1q12 Aefes Results

8/20/2019 1q12 Aefes Results

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EQUITIES RESEARCH

AEFES TI

ANADOLU EFESTURKEY / FOOD BEVERAGE & TOBACCO

HOW WE DIFFER FROM THE STREET

BNPP Consensus % Diff

Target Price (TRY) 24.07 25.30. (4.9)

EPS 2012 (TRY) 1.16 1.23. (5.7)

EPS 2013 (TRY) 1.35 1.40 (3.8)

Positive Neutral Negative

Market Recs 4 13 6

REDUCE

TARGET

CLOSE

UP/DOWNSIDE

TRY24.07

TRY24.70

-2.6%

INDUSTRY OUTLOOK

Performance improves

RESULTS REVIEWBetter-than-expected results

In 1Q12, Anadolu Efes posted net income of TRY102m, above our estimate

of TRY72m and CNBC-e consensus estimate of TRY67m on higher-than-expected financial income and marginally better operating performance. Although operating profit margin came under pressure, volume growth in

both Turkey and Russia was much higher than expected.

SUMMARYImpressive volume growth in Turkey

Despite poor weather conditions and a 14% price increase in 4Q11,Turkish unit sales increased 8.8% y-y, thanks to the intensive marketingand sales campaigns and strong consumer demand. Also, a low base in2011 and stock built-up by wholesalers ahead of a 3% planned price hikecontributed to the growth.

VALUATIONValuation looks unattractive

There remains significant downside risk to our growth estimates for theRussian market. On our 2014 estimates, the company’s core beerEV/EBITDA multiple stands at 9.3x, indicating a 20% premium to its peersand a 39% premium to Carlsberg (CARLB DC; Not rated; using consensusestimates), which has a similar level of exposure to Russia as Anadolu.Better weather conditions and a relatively low rate of increase in beerexcise taxes or yet favourable tax treatment of beer over other alcoholic

beverages may pose upside risks to our growth estimates for the Turkeyand Russia markets.

RESULTS FLASH

Kenan [email protected]

+90 216 636 4531

BNP Paribas Securities (Asia) Ltd research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/inde x. Please contactour salesperson for authorisation. Please see the important notice on the back page.

9 MAY 2012

KEY STOCK DATA

YE Dec (TRY m) 2012E 2013E 2014E

Revenue 6,315 6,538 7,072

Rec. net profit 687 801 982

Recurring EPS (TRY) 1.16 1.35 1.66

EPS growth (%) 53 .0 16.7 22 .5

Recurring P/E (x) 20.8 17.4 15.0

Dividend yield (%) 1.2 2.3 2.7

EV/EBITDA (x) 11.6 10.4 9.4

Price/book (x) 4.0 3.6 3.1

Net debt/Equity (%) 24.7 11.7 (0.4)

ROE (%) 20.2 20.6 22.3

Share price performance 1 Month 3 Month 12 Month

Absolute (%) 0.8 (5.4) 10.5

Relative to country (%) 4.4 (1.4) 24.4

Mkt cap (USD m) 8,231

3m avg daily turnover (USD m) 2.9

Free float (%) 28

Major shareholderYazicilar-Ozilhan Holding 48%

SAB-Miller 24%

12m high/low (TRY) 26.90/18.15

3m historic vol. (%) 26.9

ADR ticker -

ADR closing price (USD; Date) -

Issued shares (m) 592

Sources: Bloomberg consensus; TEB Investment/BNP Paribasestimates

(3)

7

17

27

37

47

16

18

20

22

24

26

28

May-11 Aug-11 Nov-11 Feb-12 May-12

(%)(TRY) Anadolu Efes Rel to ISE National 100

http://equities.bnpparibas.com/

http://equities.bnpparibas.com/



Anadolu Efes Kenan Cosguner

2 BNP PARIBAS 9 MAY 2012

Margins came under pressure

Despite the significant increase in prices, the profitability of the Turkish beer operation came under pressure with a 3.2ppt decline inEBITDA, as the increased on-trade and off-trade activities led to a 22% increase in operating expenses. Higher barley and packaging costsalso contributed to the decline in profit margins.

