Equity / Small Cap. / Conglomerate
28/03/2014
Global Investment Holdings
OUTPERFORM
Initiating Coverage
Upside Potential
Garnering growth assets
Stock Data
TL
US$
Price at 26 03 2014
1.18
Target Price
1.75
Prev.Target Price
n.a.
Mcap (mn)
263
Float Mcap (mn)
116
Avg.Daily Volume (3M, mn)
0.4
No. of Shares Outstanding (mn)
Free Float (%)
Multiples
2014E 2015E
0.53
0.80
n.a.
120
53
0.2
204
44.7
2016E
P/E
P/BV
EV/EBITDA
Price Perf. (%)
n.a
0.4
10.3
n.a
0.4
8.4
10.4
0.4
7.0
1 Mn
3 Mn
12 Mn
-5
-6
-9
-1
-3
1
-35
-46
-18
TL
US$
Relative to BIST-100
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
Sirnak TPP may bring more muscle with a 30% upside potential. The 0.00
Key risks: i) Deterioration in financing conditions may have an adverse
impact on future growth plans, ii) Lower GDP growth in Turkey, lower
construction sector growth in China and high dependency on a single
product/market may dent ports volumes, iii) Resurfacing tension in eastern
Turkey may cause a delay in the Sirnak TPP, iv) Possible divesture of
treasury stocks, low liquidity and execution failures are other risk factors.
1
Please refer to important disclaimer at the end of this report.
09.13
07.13
05.13
03.13
160
140
120
100
80
60
40
20
0
Relative to BIST1 00
1.10
1.57
14.6
14.5
26.03
12.03
12.02
15.01
29.01
Foreign Sh are (%)
3M Ave rage
14.4
31.12
Intends to carry on with a steady dividend policy. The Holding has
completed the share buyback after purchasing ca.20.8mn shares (9.24% of
paid-in capital) at an average price of TL1.44 and provided its shareholders
a dividend equivalent of TL30mn via share buyback. Moreover, it distributed
TL13.4mn cash dividends in 2013, corresponding to a dividend yield of 3.3%
for the first time in its history. The Holding aims to continue to pay out
dividends to its shareholders via share buyback and dividends in 2014.
01.13
Holding is developing Sirnak TPP project. The project is estimated to cost
US$350mn. In an effort to diversify away the execution and security risks as
well as the financing needs, the Group signed a preliminary agreement to
GLY HO Close(LHS)
form a partnership with Akkok Group, in which the Holding will have 30%
52 Week Range (Close TL)
stake. We believe Akkok will be a strong partner with a know-how in the
energy sector. The ongoing peace process may also ease the tension in the Foreign Share (%)
region, paving the way for the project. We value the project at US$185mn, 14.8
though not included into our valuation as the financing is not closed yet. If
14.7
included, it would have raised the upside potential of the stock to 78%.
03.14
Price / Relative Price
01.14
CNG business poses exponential growth potential. Besides pursuing
growth in the bulk compressed natural gas area, Naturelgaz, 80% owned by
the Holding, plans to further expand into the transportation segment. The
revenues have been growing at a CAGR of ca.40% since 2007, while we
believe the growth will accelerate on the back of increasing usage of CNG in
the transportation market. Potentially, Naturelgaz is set to be a starperformer in growth for the portfolio and 2014-2015 will be a litmus-test
period for this, in our view. We conservatively forecast revenues and
EBITDA to grow at a CAGR of 50% and 60%, respectively until 2016.
GLYHO
11.13
Growth & profitability wrapped in one package in the port business.
The most valuable asset of the Holding is the port business with majority
shares in three commercial and cruise ports. Commercial operations enjoy a
very sanguine period, capitalizing growth in the Turkish foreign trade as well
as in the Chinese residential construction sector and increasing
containerization trend. Container volume posted a 23% CAGR since 2007.
We expect it to grow at a CAGR of 11% until 2016. Cruise operations, on the
other hand, leverages on the tourism growth of Turkey, capturing 38% of the
total Turkish cruise passenger traffic. The cruise operations has posted a
CAGR of 6% in number of cruise passengers since 2009. Overall port
operations posted a 67% EBITDA margin in 2013, which we project it to rise
to 72% in medium term, while we forecast EBITDA to grow at a 12% CAGR
until 2016, reaching to US$71mn. New acquisitions of Creuers del Port de
Barcelona and Port of Bar will, no doubt, further boost the growth.
Ticker
26.02
We initiate the coverage of GLYHO with an OUTPERFORM rating and a
12M TP of TL1.75, offering a whopping 48% upside potential. Inclusion
of Sirnak TPP project into our valuation would increase this upside to
78%. The shares currently trade at a 56% discount to its NAV, the
highest print among the holding companies under our coverage.
48%
Mustafa Kucukmeral
[email protected]
+90 212 350 25 16
Global Investment Holdings
Investment Positives
Our valuation for ports
yields 8.8x 2014E EV/
EBITDA, implying a 13%
discount compared to its
global peers.
… a budget of US$83mn
combined EBITDA in
2014
The most valuable asset is the port business. The main asset of the Global Investment
Holdings (GIH) is its fully subsidiary Global Ports Holding (GPH), comprising 82% of the portfolio,
solely focusing on port operations. GPH operates three ports under its umbrella; i) Port Akdeniz
(99.8% stake) is a fast growing commercial and cruise port in Antalya on Turkey‟s Mediterranean
coast, ii) Ege Ports (72.5% stake) is the largest cruise port in the region providing access to unique
world heritage sites and, iii) Bodrum Cruise Port (60% stake) is a small size cruise operation. Our
valuation for port business implies 8.8x/7.8x 2014E/2015E EV/EBITDA, indicating to average
discounts of 13%/15% compared to global peers. The Holding recently added Port of Bar (62.1%)
and Creuers del Port de Barcelona (21.5%) to its portfolio. The Holding budgeted a combined
EBITDA of US$83mn for 2014, including the contribution from Barcelona and Port of Bar.
Therefore, based on the Company‟s 2014 budget and a target EV/EBITDA multiple of 8.8x, we
roughly estimate the total participated target equity value of Barcelona and Port of Bar as
ca.US$50mn. Moreover, the Holding has plans to acquire the controlling stake at Port of Barcelona
in 1H14 and has been selected as the preferred bidder for Lisbon Cruise Port.

High growth & low competition & low Capex. GPH offers high growth potential, faces limited
competition thanks to its unique locations and low Capex need with sufficient capacity going
forward to sustain the growth. Commercial operations enjoy a strong growth in foreign trade of
Turkey as well as in Chinese residential construction sector and increasing containerization
trend in Turkey. The container handling volume in Turkish ports increased at a CAGR of 10%,
while container handling volume in Port Akdeniz displayed a 23% CAGR since 2007, outpacing
the sharp containerization trend in Turkey, corresponding to 8xGDP growth and 2x of Chinese
residential construction sector growth in the same period. We foresee the container volume to
increase at ca.11% (1.5x of Chinese residential construction sector growth) until 2016 on the
back of Chinese marble demand as Chinese marble demand makes more than half of the total
container volume. Note that Chinese residential construction sector is expected to grow at a
CAGR of 7.2 until 2016 according to Oxford Economics.

