Talas Turkey Value Fund, LP
15
Mesut Ellialtioglu [email protected] Investment Case of Arcelik AS BEST IDEAS 2019, Hosted by MOI Global January 2019 TALAS CAPITAL, LLC Talas Turkey Value Fund, LP 1
Transcript of Talas Turkey Value Fund, LP
PowerPoint PresentationBEST IDEAS 2019, Hosted by MOI Global
January 2019
1
2
Disclaimer
This presentation has been prepared solely for informational purposes. Information herein is not intended to be complete, and such information is qualified in its entirety. This is not an offering or the solicitation of an offer to purchase an interest in any fund, and it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security. Nothing herein should be construed as investment advice, an opinion regarding the appropriateness or suitability of any investment, on an investment recommendation. No representation is made that the objectives or goals of any investment or strategy will be met or that an investment or strategy will be profitable or will not incur losses. Past performance is no guarantee of future results. Reliable methods were used to obtain information for this presentation but the information herein cannot be guaranteed for accuracy or reliability; the information in this presentation may be out of date or inaccurate. The information contained in this summary is and may not be distributed without permission.
Agenda
Investment Case of Arcelik AS…………….………….……….…..…8
3
TALAS participates in the rising trend of Turkish GDP per capita level to USD 15,000-20,000 vs current USD 10,000.
Investing in Turkey
Investing in Turkey
Turkish economy offers enormous growth potential over the next decade and beyond.
• 16th largest economy in the world and 7th largest in Europe (including Russia). Member of G-20, NATO, OECD, WTO
• Important US strategic ally. Stands at the crossroads of Eastern Europe, the Middle East, the Caucasus/ Central Asia and the Persian Gulf region.
• Household debt/GDP is 19%, mortgage loans/GDP is 6% and pension funds/GDP is 1.4%. Government Debt to GDP is 35% and Budget Deficit to GDP is 1.5%.
• Clean public and private balance sheets and robust long term growth potential. This is based on its scale advantage (76 million population), young demographics, rising prosperity, rising wealth of the middle class.
4
Investing in Turkey
Rising long term foreign and domestic institutional demand growth for the listed stocks
• Borsa Istanbul is ranked the 6th within the EM markets with its equity market annual traded value of avg. US$ 400 billion during the past 5 years.
• Foreign institutional investors own US$ 30 billion worth of shares
which represents a ratio of 65% of total value of shares at Borsa Istanbul
as of year-end 2018.
• IPOs executed by Turkish companies at Borsa Istanbul (Istanbul
Stock Exchange) since 2004 totalled US$ 16,5 billion of which US$
10.7 billion was purchased by foreign institutional investors.
• Turkish private pension system is expected to create constant long term domestic institutional demand for the first time. AUM expected to increase from current US$ 15 billion to over US$ 70 billion by 2023.
5
Why Is Value Investment Such A Unique Concept In The Turkish Equity Market?
Investing in Turkey
• Fly-in foreigners with lots of other interests or short-term locals trying market timing based on political developments and central bank pronouncements do not have concentration to sort out long -term value based investment opportunities.
• Large capitalization stocks are overly preferred investments due to liquidity requirements and short term trading needs leading to substantial value investment opportunity pool of mid - small cap stocks in the market which often trade at 2 - 4X adj. EV/Ebitda and 4 - 8X adj. P/E level.
• TALAS has a focus on sustainable high organic growth EM sectors such as consumer durables, renewable energy, petroleum products, automotive, banking .The lack of focus on value creates opportunity to profit from gaps between price and intrinsic value of individual firms.
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MSCI Emerging Markets 2.86 12.51 10.64 1.55
MSCI ACWI IMI 2.51 17.29 14.16 2.14
S & P 500 1.92 20.19 14.95 3.00
Current Valuation Level of the Turkish Equity Market (Nov. 30th, 2018)
Arcelik AS – (ARCLK.TI)
8 Investment Case
Arcelik A.S., Turkey's leading household appliance manufacturer, is engaged in the
production and marketing of consumer durable goods, consumer electronics, small home
appliances and kitchen accessories as well as in the provision of after-sales services.
Production Facilities: 18 factories in 7 countries (Turkey, Romania, Russia, China,
South Africa, Thailand and Pakistan)
Sales and marketing offices: 33 countries
Product and services: 145 countries
30,000 employees worldwide; 24,000 blue collar, 6,000 white collar
1500+ Researchers working in 14 R&D centers, 3000+ Patent applications
2017 Revenues $ 5.7 billion, Ebitda $ 535 million with 9.5% Ebitda margin
Shareholder structure: Koc Holding 57.2%, Burla Group 17.6%, Free float 25.2%
Arcelik AS – (ARCLK.TI)
9 Investment Case
10 Investment Case
Expanding Production Base: From 4 counties (Turkey, Romania, Russia and China) in 2010 to 7 countries
(Turkey, Romania, Russia, China, South Africa, Pakistan and Thailand) as of 2018.