Recall that SABMiller’s Russia and Ukraine operations were consolidated as from March 2012. However, we have conducted our analysis on

a pro-forma consolidated basis. The unit sales of Efes Breweries International (EBI), the international arm of Anadolu Efes, declined 1% to4.3m hectolitres, while revenue increased 2% y-y. Pro-forma EBITDA fell 4% y-y to USD46.4m and operating profit fell 56% y-y to USD7.8m,

due to higher unit costs on higher raw material costs. However, SABMiller’s higher-margin beer portfolio helped EBI absorb the effect ofthe increase in input costs. As a result, pro-forma EBITDA margin declined 1ppt y-y to 14.5%.

EXHIBIT 1: Summary income statement

FY10 FY11 Change 1Q11 4Q11 1Q12 --------- Change ---------

(TRY m) (TRY m) (y-y %) (TRY m) (TRY m) (TRY m) (y-y %) (q-q %)

Net sales 4,168.8 4,761.3 14.2 857.9 1,030.3 1,119.6 30 9

Gross profit 2117.4 2281.7 7.8 413.1 485.1 528.2 28 9

Operating expenses (1,414.4) (1,677.6) 18.6 (345.6) (447.8) (464.4) 34 4

Operating profit 703.0 604.1 (14.1) 67.5 37.3 63.9 (5) 71

EBITDA 1,004.0 939.7 (6.4) 146.4 125.8 165.0 13 31

Net other income (27.3) (5.8) (78.9) 6.6 7.1 2.8 (57) (60)

Financial Inc. (exp) (17.2) (133.4) 677.0 14.1 (14.2) 75.1 432 nm

PBT 643.8 446.7 (30.6) 86.4 26.7 138.5 60 419

Taxation (140.1) (105.5) (24.7) (27.6) (10.2) (33.6) 22 229

Minority Interest (14.8) (18.3) 23.6 (1.8) (3.6) (3.3) 81 (8)

Net income 503.6 341.2 (32.3) 56.7 14.8 102.4 81 593

Operating ratios

Gross margin (%) 50.8 47.9 48.2 47.1 47.2

EBITDA margin (%) 24.1 19.7 17.1 12.2 14.7

Net margin (%) 12.1 7.2 6.6 1.4 9.1

Balance sheet data

Cash & Equivalents 994.4 940.2 (5) 938.1 940.2 1,190.9 27 27

S/T Fin. debt 996.1 795.6 (20) 1,126.0 795.6 881.2 (22) 11

L/T Fin. debt 768.4 1,303.8 70 726.5 1,303.8 1,466.9 102 13

Net debt (cash) 770.1 1,159.2 51 914.5 1,159.2 1,157.2 27 0

Working capital 732.8 832.3 14 843.7 832.3 1,089.8 29 31

Book value 2,815.0 3,206.9 14 2,959.7 3,206.9 6,557.6 122 104

Total assets 5,588.8 6,420.7 15 5,964.2 6,420.7 10,566.3 77 65

Net debt (cash) / equity (%) 27 36 31 36 18

Sources: Anadolu Efes; TEB Investment/BNP Paribas estimates

EXHIBIT 2: Local beer operations

Income statement 1Q11 1Q12 Change

(TRY m) (TRY m) (y-y %)

Volume (m unit cases) 1.7 1.8 9

Net sales 282.4 337.2 19

Operating profit 84.3 91.2 8.2

EBITDA 107.6 117.6 9.3

Net profit 69.6 98.6 41.7

Operating ratios

EBITDA margin (%) 38.1 34.9

Sources: Anadolu Efes; TEB Investment/BNP Paribas





Financial statements Anadolu Efes

Profit and Loss (TRY m) Year Ending Dec 2010A 2011A 2012E 2013E 2014E

Revenue 4,169 4,761 6,315 6,538 7,072

Cost of sales ex depreciation (1,753) (2,134) (2,795) (2,908) (3,168)

Gross profit ex depreciation 2,416 2,627 3,520 3,630 3,904

Other operating income (27) (6) (14) (14) (19)

Operating costs (1,414) (1,678) (2,119) (2,110) (2,172)

Operating EBITDA 974 943 1,387 1,507 1,713

Depreciation (299) (345) (471) (486) (506)