Strong EBITDA margin. We forecast EBITDA to grow at a CAGR of 12% until 2016 and
EBITDA margin to hit 72% in medium term from 67% in 2013. Our EBITDA expectation for
2014 is US$56mn with a margin of 69%, excluding the new acquisitions. The management
budged a US$83mn combined EBITDA in 2014, including Barcelona and Port of Bar.

Underpenetrated container market. The containerization rate of Turkey standing at 103 TEU/
thousand population is quite low compared to the global average of 190 TEU/per thousand
population. Therefore, there is significant room for further growth in container handling volume
in the sea transportation. Considering that the container business has higher margins than
conventional cargo business, we believe the sharp containerization trend in Turkish foreign
trade will further support Port Akdeniz‟s volume and profitability.

Market leader in cruise operations. Cruise operations leverages on tourism growth in Turkey,
capturing 38% of the Turkish cruise passengers traffic and 45% of calls. The cruise operations
has recorded a CAGR of 6% in number of cruise passengers since 2009. We expect the cruise
passenger volume to grow at the same rate until 2016.

Recent port acquisitions offer significant potential. The Group aims to become an
international port operator and expand its presence in the region via new acquisitions. GPH has
recently acquired Port of Bar, Port of Barcelona and has been selected as first preferred bidder
for Lisbon Cruise Port. The Group has been pre-qualified for the tender of Greek marina and
tourist ports as well. We believe recent additions to the portfolio offer significant upside
potential considering the excellent track record of "build and develop strategy" of the Holding.
However, we attach no value for these assets as they are either in development stage and
limited information available or the financing has not been completed yet.
Market leader in cruise
operations with 45% market share
i) Port of Bar: GPH has completed the acquisition of unlisted 62.1% stake (the remaining
shares are free float) at Port of Bar (Montenegro) to operate the port for a period of 30 years for
a total consideration of €8.1mn. The Holding will invest €19mn in upcoming years. The Port has
a current maximum capacity of 1mn TEU container and 6mn tons of general cargo; however,
2
Global Investment Holdings
due to the lack of proper highway, underutilization of the railway network and insufficient
infrastructure, the port is currently not being used to its full potential. However, it represents
important link in the chain of intermodal transport because of its integration with the BelgradeBar railway and road traffic network. GPH aims to direct the Serbian traffic back to the port to
increase utilization and to reach US$4mn EBITDA in 2014 on the back of operational
improvements, traffic growth and most importantly ongoing redundancy program.
Aims to acquire the controlling stake in Port of
Barcelona in 1H14.
ii) Port of Barcelona: Global Port Holding acquired 43% stake in a 50/50% JV with a leading
cruise port operator Royal Caribbean Cruises in Creuers del Port de Barcelona, which operates
the Barcelona Cruise Port (21.5% owned by GPH) and owns the majority share of Malaga
(17% owned by GPH) and minority share of Singapore (9% owned by GPH) Cruise Ports. The
Holding aims to acquire a controlling stake in the port in 1H14. Barcelona Port is one of the
largest cruise port in Europe with 1.9mn passengers in 2013. The concessions for Barcelona,
Malaga and Singapore last until 2030, 2038 and 2022, respectively.
iii) Lisbon Cruise Terminal: Global Ports Holding has been selected as first preferred bidder,
as part of a consortium comprising of Royal Caribbean Cruises (20%), Creuers del Port de
Barcelona (10%) and Grupo Sousa - Investimentos SGPS (30%) for the “Built Operate
Transfer” (BOT) contract of the Lisbon Cruise Terminal. GPH will be holding 42.15% stake,
40% of which is direct stake. The 35-year contract will include the construction and the
operation of the terminal, on a public-service concession basis. With this new terminal, the Port
Authority of Lisbon aims to double the current traffic of 550k passengers in the medium term.
The new terminal is expected to provide the port with an estimated 1.8mn passengers. The
construction of the new Lisbon Cruise Terminal, estimated to cost ca.€24mn, will start in early
2014 and expected to be completed by the end of 2015.
iv) Greek marina privatization is also on radar screen: GPH has been pre-qualified by the
Hellenic Republic Assets Development Funds (HRADF) for the tender of Greek marina and
tourist ports group consisting of Alimos, Nea Epidaurus, Hydra and Poros covering the
management, operation and exploitation of the related assets for a period of 40 years.
The market attaches no
value to CNG business in
our view given that our
target value only for port
business is even higher
than GLYHO’s current
Mcap
CNG business offers significant growth potential, 2014-2015 will be test years for the
growth. Naturelgaz serves a wide array of customers ranging from big industrial enterprises to
SMEs. Besides pursuing growth in its core business of sales & distribution of bulk compressed
natural gas, the Company plans to further expand its existing core business into the transportation
area by supplying required technology to convert public busses, garbage trucks and intercity heavy
and mid-size commercial vehicles with diesel engines into CNG and to supply CNG, establishing a
fueling station network that will cover central and western part of Turkey. We believe Naturelgaz
bears the highest potential in the portfolio. The sales volume of the Company has been increasing
at a CAGR of 27% since 2007, while the revenues grew at a CAGR of ca.40% in the same period.
We believe the revenues will accelerate on the back of increasing usage of CNG in transportation
market. We conservatively forecast revenues and EBITDA to grow at a CAGR of ca.50% and
ca.60%, respectively until 2016.
Turkey CNG market has displayed strong growth. Turkey‟s CNG consumption is increasing at
a CAGR of 18% since 2007 and we expect it to grow at accelerated pace on the back of increasing
usage in transportation. Naturelgaz will be one of the main beneficiaries of the growth as it is well
positioned in the market with 70% market share in bulk segment and 50% overall market share.
CNG usage in transportation is expected to grow
exponentially as it offers
35% savings over diesel

Expansion to transportation area may boost growth. The Company currently has 19
stations across Turkey and carries out its investments at full speed in order to extend the reach
of CNG and as such aims to have 22 more stations throughout the country by YE2015, which
may boost the usage of CNG in transportation as an extensive station network is crucial to
enhance the market. The size of the market is estimated at 1.3mn vehicle; 400k busses, 40k
garbage trucks, and the remaining is heavy-mid size commercial vehicles. The management
aims to reach a 14.4k car park in 2020 with annual 45k m3 per vehicle consumption in average.