Increasing Emerging Market Exposure In addition to the improving presence in Europe and other Developed
Markets, Arcelik’s exposure to Emerging Markets has risen through successful acquisitions and opening of new
sales offices.
49%
28%
23%
Revenue Breakdown 2017
Turkey DM EM
Arcelik Competitive Strengths
11 Investment Case
Market Leader in Turkey: Leading producer of white goods with c. 50% market share, exclusive dealer
network and exclusive authorized after-sales service points, the widest network.
Solid Presence in Europe: Beko is the second largest brand in volume terms in Europe (up from 7th level in 04),
market share in total EU23 is 10.1%
Arcelik Group market shares: 21.2% UK, 7.8% Spain, 8.3% Italy, 7.4% France,
5.4% Germany, 42% Romania, 16.1% Poland, 5.6% Russia, 5.4% Ukraine
Growth in EM markets: Greenfield investments in Thailand, acquisition of Pakistan’s leading brand
Dawlance and South Africa’s Defy, JV with Voltas, TATA Group in India
Cost Competitiveness: Production in low cost regions which are close to key markets, manufacturing facilities
are largest of their kind leading to economies of scale and flexible manufacturing to
address special local needs strongly.
Leading R&D Capabilities: Manufacturing with its technology, no external licencing. Strategy to deliver
innovative product pipeline with energy efficient products
Arcelik Operational Results
12 Investment Case
Demographics, replacement sales and higher
Penetration (in products like dryers and ACs)
5.4 5.4 5.2 5 5.4
6.5 6.5 6.8 6.7
8.5
0
1
2
3
4
5
6
7
8
9
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
M il
li o
n i
te m
Europe
Beko is 2nd largest brand, EU27 market share 9% in 2017.
Grunding is an Arcelik brand in the premium segment
Market leader in South Africa and growth in Sub-Sahara
Owns Defy which is South Africa’s biggest manufacturer and
distributor of home appliances with 40% market share
Growth in ASEAN
the region. Production centers in China and
Thailand
Pakistan
market share in cooling appliances and A/C market
India
operational in 2019 and target of $ 1 billion in revenues
and 10% market share in 10 years.
Arcelik Financial Results
13 Investment Case
US$ million 2013 2014 2015 2016 2017 2017 -9M 2018 -9M
Total Assets 5,345 5367 4,721 4,785 5,400 5,583 5,040
Equity 1,938 1,896 1,606 1,700 1,826 1,835 1,487
Sales 5,838 5,724 5,200 5,329 5,721 4,204 4,227
Ebit 448 467 425 440 385 312 302
Ebitda 606 625 560 585 535 424 409
Net Earnings 326 292 328 431 233 209 125
Arcelik - Valuation
Method P/E
Current share price 14.5 TL
Upside 70%
Talas Capital, LLC
Suite 2000
Email: [email protected]
January 2019
1
2
Disclaimer
This presentation has been prepared solely for informational purposes. Information herein is not intended to be complete, and such information is qualified in its entirety. This is not an offering or the solicitation of an offer to purchase an interest in any fund, and it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security. Nothing herein should be construed as investment advice, an opinion regarding the appropriateness or suitability of any investment, on an investment recommendation. No representation is made that the objectives or goals of any investment or strategy will be met or that an investment or strategy will be profitable or will not incur losses. Past performance is no guarantee of future results. Reliable methods were used to obtain information for this presentation but the information herein cannot be guaranteed for accuracy or reliability; the information in this presentation may be out of date or inaccurate. The information contained in this summary is and may not be distributed without permission.
Agenda
Investment Case of Arcelik AS…………….………….……….…..…8
3
TALAS participates in the rising trend of Turkish GDP per capita level to USD 15,000-20,000 vs current USD 10,000.
Investing in Turkey
Investing in Turkey
Turkish economy offers enormous growth potential over the next decade and beyond.
• 16th largest economy in the world and 7th largest in Europe (including Russia). Member of G-20, NATO, OECD, WTO
• Important US strategic ally. Stands at the crossroads of Eastern Europe, the Middle East, the Caucasus/ Central Asia and the Persian Gulf region.
• Household debt/GDP is 19%, mortgage loans/GDP is 6% and pension funds/GDP is 1.4%. Government Debt to GDP is 35% and Budget Deficit to GDP is 1.5%.
• Clean public and private balance sheets and robust long term growth potential. This is based on its scale advantage (76 million population), young demographics, rising prosperity, rising wealth of the middle class.
4
Investing in Turkey
Rising long term foreign and domestic institutional demand growth for the listed stocks
• Borsa Istanbul is ranked the 6th within the EM markets with its equity market annual traded value of avg. US$ 400 billion during the past 5 years.
• Foreign institutional investors own US$ 30 billion worth of shares
which represents a ratio of 65% of total value of shares at Borsa Istanbul
as of year-end 2018.
• IPOs executed by Turkish companies at Borsa Istanbul (Istanbul
Stock Exchange) since 2004 totalled US$ 16,5 billion of which US$
10.7 billion was purchased by foreign institutional investors.
• Turkish private pension system is expected to create constant long term domestic institutional demand for the first time. AUM expected to increase from current US$ 15 billion to over US$ 70 billion by 2023.