Goodwill amortisation 0 0 0 0 0

Operating EBIT 676 598 916 1,020 1,207

Net financing costs (17) (133) (51) (13) 27

Associates 0 0 0 0 0

Recurring non operating income 0 0 0 0 0

Non recurring items 0 0 0 0 0

Profit before tax 659 465 865 1,008 1,233

Tax (140) (106) (177) (206) (251)

Profit after tax 518 359 687 802 982

Minority interests (15) (18) 0 0 0

Preferred dividends 0 0 0 0 0Other items 0 0 0 0 0

Reported net profit 504 341 687 801 982

Non recurring items & goodwill (net) 0 0 0 0 0

Recurring net profit 504 341 687 801 982

Per share (TRY)

Recurring EPS * 1.12 0.76 1.16 1.35 1.66

Reported EPS 1.12 0.76 1.16 1.35 1.66

DPS 0.38 0.56 0.29 0.58 0.68

Growth

Revenue (%) 9.4 14.2 32.6 3.5 8.2

Operating EBITDA (%) 7.9 (3.2) 47.0 8.6 13.7

Operating EBIT (%) 6.1 (11.5) 53.1 11.4 18.3Recurring EPS (%) 19.2 (32.3) 53.0 16.7 22.5

Reported EPS (%) 19.2 (32.3) 53.0 16.7 22.5

Operating performance

Gross margin inc depreciation (%) 50.8 47.9 48.3 48.1 48.0

Operating EBITDA margin (%) 23.4 19.8 22.0 23.0 24.2

Operating EBIT margin (%) 16.2 12.6 14.5 15.6 17.1

Net margin (%) 12.1 7.2 10.9 12.3 13.9

Effective tax rate (%) 21.3 22.7 20.5 20.4 20.4

Dividend payout on recurring profit (%) 33.6 73.8 24.8 42.9 40.8

Interest cover (x) 39.4 4.5 17.9 81.0 -

Inventory days 91.7 88.0 85.8 96.1 93.4

Debtor days 41.1 42.0 39.1 44.0 43.1

Creditor days 50.8 48.0 47.0 52.6 51.2Operating ROIC (%) 24.3 18.9 25.0 26.7 31.2

Operating ROIC - WACC (%) - - - - -

ROIC (%) 17.7 14.1 19.1 20.7 24.2

ROIC - WACC (%) - - - - -

ROE (%) 19.4 11.5 20.2 20.6 22.3

ROA (%) 9.7 8.2 11.0 11.2 12.2

*Pre exceptional, pre-goodwill and fully diluted

Sources: Anadolu Efes; Bloomberg consensus; TEB Investment/BNP Paribas estimates





Anadolu Efes

Cash Flow (TRY m) Year Ending Dec 2010A 2011A 2012E 2013E 2014E

Recurring net profit 504 341 687 801 982

Depreciation 299 345 471 486 506

Associates & minorities 0 0 0 0 0

Other non-cash items 0 0 0 0 0

Recurring cash flow 802 686 1,158 1,288 1,489

Change in working capital 58 (185) (283) (40) (95)

Capex - maintenance 0 0 0 0 0

Capex - new investment (314) (453) (465) (473) (486)Free cash flow to equity 546 48 410 775 908

Net acquisitions & disposals 0 0 0 0 0

Dividends paid (169) (252) (171) (343) (401)

Non recurring cash flows (58) (45) 0 0 0

Net cash flow 318 (248) 240 432 508

Equity finance (259) 15 0 0 0

Debt finance (93) 335 0 0 0

Movement in cash (34) 102 240 432 508

Per share (TRY)

Recurring cash flow per share 1.78 1.53 1.96 2.17 2.51

FCF to equity per share 1.21 0.11 0.69 1.31 1.53

Balance Sheet (TRY m) Year Ending Dec 2010A 2011A 2012E 2013E 2014E

Working capital assets 1,146 1,403 1,791 1,845 1,974

Working capital liabilities (761) (833) (937) (952) (987)

