 0,5 0,5 0,5 0,4 0,4 0,4Profitability RatiosGross Profit Margin (%) 37,7% 33,9% 38,2% 32,1% 28,3% 31,0% 31,4% 31,0% 32,0% 31,1% 31,3%EBIT Margin (%) 10,4% 12,1% 10,9% 5,5% 2,9% 7,7% 8,5% 8,4% 9,5% 8,7% 9,1%EBITDA Margin (%) 17,9% 16,8% 17,5% 11,0% 9,8% 13,7% 14,4% 14,3% 15,2% 14,6% 15,0%EBITDAR Margin (%) 22,3% 20,2% 22,9% 16,6% 14,0% 16,9% 17,3% 16,9% 17,7% 16,8% 17,0%Net Prof. Margin (%) 5,5% 18,5% 8,0% 3,4% 0,2% 6,7% 7,2% 7,1% 7,9% 7,2% 7,5%RoA (%) 5,5% 18,5% 6,7% 2,9% 0,2% 5,7% 5,9% 6,0% 6,9% 6,7% 7,3%RoE (%) 12,8% 44,3% 15,9% 7,6% 0,6% 24,2% 23,2% 21,0% 21,2% 18,8% 19,0%Source: Team’s Estimates and Company’s Annual Report
  31. 31. Back upMultiple Peer ValuationEV/EBITDA P/E EV/EBITDAR2012 E 2013 E 2012 E 2013 E 2013 TargetDeveloped Market CarriersAir Canada 4,5 4,2 7,2 6,1Air FRANCE-KLM 8 6,4 - -Air New Zealand 5,6 5,4 19,4 9,3Lufthansa 4,5 4,1 - 12,6Qantas Airways 4,1 3,3 - -Average 5,3 4,7 13,3 9,3Emerging Market CarriersAir China 9,7 8,2 14,8 12,1Cathay Pacific 10,9 8,3 - -China Airlines 16,4 11 - 15,2China Eastern Airlines 7,4 6,6 9,7 8,1China Southern Airlines 7,9 6,2 15,6 9,9EVA Airways 6,9 4,8 - 10,6Korean Air 9,5 9,5 - -Average 9,8 7,8 13,4 11,2Low Cost CarriersEasyJet 7,7 9,3 7,5 9,2Ryanair 9,2 11,1 10,2 12,3AirAsia 9,1 10,2 8,6 9,3Average 8,7 10,2 8,8 10,3Grand Average / Target (EBITDAR) 7,9 7,6 11,8 10,3 6Turkish Airlines 7,7 6,8 8,1 6,5 5,6Discount Rate -7% -25% -31% -37% -14%Current Price 6,68 6,68 6,68 6,68 6,68Target Price 7,16 8,33 9,73 10,53 7,63Weighted Target Price 8,68Source: Team’s Estimates and Company’s Annual Report
  32. 32. Back up2012 F 2013 F 2014 F 2015 F 2016 F 2017 FTerminalValueEBIT 650 821 951 1229 1348 1695Tax Eff. 0,2 0,2 0,2 0,2 0,2 0,2NOPAT 520 657 761 983 1078 1356Depreciation 496 573 661 744 925 1107CAPEX -1291 -1551 -837 -1082 -1767 -1770Change in WorkingCapital-224 203 72 192 89 449Free Cash Flow To Firm -499 -118 657 837 326 1141 16542Discount Factor 0,94 0,88 0,83 0,78 0,73 0,69DCF -469 -104 544 651 238 783 11351Perpetuity Growth Rate 0,02Market Value of Firm 12995MV of Debt 7504Market Value of Equity 5491No of Shares Outstanding 1200Target Price ($) 4,58Currency 1,77Target Price (TL) 8,10Discounted Cash Flow (FCFF) ValuationSource: Team’s Estimates and Company’s Annual Report
  33. 33. Back upRegression Based ForecastsSales ForecastTemporalRegressionScenerioForecastsFunctionalRegression20%16% 16%15%19%20%10%20%12 E 13 E 14 E 15 E 16 E 17 EWeighted Sales ForecastTeam Estimate The BaseSource: Team’s Estimates and Company’s Annual Report
  34. 34. Back upRegression Based ForecastsSource: Team’s Estimates and Company’s Annual Report
  35. 35. Back upScenario Based Forecast18% 19%13%10%14%18%-5%5%15%25%35%12 E 13 E 14 E 15 E 16 E 17 EScenerio Sales ForecastTeam Estimate The Worst The Base The BestLack of hub capacity. First phase of new airport launched.Source: Team’s Estimates and Company’s Annual Report