35% price advantages over diesel gives a strong edge. CNG offers 35% and 45% fuel
savings over diesel and LPG, respectively, which will support the usage of CNG in
transportation sector. We believe the market is very price sensitive as evident from the current
high penetration of LPG, which has a similar price advantage over Gasoline.
3
Global Investment Holdings
Turkish LPG market has reached 3.7mn tons of consumption and ranked 2nd in Europe after
Russia in terms of total consumption with a total turnover of US$5bn. Auto gas segment
comprises 71% of LPG consumption. Currently, LPG vehicles comprise around 40% of the
passenger car park. We expect the penetration level of CNG vehicles in heavy and mid-size
commercial vehicle segment and public transportation to exponentially increase on the back of
significant fuel savings advantage and widening station network. We believe Naturelgaz‟s
growth targets will be tested in 2014-2015 period as the Company will be completing the major
portion of its investments to expand the station network during the period.
Sirnak TPP may bring
additional 30% upside
potential
Akkok Group will be a
strong partner with a
know-how in energy sector

CNG consumption in public transportation is rapidly increasing. Turkish Metropolitan
Municipalities like Istanbul, Ankara, Kocaeli, Kayseri and Bolu have purchased over 1000 CNG
buses and garbage trucks in the last few years and other municipalities are expected. The
Ankara Municipality has not purchased any bus except original equipment manufacturer (OEM)
CNG busses since 2007 and currently over 60% of its bus park consist of OEM busses.
Furthermore, Istanbul, Gaziantep and some other municipalities open tender for the
conversation of diesel public transportation vehicles. We believe the imports of new busses and
conversation of the existing buses to CNG will continue in the near future and Naturelgaz will
be a main beneficiary thanks to its strong position in the market.

The Company won new contracts and others are on the way. The Company has recently
signed new contracts in auto segment, including conversion of Istanbul Anatolian side‟s
garbage trucks, Afyon‟s in city transportation vehicles and Reysas Group‟s trucks, one of the
largest logistic company in Turkey. The Company won Bolu and Kayseri Municipalities tender
as well. The Bolu tender includes the installation and operation of CNG refueling station for 15
years with BOT method and the Kayseri Municipality‟s tender includes a three-year rental
contract to operate a natural gas station in Kayseri. The stations will serve to all public vehicles
as well as private vehicles. Naturelgaz aims to participate all municipality CNG station tenders
in upcoming years. In the bulk segment the Company captures the two largest LNG (a close
substitute) users recently, Caykur and Saray with a total of 38mn m3, and others on the way.
Sirnak TPP project to provide higher footing in energy. The Holding is developing Sirnak
thermal power plant project owned by Galata Energy, a 85% subsidiary of the Holding. The Group
holds a 49-year power generation license for the asphaltite-fired thermal power plant with an initial
installed capacity of 270MW. The plant will be located in Sirnak, in eastern Turkey near to a coal
mine owned by Gelis Mining, 85% subsidiary of the Group, which will source the needed coal to
the plant. The Holding has already agreed with China National Electric Engineering Co. (CNEEC)
for the construction of the plant. The project is estimated to cost US$350mn, requiring
ca.US$95mn equity assuming a 65%/35% debt to equity ratio and US$30mn supplier credit. We
expect the plant to be fully operational in 2018. Since the financing of the project is not closed yet,
we do not include the plant into our valuation. However, we run a DCF analysis to unveil the value
of the project and derived US$185mn value, which would raise our TP to TL2.10, offering 78%
upside potential at current price.

Obtained incentives for the plant. Galata Energy‟s application to the Ministry of Economy
with the purpose of obtaining a Regional Investment Incentive Certificate for the Sirnak power
plant has been approved and Galata Energy was granted the “Investment Incentive Certificate”
back in Dec‟2013. Sirnak thermal power plant project falls within the scope of “State Incentive
Practices” given its location in the 6th region and the use of locally-procured raw material. As
such, the Group will benefit from exemptions in custom duty and VAT, tax reductions (of 90% in
corporate and income tax) and support in interest, insurance premium and withholding taxes.
We calculate the NPV of the incentives to be around US$45mn.

Yet, we have some concerns regarding the project. Possible resurfacing of the tension in
the eastern Turkey is the major risk for the project due to security concerns. Therefore, the
Company is required to have a higher equity/debt ratio and to give higher collateral to financial
institutions, necessitating a partner for the project.

Akkok Group will be a strong partner ensuring the completion of the project. Due to the
execution risks and security concerns in the eastern Turkey and the financing need, the Group
has signed a preliminary agreement to form a partnership with a prominent Akkok Group.
Following the final agreement, the Holding will have 30% stake in the project.
4
Global Investment Holdings
We believe Akkok Group will be a strong partner with a know-how in energy sector and will
ensure the completion of the project.

May benefit from ongoing peace process. The completion of the peace process may
significantly improve the investment climate in the region.
Mining investment is not in the price. Straton Maden, in which Global Energy, a fully owned
subsidiary of Global Investment Holdings, holds 75% stake, acquired feldspar and logistical mining
operations including substantial feldspar reserves (250k tons of annual production) in Mugla Yatagan (Aegean region of Turkey) for a total consideration of TL11mn. The transaction is
completed in June 2013 and price will be recalculated based on the 3.0 times of next 12-monthEBITDA of the Company.
Have excellent track record in built-develop-exit
strategy
Aims to continue to pay
dividends via share buyback and dividends in
2014.

Turkey is the global leader in feldspar mining with 5mn tons of production per annum,
accounting for 24% of the world’s production. Straton Maden is among the top five feldspar
producers in Turkey with 250k tons (5% market share) of feldspar production per annum 80%
of which is exported. In 2012, Turkey´s feldspar exports of 3.9mn tons generated US$135mn
revenues, amounting to 3.2% of Turkey´s mine exports.

