OZKGY- Outperform maintained with TP of TL10.10/share

2022E unit sales revenue at TL1.3bn

Despite counter-cyclical regulatory changes such as cap for house rent increases and tightening of credit conditions, we still observe increasing trend in home sales. 12M trailing total home sales and first hand sales in June grew by 17% and 14% y/y, respectively. Mortgage-backed sales constituted only 22% of total sales in last twelve months. We think that branded real estate projects would maintain its appeal as an alternative investment amid negative real interest rates for Turkish Lira.  Additionally, Ozak REIT should maintain its resilient margins thanks its inventory from completed projects. In 2022, we forecast Buyukyali (6% of Target NAV) sales revenue to reach TL1.1bn, while expecting TL27mn revenues from Gokturk-1 (0.1% of Target NAV) and TL188mn revenues from Gokturk-2 (2% of Target NAV). Recently, OZKGY also showed its strong appetite for new projects by placing the best bids for two tendered plots of Emlak REIT, Bizim Mahalle 2nd Stage 1st and 2nd Phases (TL12.1bn expected revenue for OZKGY). We believe these possible projects might increase our valuation by c.14%.

Ela Hotel revenue estimate of TL294mn vs TL156mn in 2021

In our view, resilient tourist arrivals and weak TL would support Ela Excellence Hotel revenues. Hence, we forecast Ela Hotel revenues to reach TL294mn (+88% y/y) in 2022 on the back of normalization process with higher vaccinations. We estimate rental revenues from other rent yielding assets to realize at TL155mn (+150% y/y) while forecasting TL28mn (+30% y/y) service revenues in Fisekhane, the commercial area in Buyukyali.

TP raised to TL10.10 from TL5.63, while maintaining Outperform

Considering solid unit sales estimates, improved hotel revenues, resilient margins and healthy balance sheet with net cash position, we maintain our Outperform rating for OZKGY. We calculate TL10.10 TP for the stock, on 40% discount (unchanged) to our target NAV of TL12.2bn (previously: TL6.8bn). The stock trades at 36% discount to its current NAV, whereas sector trades at 11% premium.

Strong results expectation with 138% revenue growth in 2Q22

Thanks to the strong sale momentum, ongoing deliveries, resilient hotel revenues and rental revenues, we expect sales to reach TL665mn in 2Q22, implying 138% annual growth. Parallel to higher revenues and well cost management, we forecast TL266mn EBITDA with 40% margin (2Q21: 39%, 1Q22: 36%). Hence, our bottom-line estimate stands at TL359mn (+227% y/y). Besides, mainly thanks to the robust sale performance, we believe net cash position of the Company would increase to TL983mn in 2Q22 from TL468mn in 1Q22.


Y. F. Securities Research