  36. 36. SWOT ANALYSISStrengths Weaknesses1. Impressive Flight Network 1. Airport Insufficiency2. Innovative Marketing Strategies 2. High Leasing Expenses3. Young Fleet 3. Lack of Scale4. Affiliates and Subsidiaries5. Government SupportOpportunities Threats1. Growth of The Economy 1. Volatile Costs2. International and Domestic Market Expansion 2. Threats of Potential Entrants3. Increasing Air Transportation Usage 3. Substitution of Products4. Instruction of New Airports 4. Currency Shifts5. Governments Effective International Economy Policy 5. Political RisksSource: Team’s Estimates and Institutions & Research PapersBack up
  37. 37. Source: Company’s DataSubsidiaries and AffiliatesBack up
  38. 38. Source: Company’s DataUtilization of AffiliatesBack up
  39. 39. Source: MarshRisk AssestmentBack up
  40. 40. Source: MarshRisk AssestmentBack up
  41. 41. 87%8%4% 1%Split By RevenuePAX Cargo Charter Other60%14%13%8%5%International Pax BreakdownEurope Middle East Far East Africa AmericaSource: Company’s DataRevenue and PAX StructureBack up
  42. 42. 7.58.09.07.27.98.58.97.93.9 4.0 3.9 3.8 4.0 3.94.13.52.1 2.23.11.82.23.0 3.13.01.51.9 2.01.6 1.8 1.7 1.71.50123456789102006 2007 2008 2009 2010 2011 9M11 9M12Cost Per ASK ( $ cent )CASK Personnel/ASK Fuel/ASK Others/ASKSource: Company’s DataBack up
  43. 43. Annual GDP Growth 2011 to 20317.16.54.64.44.34.13.93.43.22.82.61.91.30 1 2 3 4 5 6 7 8South AsiaChinaAsia PacificAfricaSoutheast AsiaLatin AmericaMiddle EastCISWorldOceniaNorth AmericaEuropeNorheast AsiaSource: HIS Global InsightBack up
  44. 44. 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 EPax (m) 25,1 29,1 32,6 39 45,4 51,3 54,7 60,1 67,8Pax Growth (%) 11% 16% 12% 20% 18% 12% 7% 10% 13%Load Factor (%) 70,9% 73,7% 72,6% 77,7% 78,6% 78,8% 79,2% 77,6% 77,4%ASK (bn) 56,6 65,1 81,2 96,1 110,3 127 142,1 166,9 196,6ASK growth (%) 22% 15% 25% 18% 15% 15% 12% 17% 18%RPK (bn) 40,1 47,9 58,9 74,6 86,2 102 117,2 141,5 171,2RPK growth (%) 17% 19% 23% 27% 16% 18% 15% 21% 21%Source: Team’s Estimates and Company DataAviation Factor EstimationsBack up
  45. 45. Years Central Bank of Turkey OECD Fitch2013 E 4,0% 4,2% 3,8%2014 E 5,0% 5,2% 4,5%2015 E 5,0% 5,5% 5,0%2016 E - 5,6% 5,0%2017 E-2030 E - 4,1% -GDP Growth Forecasts Between 2013-2017Back up
  46. 46. Back upNumber of Aircrafts Between 2013-2017Years 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 EOur Expected 100 127 133 158 179 202 220 232 239 256 280CompanysExpected100 127 133 158 179 200 214 224 234 240 232
  47. 47. EV/EBITDARAccurate ValuationWeighted Calculation DCF Multiples02468102004 2005 2006 2007 2008 2009 2010 2011 2012 E 2013 EEV/EBITDAR multiple Previous YearsTarget 6xTurkishAirlines5,6Discount Rate -14%Target Price 7,63
  48. 48. Cost Comparison048121620SAS DL UA AF-KL LH AY IAG LAN SQ* TKCASK Fuel/ASKHigh Profit Yield Potential7.58.09.07.27.98.58.97.92.1 2.23.11.82.23.0 3.13.002468102006 2007 2008 2009 2010 2011 9M11 9M12CASK Fuel/ASKCost Per ASK($ Cent)($ Cent)

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