The Group targets to multiply EBITDA by 3-4 times following the completion of a new
investment. The Company has secured €6mn loan to undertake a new investment to be able
to increase the clarity of feldspar. Following the completion of the investment, the Company
targets to multiply the EBITDA by around 3-4 times to TL10-12.5mn in 2014. If the Holding
achieves its target, it will create additional value, which is not included in our valuation.
Acts like a private equity with a reputable track record in build-develop-exit strategy. The
Group presents its difference from other listed holdings in Turkey as the Group is more flexible to
enter and exit sectors as opportunities arise or the market conditions change. Thus, the Holding‟s
business investment strategy functions similarly to a private equity firm with a build-develop-exit
strategy. The Holding has limited but reputable track record. The Holding sold its stake in Energy
Investment Holding back in July 2012 for US$75mn with an IRR of 29% and sold sold Yesil Energy
(five HEPP projects with a total 560MW capacity) for US$116mn to Statkraft of Norway with an
IRR of 148% in 2009.
Share buyback program. Global Investment Holdings has recently completed the share
repurchase program, unanimously resolving the repurchase of 20.8mn shares, corresponding to
9.24% of GIH‟s paid-in capital for a total amount of TL30mn, corresponding to an average TL1.44
per share price, which is clearly higher than current price levels, which we believe a good signal for
the market that the share price is undervalued by the market.
Intends to carry on with a steady dividend policy. The Holding distributed TL13.4mn gross
cash dividends in 2013, corresponding to a dividend yield of 3.3%, for the first time in its history.
The Holding aims to continue to pay dividends via share buyback and dividends in 2014.
The major source of dividend income is Global Ports Holding. Global Ports Holding distributed
TL54.4mn gross dividends in 2013, TL24mn of which from Port Akdeniz, while the remaining
ca.TL19.8m from Ege Ports. Given the strong profitability of Global Ports Holding we believe the
dividend stream to Global Investment Holdings will continue in accelerated pace, which may be
directed to investors as dividends or used for the new investments.
Winning the court case
translates into 18% increase in our TP
The solution of the legal case regarding the letter of guarantee related to Baskent Natural
Gas in Group’s favor is an upside risk. The letter of guarantee given to Ankara Municipality
(related to Baskent Natural Gas Distribution tender) worth US$50mn has already been paid in full
by the Holding. Yet, the legal dispute is still ongoing. Mind that a JV, in which GLYHO has 52%
share, had placed the winning bid for Baskent Natural Gas Distribution A.S. privatization for
US$1.61bn back in 2008, yet, couldn‟t finalise the deal. The Holding is expecting the suit to be
resulted in its favor. We did not attached any value to our valuation regarding the possible positive
outcome and cash inflow. The Group will receive US$50mn, if it wins the case, which will increase
our target price to TL2.07 per share by 18%. Moreover, the Management stated that although they
paid the full amount, they will be receiving US$24mn from the consortium partners even if they
loose the case as their share in the consortium was 52%. In such case our TP increases to TL1.91
per share by 9%.
5
Global Investment Holdings
Investment Risks
Antalya port revenues and profitability are highly sensitive to the fluctuations in GDP
growth. Container and bulk cargo handling volumes are highly sensitive to the foreign trade
volumes. Thus, a sharp contraction in the GDP growth and in foreign trade volumes would hurt
Antalya Port‟s revenues and margins.
Limited product range, which is also solely carried out to a single country is a major risk
factor in revenue growth of commercial port activities.
Dependency on a single
country and a single
product group are major
risks

The Holding’s container handling business is hugely dependent on Chinese marble
demand. The total marble handling volume dominates the total container volume with a 75%
share. Moreover, the marble is carried out mainly to China, consisting of 72% of total trade
volume. Thus, the slowdown in Chinese economy may seriously affect the marble export which
might lead to a significant reduction in container revenues, which captures 63% share in total
Port Akdeniz‟s revenues. However, it should be noted that, al least in the medium term no
major risk seen related to marble export to China. The management expect the marble export
to China to grow at 10-16% in 2013-2018 period, higher than the growth of Chinese
construction sector. Indeed, the container volume in the port has been growing at 2x of
Chinese residential construction sector growth since 2007 and the latter is expected to grow at
a CAGR of 7.2 until 2016 according to Oxford Economics.