Net working capital 385 570 853 893 987

Tangible fixed assets 2,406 2,957 2,951 2,938 2,917

Operating invested capital 2,791 3,527 3,804 3,830 3,904

Goodwill 0 0 0 0 0

Other intangible assets 0 0 0 0 0

Investments 37 25 25 25 25

Other assets 1,005 1,095 1,095 1,095 1,095

Invested capital 3,833 4,648 4,924 4,950 5,024

Cash & equivalents (994) (940) (1,180) (1,612) (2,120)

Short term debt 996 796 796 796 796

Long term debt * 768 1,304 1,304 1,304 1,304

Net debt 770 1,159 919 487 (21)Deferred tax 0 0 0 0 0

Other liabilities 248 281 281 281 281

Total equity 2,767 3,144 3,660 4,118 4,700

Minority interests 48 63 63 63 64

Invested capital 3,833 4,648 4,924 4,950 5,024

* includes convertibles and preferred stock which i s being treated as debt

Per share (TRY)

Book value per share 6.15 6.99 6.18 6.96 7.94

Tangible book value per share 6.15 6.99 6.18 6.96 7.94

Financial strength

Net debt/equity (%) 27.4 36.1 24.7 11.7 (0.4)

Net debt/total assets (%) 13.8 18.1 13.1 6.5 (0.3)

Current ratio (x) 1.2 1.4 1.7 2.0 2.3

CF interest cover (x) 51.1 4.8 18.1 100.1 -

Valuation 2010A 2011A 2012E 2013E 2014E

Recurring P/E (x) * 22.1 32.6 21.3 18.2 14.9

Recurring P/E @ target price (x) * 21.5 31.7 20.7 17.8 14.5

Reported P/E (x) 22.1 32.6 21.3 18.2 14.9

Dividend yield (%) 1.5 2.3 1.2 2.3 2.7

P/CF (x) 13.9 16.2 12.6 11.4 9.8

P/FCF (x) 20.4 230.0 35.6 18.9 16.1

Price/book (x) 4.0 3.5 4.0 3.6 3.1

Price/tangible book (x) 4.0 3.5 4.0 3.6 3.1

EV/EBITDA (x) ** 12.4 12.9 10.1 10.2 8.7

EV/EBITDA @ target price (x) ** 12.1 12.6 9.8 10.0 8.5

EV/invested capital (x) 3.1 2.7 3.2 3.1 2.9

* Pre exceptional, pre-goodwill and fully diluted ** EBITDA includes associate income and recurring non-operating income

Sources: Anadolu Efes; Bloomberg consensus; TEB Investment/BNP Paribas estimates





History of change in investment rating and/or target price

Anadolu Efes (AEFES TI)

Kenan Cosguner started covering this stock from 16-Sep-2011Price and TP are in local currency

Valuation and risks: Valuation and risks: Key risk to our target price, based on a blended valuation of DCF and peer comparison, are better weather conditions and a relativelylower rate of increase in beer excise taxes or yet favorable tax treatment of beer over other alcoholic beverages may pose an upside risk to our growth estimates in Turkey andRussia.

Sources: Bloomberg consensus; TEB Investment/BNP Paribas

Date Reco TP

8.27

13.27

18.27

23.27

28.27

May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12

(TRY) Anadolu Efes





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ANALYST(S) CERTIFICATION

Kenan Cosguner, TEB Investment, BNP Paribas JV, +90 216 636 4531, [email protected].

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All share prices are as at market close on 8 May 2012 unless otherwise stated.

RECOMMENDATION STRUCTURE

Stock RatingsStock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price.BUY (B). The upside is 10% or more.HOLD (H). The upside or downside is less than 10%.REDUCE (R). The downside is 10% or more.

Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a

temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't 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 months.




Neutral ( ): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months.Deteriorating ( ): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months.

Country (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 equity.

Neutral (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 returnsrelative to the market cost of equity.

Underweight (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 index

returns relative to the market cost of equity.

RATING DISTRIBUTION (as at 9 May 2012)

Total BNP Paribas coverage universe 565 Investment Banking Relationship (%)

Buy 319 Buy 4.70

Hold 184 Hold 2.70

Reduce 62 Reduce 3.20

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report.

© 2012 TEB Investment BNP Paribas

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1q12 Aefes Results