5
Why Is Value Investment Such A Unique Concept In The Turkish Equity Market?
Investing in Turkey
• Fly-in foreigners with lots of other interests or short-term locals trying market timing based on political developments and central bank pronouncements do not have concentration to sort out long -term value based investment opportunities.
• Large capitalization stocks are overly preferred investments due to liquidity requirements and short term trading needs leading to substantial value investment opportunity pool of mid - small cap stocks in the market which often trade at 2 - 4X adj. EV/Ebitda and 4 - 8X adj. P/E level.
• TALAS has a focus on sustainable high organic growth EM sectors such as consumer durables, renewable energy, petroleum products, automotive, banking .The lack of focus on value creates opportunity to profit from gaps between price and intrinsic value of individual firms.
6
MSCI Emerging Markets 2.86 12.51 10.64 1.55
MSCI ACWI IMI 2.51 17.29 14.16 2.14
S & P 500 1.92 20.19 14.95 3.00
Current Valuation Level of the Turkish Equity Market (Nov. 30th, 2018)
Arcelik AS – (ARCLK.TI)
8 Investment Case
Arcelik A.S., Turkey's leading household appliance manufacturer, is engaged in the
production and marketing of consumer durable goods, consumer electronics, small home
appliances and kitchen accessories as well as in the provision of after-sales services.
Production Facilities: 18 factories in 7 countries (Turkey, Romania, Russia, China,
South Africa, Thailand and Pakistan)
Sales and marketing offices: 33 countries
Product and services: 145 countries
30,000 employees worldwide; 24,000 blue collar, 6,000 white collar
1500+ Researchers working in 14 R&D centers, 3000+ Patent applications
2017 Revenues $ 5.7 billion, Ebitda $ 535 million with 9.5% Ebitda margin
Shareholder structure: Koc Holding 57.2%, Burla Group 17.6%, Free float 25.2%
Arcelik AS – (ARCLK.TI)
9 Investment Case
10 Investment Case
Expanding Production Base: From 4 counties (Turkey, Romania, Russia and China) in 2010 to 7 countries
(Turkey, Romania, Russia, China, South Africa, Pakistan and Thailand) as of 2018.
Increasing Emerging Market Exposure In addition to the improving presence in Europe and other Developed
Markets, Arcelik’s exposure to Emerging Markets has risen through successful acquisitions and opening of new
sales offices.
49%
28%
23%
Revenue Breakdown 2017
Turkey DM EM
Arcelik Competitive Strengths
11 Investment Case
Market Leader in Turkey: Leading producer of white goods with c. 50% market share, exclusive dealer
network and exclusive authorized after-sales service points, the widest network.
Solid Presence in Europe: Beko is the second largest brand in volume terms in Europe (up from 7th level in 04),
market share in total EU23 is 10.1%
Arcelik Group market shares: 21.2% UK, 7.8% Spain, 8.3% Italy, 7.4% France,
5.4% Germany, 42% Romania, 16.1% Poland, 5.6% Russia, 5.4% Ukraine
Growth in EM markets: Greenfield investments in Thailand, acquisition of Pakistan’s leading brand
Dawlance and South Africa’s Defy, JV with Voltas, TATA Group in India
Cost Competitiveness: Production in low cost regions which are close to key markets, manufacturing facilities
are largest of their kind leading to economies of scale and flexible manufacturing to
address special local needs strongly.
Leading R&D Capabilities: Manufacturing with its technology, no external licencing. Strategy to deliver
innovative product pipeline with energy efficient products
Arcelik Operational Results
12 Investment Case
Demographics, replacement sales and higher
Penetration (in products like dryers and ACs)
5.4 5.4 5.2 5 5.4
6.5 6.5 6.8 6.7
8.5
0
1
2
3
4
5
6
7
8
9
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
M il
li o
n i
te m
Europe
Beko is 2nd largest brand, EU27 market share 9% in 2017.
Grunding is an Arcelik brand in the premium segment
Market leader in South Africa and growth in Sub-Sahara
Owns Defy which is South Africa’s biggest manufacturer and
distributor of home appliances with 40% market share
Growth in ASEAN
the region. Production centers in China and
Thailand
Pakistan
market share in cooling appliances and A/C market
India
operational in 2019 and target of $ 1 billion in revenues
and 10% market share in 10 years.
Arcelik Financial Results
13 Investment Case
US$ million 2013 2014 2015 2016 2017 2017 -9M 2018 -9M
Total Assets 5,345 5367 4,721 4,785 5,400 5,583 5,040
Equity 1,938 1,896 1,606 1,700 1,826 1,835 1,487
Sales 5,838 5,724 5,200 5,329 5,721 4,204 4,227
Ebit 448 467 425 440 385 312 302
Ebitda 606 625 560 585 535 424 409
Net Earnings 326 292 328 431 233 209 125
Arcelik - Valuation
Method P/E
Current share price 14.5 TL
Upside 70%
Talas Capital, LLC
Suite 2000
Email: [email protected]