Dominating 67% of total conventional cargo, cement and clinker product group is crucial
in future revenue growth of conventional cargo segment. That is the main reason behind
the decrease in the volume of bulk and general cargo segments in last three years since
cement exports to Middle East is down significantly due to the political unrest.
It should be noted that the new acquisitions of Barcelona and Port of Bar will help the Holding to
further diversify the port operations, reducing the single market/single product risks. Moreover, the
management aims to steal shares from Istanbul and Izmir‟s import handling volumes, which may
increase the diversity and boost the growth in medium term, in our view.
The reversal risk of Ege Ports privatization seems to be eliminated. The government‟s
decision against the court verdict for the cancellation of the tender of Ege Ports seems to eliminate
the reversal risk of the privatization.
The limited ownership of the controlling shareholder raises some concerns. The controlling
shareholder and the CEO of the Holding, Mehmet Kutman, has only 25.8% direct stake. Holding
itself and the Group companies, mainly fully owned subsidiary GES Energy, hold 29.3%.
Accordingly, Mehmet Kutman‟s share reaches to 33.4%, including indirect stakes. Note that the
Holding decided to cancel the 20.8mn (9.24% of paid in capital) shares, which has been purchased
by the Holding itself via share buyback. We believe the move is positive as it will increase the
ownership of the controlling shareholder Mehmet Kutman to some extent. A greater ownership
would boost investor confidence helping the stock to trade at higher levels, in our view.
Treasury stocks pose an overhang risk. Possible divesture of treasury shares (29.3%) pose an
overhang risk despite the management considers to use these shares as collateral to raise fund for
upcoming projects or to sale the shares via a private placement. Yet, the shares may come to the
market eventually posing an overhang risk. We believe the management‟s decision to cancel the
9.24% of the treasury stock partially ease the overhang risk.
Debt to EBITDA ratio increased to 12.5x even
before the new port acquisitions
High indebtness. High FX-denominated debt appears to be a major drawback. The Holding has
TL758mn net debt (excluding treasury stock at hand worth TL77mn). The financial leverage of the
Holding increased to 118%, while the net debt to EBITDA ratio increased to 12.5x as of 2013. The
investments in recent acquisitions in port business and investments in energy segment will further
increase the leverage of the Holding. Besides, the fully subsidiary Global Ports Holding has
decided to issue a Eurobond worth at US$300mn via private placement in upcoming periods to
mostly refinance existing debt. The Holding carries a US$228mn short FX position as of 2013,
being prone to weakness in TL. However, the Company‟s revenues from the port business are in
hard currencies. Therefore, this provides a natural hedging mechanism for the Holding.
6
Global Investment Holdings
Valuation Summary
We use sum of the parts approach to value Global Investment Holdings. Accordingly, we employ
discounted cash flow analysis for each port under the umbrella of the port division to estimate a fair
value for Global Ports Holding and include GPH‟s solo debt position. We use DCF analysis to
value Naturelgaz under energy division and use a 2014E EV/EBITDA multiple of 5x for Straton
Maden. We utilize hurdle rate valuation (Mcap x (1+CoE)) for listed Pera REIT (PEGYO) and
Global Securities (GLBMD). Accordingly, we reach a target value of US$345mn for Global Ports
Holding (82% of total participated value) and US$60mn for Global Energy (14% of participated
value). In line with their Mcap, the real estate division is valued at US$17mn and finance division at
US$10mn. The new acquisitions; Port of Bar is included with the transaction value, while Creuers
del Port de Barcelona is not included in our valuation since the details is not available yet. Lastly,
Sirnak TPP project is also not included in our valuation as the financing has not been closed yet.
We attach a 40% discretionary conglomerate discount in arriving to our target value. The
discounts we apply range from 10% to 30% to holding companies in our coverage universe.
The main reasons for relatively higher discount applied to Global Investment Holdings are;
ownership structure of the Group, treasury stocks in hand, lack of dividend income from
some subsidiaries, asset composition (diversification, dependency on a single asset/sector/
country/product group), limited financial transparency, low liquidity of the stock and
Holding’s active portfolio management, which is especially unattractive for long-term
investors. We believe over the long term the market also appears to reward 'earnings
certainty' and penalize those stocks that carry a large degree of earnings risk. Since
GLYHO’s earnings shows large fluctuations due to the its active portfolio management, the
market attaches it a higher discount, in our view.
We believe the major events that may decrease the level of discretionary discount attached
to the Holding are; i) any corporate action, which may crystalize the value of its assets, ii)
the cancelation of treasury stocks at hand, which eventually will increase the shareholding
of Mehmet Kutman and release the overhang risk, iii) addition of Sirnak plant and full
integration of recent port acquisitions, which will increase the diversification.
Figure 1: Global Investment Holdings SOTP (US$ mn)
Business
Segm ent/Com pany
Ticker
Global Ports Holding
GLYHO's
Stake
Current
Valuation Method
Current
Value
GLYHO's
Stake
Weight
in Part.
Target
Valuation Method
Target GLYHO's Weight
Value
Stake in Part.
99.9%
Sum of the parts
345
345
87.1%
Sum of the parts
345
345
82.1%
Antalya Port
99.8%
DCF
377
376
95.0%
DCF
377
376
89.6%
Ege Ports
72.5%
DCF
121
88
22.1%
DCF
121
88
20.9%
Bodrum Cruise Port
60.0%
DCF
8
5
1.2%
DCF
8
5
1.1%
Solo Net Cash (Debt) of GPH **
-109
NPV of GPH's Solo Opex
-109
-25
Creuers del Port de Barcelona *
21.5%
Port of Bar
62.1%
Global Energy
-25
0
0
0.0%
0
Transaction Value
18
11
2.8%
0
Transaction Value
18
11
100.0%
Sum of the parts
38
38
Naturelgaz
80.0%
Transaction Value
40
Straton Maden
75.0%
Equity Value
8
Sirnak TPP *
30.0%
DCF
2.6%
9.5%
Sum of the parts
60
60
14.3%
32
8.1%
DCF
62
50
11.8%
6
1.5%
5 x 2014E EV/EBITDA
14
11
2.5%
185
0
0.0%
DCF
185
0
0.0%
24
13
3.4%
27
15
3.6%
Others
0.0%
Pera REIT
PEGYO
49.9%
Current Mcap
15
7
1.9%
Current Mcap * (1+CoE)
17
8
2.0%
Global Securities
GLBMD
67.3%
Current Mcap
9
6
1.5%
Current Mcap * (1+CoE)
10
7
1.6%
396
100%
Total Value from Participations
420
100%
13
3%
382
97%
-145
-58%
Total Value from Participations
Listed Participations
Unlisted Participations
Holding Only Net Cash (Debt) **
Current NAV
251
Prem / (Disc) to Current NAV
Listed Participations
Unlisted Participations
Holding Only Net Cash (Debt) **
Target NAV
15
4%
405
96%
-145
-53%
275
-52.3%
Prem / (Disc) to Target NAV
-56.4%
Historical Average Discount
n.a.
Historical Average Discount
n.a.
Current Mcap
120
Target Mcap***
164
* Sirnak TPP and Barcelona Cruise Port are not included in our valuation
Target Share Price (US$)
0.80
** Net cash (debt) is as of YE2013, and the net debt of GPH is adjusted with payments for new port acquisitions
Target Share Price (TRY)
1.75
*** after applying 40% conglomerate discount
Upside Potential
48%
Source: Company, Is Investment
7
Global Investment Holdings
The Holding currently trades at a 56% discount to its NAV. It should be noted that the inclusion of
Sirnak TPP and recent port acquisitions into our valuation would have further increased the
discount attached to the Holding.
The reasons behind the higher discretionary holding discount attached to the Holding are;
i) limited ownership and the privilege to nominate board of directors of the controlling
shareholder. The limited shareholding ratio and the privilege to nominate board of directors of the
controlling shareholder, Mehmet Kutman, raises some concerns. We believe this is one of the
reasons that the stock is trading at a high discount. Mehmet Kutman, holds only 33.4% of total
shares, 25.8% of which is direct stake. Note that the Holding decided to cancel the 20.8mn (9.24%
of paid in capital) shares, which has been purchased by the Holding itself via share buyback. We
believe the move is positive as it will increase the ownership of the controlling shareholder Mehmet
Kutman to some extent. A greater ownership would boost investor‟s confidence helping the stock
to trade at higher levels, in our view.
ii) treasury stocks pose an overhang risk. Global Investment Holdings‟ subsidiaries, mainly its
fully subsidiary GES Energy, hold 29.3% stake of the Global Investment Holding including the
9.24% shares that the Holding itself holds. Possible divesture of these shares pose an overhang
risk, requiring higher discretionary Holding discount. However, the management‟s decision to
cancel the 9.24% stake and plans to use the remaining shares as collateral to raise fund for new
investments or to sale via a private placement may partially ease the overhang risk.
iii) limited portfolio diversification with a high dependency on a single asset/sector. The port
business makes up 82% of the portfolio, causing a high dependency on a single asset risk for the
Conglomerate. However, we believe growing operations of Naturelgaz and addition of Sirnak
power plant and new port acquisitions (in the sense of regional diversity) will further diversify the
portfolio going forward, which may decrease the level of discount attached to the Holding by the
market in the medium term.
iv) liquidity discount. The average 3-month daily trading volume stands at US$0.4mn is very low
compared to BIST listed Holdings‟ average of US$9mn, necessitating a liquidity discount.
v) low dividend income from subsidiaries. The Holding only receives dividend from port
business and does not receive dividends from other businesses. Moreover, we believe the
dividend income from port business will be lower in 2014 compared to last year‟s TL54mn due to
the its financing need as a result of recent acquisitions.
vi) financial transparency. There is limited information available on the unlisted subsidiaries,
which creates some transparency discounts on NAV. The listed subsidiaries accounts for a mere
4% share in the NAV of the Holding.
vii) its active portfolio management requires a relatively higher discount as long term
investors may avoid such stocks since they could not foresee how the NAV would look like in the
foreseeable future. Note that active portfolio management companies and private equity
companies trade at a much higher discounts.
viii) fluctuations in earnings. We believe over the long term the market also appears to reward
'earnings visibility' and penalize companies have a large degree of earnings volatility. As a result of
active portfolio management; incurring profit/losses from asset sales, as well as other nonrecurring
gains/losses such as project development expenses or high FX gains/losses due to large FX
position, Global‟s earnings are subject to significant fluctuations.
8
Global Investment Holdings
Valuation of Global Ports Holding (82% of participated value)
We employ a discounted cash flow analysis for each port under the umbrella of the port division
based on the concession period of each port to estimate a fair value for Global Ports Holding
(GPH). Accordingly, we derive a value of US$345mn for GPH. Our valuation offers an EV/EBITDA
of 8.8x/7.8x for 2014E/2015E, implying discounts of 13% and 15%, respectively, compared to
median multiples of its peers. We deem DCF to be a more appropriate tool in valuing each asset
as opposed to a multiple based approach due to;
i) Different concession periods of ports. Except the Bodrum Cruise Port, for which the operating
rights will terminate at the end of 2019, Port Akdeniz and Ege Port both have relatively long
concession periods, which will end at the end of 2028 and 2033, respectively. Thus, a DCF over
the concession period would better reflect ports‟ values.
ii) Cruise and commercial operations have different risk and growth dynamics. Since
commercial and cruise operations have different growth & risk dynamics, a peer multiple analysis
may not be appropriate as most peer companies have different commercial & cruise revenue mix.
1) Port Akdeniz (90% of participated value)
Key valuation assumptions are as follows:
Demand & Throughput: Demand growth is the main driver behind the revenue potential of Port
Akdeniz, which is closely related to the GDP growth, population growth and the increase in foreign
trade activities. The level of activity and the structure of national economies, as well as their trade
patterns influence the national and global transportation systems.
We forecast that the demand will increase at 11% (1.5x of expected Chinese residential sector
growth) until 2016 on the back of strong marble demand of China. Note that the Ports‟ container
volume has been growing at 2x of Chinese residential construction sector growth since 2007 and
the latter is expected to grow at a CAGR of 7.2 until 2016 according to Oxford Economics. For
2016-2021 period, we foresee the volume to increase at 2x of the expected GDP growth in Turkey
(corresponding to a CAGR of 8%), which is a conservative assumption compared to the historical
average demand growth of 8x of the GDP since 2007. Please note that Port Akdeniz has certain
capacity constraints and according to the feasibility studies, the Ports‟ container capacity could be
extended maximum up to gross 500K TEUs. We assumed Port Akdeniz‟s capacity would reach the
maximum capacity by 2021 and remain at this level thereafter. We expect conventional cargo
volume to post a strong 14% CAGR until 2016 due to low base year and expected recovery in
Middle East, then to grow at a lower speed at 1x of the expected GDP growth.
Figure 2: Port Akdeniz DCF Valuation (US$ mn)
2012
2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E … 2028E
Revenues
49.2
55.5
61.4
68.1
75.9
81.7
88.6
96.1
104.3
116.8
EBIT
13.7
19.3
25.2
31.3
38.1
42.7
49.0
55.2
61.9
76.7
33.5
38.9
43.2
48.3
54.1
58.5
63.9
69.7
76.1
86.5
68.0% 70.1% 70.4% 70.9% 71.3% 71.6% 72.1% 72.5% 72.9%
74.0%
EBITDA
EBITDA M argin
∆ NWC (-)
1.7
1.7
1.8
2.0
2.3
2.5
2.7
Capex (-)
2.2
7.2
4.0
4.0
4.0
4.0
4.0
4.0
4.0
1.0
Tax (-)
2.7
3.9
5.0
6.3
7.6
8.5
9.8
11.0
12.4
15.3
FCF to the Firm
26.8
26.2
32.3
36.0
40.2
43.5
47.4
51.8
56.6
66.6
EV
410
Net Debt (Cash) 2013
2.9
3.1
3.5
34
Target Equity Value
377
2014 EV/EBITDA
9.5x
Source: Company, Is Investment
Tariffs: All the tariffs of the port are announced and applied in US$ basis. The management
introduced 5.5% tariff increase in average both in container and cargo tariffs in January 2014. We
do not implement any other adjustments in tariffs although the management stated that there is still
room for an upward adjustment especially for export related container service tariffs.
9
Global Investment Holdings
Revenues: Parallel to the favorable demand conditions, we expect Port Akdeniz‟s container
revenues to grow at a CAGR of 5.1% in US$ terms between 2013-2028 period. While the growth
will be relatively higher at ca.10% for 2013-2021 period, it is expected to be flat for remaining part
of the license period owing to the full capacity being reached in 2021. We also assume general
cargo&dry bulk cargo revenues to increase at a CAGR of ca.7% until the end of concession period.
As a result, we forecast that Port Akdeniz‟s revenues will reach US$117mn by 2028 up from
US$56mn in 2013, implying a CAGR of 5.1%.
Operating Costs & EBITDA: Wages and salaries, fuel and electricity costs and third party
contracts capture the majority stake in total operating costs of Port Akdeniz with 55% share as of
2013. We forecast EBITDA to grow at a CAGR of 5.5% until the end of the license period, slightly
higher than revenue growth since around 30% of the cost items like wages and salaries and half of
third party contracts are fixed. EBITDA margin is set to touch 74% by 2028 from 70% recorded in
2013.
Capex & Capacity: In line with the increasing demand, we assume Port Akdeniz‟s container
handling volume will gradually increase to full capacity by 2021, while the conventional cargo
capacity of 5mn tons will be enough to meet the maximum demand for the concession period.
Thanks to the favorable specifications of the port, the additions to the container handling capacity
do not require a high amount of investment. Only a few number of cranes and stackers will be
enough to carry the functional capacity to gross 500K TEU. We forecast US$2.6mn of average
Capex per annum for 2013-2028 period.
Forecast period: Our forecast period is 15 years from 2014 to 2028, which is the end-date of the
operating license for the port acquired from the Privatization Administration.
WACC assumption: We use risk free rate at 6.5%, benchmarking to Turkish Treasury Eurobonds,
equity risk premium as 5.5% and beta as 0.9x, slightly lower than market beta due to the defensive
nature of the commercial port business, which is also in line with its global peers'. Our WACC
calculation is ca.10.3% during the concession period.
2) Ege Ports (21% of participated value)
Demand & Throughput: In our model, we assume the number of cruise calls to gradually
increase to 670 as of 2033 from 451 in 2013, while the passenger number per each call reaches to
1,922 from 1,294 in 2012 parallel to the expansion of the ship sizes. The new dock investment to
be completed in 2015, which will enable bigger sized ships to the dock, which is the major factor
behind the growth in passenger numbers and revenues. The increase in the average tonnage of
the ships will translate to an improvement in pilotage and towage revenues as well.
Figure 3: Ege Ports DCF Valuation (US$ mn)
2012
2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E … 2033E
Revenues
16.4
16.2
17.3
19.9
20.7
21.5
22.4
23.2
24.1
38.0
EBIT
10.9
10.8
10.8
12.4
13.4
14.3
15.2
17.3
18.8
30.5
EBITDA
12.7
12.6
13.6
15.9
16.5
17.2
17.9
18.7
19.3
31.0
77.1% 77.6% 78.5% 79.7% 79.6% 79.9% 80.2% 80.5% 80.0%
81.7%
EBITDA M argin
∆ NWC (-)
0.8
0.8
0.9
1.0
1.0
1.1
1.1
1.2
1.2
1.9
Capex (-)
1.0
1.0
8.5
5.5
0.5
0.5
0.5
0.5
0.5
0.5
Tax (-)
2.2
2.2
2.2
2.5
2.7
2.9
3.0
3.5
3.8
6.1
FCF to the Firm
8.7
8.6
2.0
6.9
12.2
12.7
13.3
13.5
13.8
22.5
EV
109
Net Debt (Cash) 2013
-11
Target Equity Value
121
2014 EV/EBITDA
8.1x
Source: Company, Is Investment
Tariffs: All the tariffs of the port are announced and applied in US$ basis. Ege Ports is one of the
most expensive cruise port in the region. Thus, we do not assume any upward adjustments in
tariffs in order to be on the conservative side.
10
Global Investment Holdings
Revenues: We expect Ege Ports‟ revenues to grow at a CAGR of 4.4% in US$ terms between
2013-2033 period mainly fuelled by cruise revenues. Real drivers behind this growth could be
listed as the increase in average GRT of cruise calls and increasing passenger numbers, which will
be also positively affected from the new dock investment.
Operating Costs & EBITDA: Wages and salaries, consultancy expenses, shopping mall
expenses and commissions paid to the government capture the majority stake in total operating
costs. We forecast EBITDA to grow at a CAGR of 4.6% until the end of the license period, carrying
the EBITDA margin to 82% in long term from the 78% in 2013 thanks to the operation leverage.
Capex: Ege Ports completed a significant investment of US$13mn back in 2005 including a new
passenger terminal and a shopping complex. The most important investment plan is a new dock,
with a total spending of US$13mn. We assume the Company to spend US$8mn in 2014 and
US$5mn 2015 for the new dock. After 2015, annual spending has been limited at US$0.5mn until
the end of the license period, which is mainly for maintenance.
Forecast period: Our forecast period is 20 years from 2014 to 2033, which is the end-date of the
operating license for the port acquired from the Privatization Administration.
WACC assumption: We use risk free rate at 6.5%, benchmarking to Turkish Treasury Eurobonds,
equity risk premium as 5.5% and beta as 1x. Our WACC calculation is 11.6% for the entire
concession period.
3) Bodrum Cruise Port (1% of participated value)
Demand & Throughput: We assume the number of cruise calls to gradually increase to 235 as of
2019 from 136 in 2013, while the passenger number per each call gradually increases to 413 from
212 in 2013.
Tariffs: All the tariffs of the port are announced and applied in US$ basis. We do not assume any
upward adjustments in tariffs.
Figure 4: Bodrum Cruise Port DCF Valuation (US$ mn)
2012
Revenues
EBIT
EBITDA
EBITDA M argin
2013
2014E
2015E
2016E
2017E
2018E
2019E
2.6
2.5
3.0
3.5
3.9
4.4
4.9
5.5
-0.3
-0.3
1.2
1.9
2.6
3.0
3.4
3.9
1.5
1.3
1.9
2.3
2.6
3.1
3.5
4.0
56.6%
53.9%
63.8%
66.4%
68.0%
69.8%
71.1%
72.4%
∆ NWC (-)
0.1
0.1
0.1
0.2
0.2
0.2
0.2
0.3
Capex (-)
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
-0.1
-0.1
0.2
0.4
0.5
0.6
0.7
0.8
1.3
1.2
1.4
1.7
1.8
2.2
2.5
2.8
Tax (-)
FCF to the Firm
EV
9
Net Debt (Cash) 2013
1
Target Equity Value
2014 EV/EBITDA
8
4.8x
Source: Company, Is Investment
Revenues: We expect Bodrum Cruise Port‟s revenues to grow at a CAGR of 10% in US$ terms
between 2012-2019 period thanks to the rapid increase in the number of cruise calls.
Operating Costs & EBITDA: Personnel, consultancy, security and insurance expenses have the
majority share in total operating cost with 55% share as of 2013. We forecast EBITDA to grow at a
CAGR of 12% until the end of the license period, which is higher than the revenue growth due to
the high share of fixed costs in operating costs of the port such as personnel expenses.
Capex: Bodrum Cruise Port is one of the newest cruise terminals in Turkey and there is no
substantial need for modernization and capacity expansion investment. We assume on average
US$0.1mn maintenance investment per annum until the end of 2019.
Forecast period: Our forecast period is 7 years from 2013 to 2019, which is the end-date of the
operating license for the port.
11
Global Investment Holdings
Valuation of Naturelgaz (12% of participated value)

Growth: We estimate that bulk CNG sales volume to grow at a CAGR of 12% in our 10-year
forecast horizon, remaining lower than the last five year‟s CAGR of 22%. We anticipate the
sales volume in transportation segment to grow at a CAGR of 45% until 2023. Our growth
estimate translates into an annual 450 NGV addition, reaching 4.7k car park in 2023 and
annual 35k m3 per vehicle consumption. Mind that the management expects to reach a 14.4k
car park and over 45k m3 annual per vehicle consumption until 2020.

Price-cost spread: We assume that the price-cost spread will be around US$0.22/cbm for bulk
sales and US$0.17/cbm for transportation sales. The management„s long term forecast for the
spread are around US$0.29/cbm and US$0.19/cbm for bulk and transportation segments,
respectively, as they are more optimistic about the natural gas price and competition.

Operating cost: We anticipate the current Opex/Sales figure of 32% to gradually decrease to
17% due to the economies of scale in medium term.

Capex: We pencil in one station installment for each 450 NGV addition to the car park and
needed trucks and tanks investments in upcoming periods. Accordingly, the investments
require US$5mn Capex per year in average in our forecast horizon, except for 2014-2015
period, in which we pencil in US$17mn Capex due to the planned station network
establishment in line with the management‟s guidance.

WACC: We use risk free rate at 6.5%, benchmarking to Turkish Treasury Eurobonds, equity
risk premium as 6%. For beta calculation we use the unlevered beta of listed Clean Energy,
which is a close peer, and calculated beta in a range of 1.8-1.4 for Naturelgaz for our forecast
horizon. Accordingly, our WACC calculation varies between 7.7% and 11.1% in US$ terms for
the forecast horizon.
Figure 5: Naturelgaz DCF Valuation (US$ mn)
Revenue
EBIT
EBITDA
EBITDA Margin
∆ NWC (-)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
50
2
68
3
85
4
103
6
118
7
133
9
148
11
163
13
177
15
192
17
12
14
16
18
19
21
5
6
8
10
10.1%
2
9.1%
1
9.3%
1
9.5%
1
12
5
5
5
5
5
5
5
5
5
2
2
3
3
3
Capex (-)
Tax (-)
9.8% 10.2% 10.5% 10.8% 11.0% 11.2%
1
1
1
1
1
1
0
1
1
1
1
FCF to the Firm
WACC
-9
7.7%
-1
7.9%
1
8.3%
2
8.9%
4
9.5%
Discount Factor
1.00
1.08
1.17
1.27
1.39
1.53
1.69
1.86
2.07
2.30
-9
-1
1
2
3
4
4
5
5
5
DCF
Sum of DCF
Terminal Grow th
19
3.0%
Term inal value
66
EV
86
Net Debt (Cash) 2013
Target Equity Value
24
62
Source: Company, Is Investment
12
6
7
9
10
12
9.8% 10.2% 10.6% 10.9% 11.1%
Global Investment Holdings
Sensitivity Analysis
We ran different scenario analysis based on the key drivers. Our valuation is most sensitive to
volume growth in transportation segment and price-cost spread. The volume growth depends on
number of natural gas vehicle addition to the portfolio and annual per vehicle consumption.
Therefore, we run different scenario analysis to see the impacts of these variables in our valuation
for Naturelgaz. We pencil in 450 NGV addition per year to the car park with 35k/cbm per vehicle
consumption assumption to derive US$62mn value for Naturelgaz in our base case scenario.
Figure 6: NGV addition per year / Annual per vehicle consumption (m3)
20,000
30,000
35,000
40,000
50,000
250
350
10
17
26
38
34
48
41
58
57
78
450
24
49
62
74
99
550
31
61
76
91
121
650
39
74
91
108
143
6188.5%
Source: Company, Is Investment
Secondly, we run a sensitivity analysis to show the impact of number of NGV addition and pricecost spread in transportation market. We assume the price-cost spread to be US$0.17/cbm for
transportation sales vs. the management„s forecast of US$19/cbm. For annual per vehicle
consumption, we anticipate 35k/cbm while the management expects over 50k/cbm consumption in
medium term.
Figure 7: Annual per vehicle consumption (m3) / Price-cost spread (US$/m3)
0.15
0.16
0.17
0.18
0.19
20,000
30,000
14
35
19
42
24
49
29
56
33
63
35,000
46
54
62
70
78
40,000
56
65
74
83
93
50,000
76
88
99
110
122
6188.5%
Source: Company, Is Investment
Our last analysis is to show the sensitivity of our model for NGV addition per annum and price-cost
spread in transportation segment.
Figure 8: NGV addition per year / Price-cost spread (US$/m3)
0.15
0.16
0.17
0.18
0.19
250
350
23
34
28
41
34
48
39
54
44
61
450
46
54
62
70
78
550
57
67
76
86
95
650
69
80
91
102
112
6188.5%
Source: Company, Is Investment
Valuation of Sirnak TPP (not included into our valuation)
Financing is expected to be completed in 2H14. The Group holds a 49-year power generation
license for the asphaltite-fired thermal power plant with an initial installed capacity of 270MW. The
construction is planned to start in 2014 and to be completed in 3 years. We expect the plant to be
fully operational in 2018. The total investment is around US$350mn. The project is estimated to be
financed via 65/35% debt to equity combination, therefore given its expected 30% share in the
project, and US$30mn supplier credit, Global Investment Holdings needs to raise ca.US$30mn as
equity. The plant will be using the coal, which is sourced by another subsidiary of the Holding,
Gelis Mining. The current extraction cost of the asphaltite is around US$32-34. The Group will also
benefit from exemptions in custom duty and VAT, tax reductions (of 90% in corporate and income
tax) and support in interest, insurance premium and withholding taxes. We conservatively calculate
the NPV of the incentives at US$45mn.
13
Global Investment Holdings
Sirnak TPP may create additional upside potential of 30%. The project is not included in our
valuation due the lack of financing. Yet, we run a DCF analysis and value the project at
US$185mn, in which Global is expected to have 30% stake. We conservatively calculate 12% IRR
and our target value for the project corresponds to 5.3x 2018E EV/EBITDA multiple. If we had
included the project into our valuation our TP would have been TL2.1 per share, offering additional
30% upside potential to the current price.
Figure 9: KPIs for Sirnak TPP Project
Key Assum ptions
2018
2019
2020
2021
2022
2023
2024
2025
2026
270
270
270
270
270
270
270
270
270
270
CUR
Total Sales Volume (mn KWh)
78%
1,574
78%
1,574
78%
1,574
78%
1,574
78%
1,574
78%
1,574
78%
1,574
78%
1,574
78%
1,574
78%
1,574
Coal Cost (US$/ton)
34.00
34.00
34.00
34.00
34.00
34.00
34.00
34.00
34.00
34.00
Coal Consumption (US$/KWh)
0.020
0.020
0.020
0.020
0.020
0.020
0.020
0.020
0.020
0.020
Other costs (US$/KWh)
0.018
0.018
0.018
0.018
0.018
0.018
0.018
0.018
0.018
0.018
DUY electricity price (US$cent/KWh)
8.58
8.58
8.58
8.58
8.58
8.58
8.58
8.58
8.58
8.58
Average electricity price (US$cent/KWh)
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
Installed Capacity (MW)
2027
Source: Company, Is Investment
Will have 30% stake in the project. Our revenue expectation stands roughly at US$142mn with
an EBITDA margin of 52%. We estimate the participated EBITDA contribution to Global as
ca.US$22mn as the Holding is expected to hold 30% stake in the project.
Figure 10: Sirnak TPP DCF Valuation (US$ mn)
2015
2016
2017
Revenue
EBITDA
EBITDA Margin
Depreciation
∆ NWC (-)
Capex (-)
100
150
100
Tax (-)
Cash Savings from Investment Incentive
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
142
142
142
142
142
142
142
142
142
142
73
73
73
73
73
73
73
73
73
73
52%
52%
52%
52%
52%
52%
52%
52%
52%
52%
13
14
14
15
15
15
15
15
15
15
3
0
0
0
0
0
0
0
0
0
8
8
8
8
8
8
8
8
8
8
12
12
12
12
12
12
12
12
12
12
7
7
8
8
9
9
9
9
10
10
FCF to the Firm
-100
-150
-100
57
61
61
62
62
63
63
63
63
63
WACC
8.0%
8.0%
8.0%
8.2%
8.5%
8.8%
9.2%
1.08
1.17
1.26
1.36
1.48
1.61
1.76
1.93
2.13
2.35
2.59
2.85
3.15
-93
-129
-79
42
41
38
35
32
30
27
24
22
20
Discount Factor
DCF
EV
9.7% 10.3% 10.3% 10.3% 10.3% 10.3%
11
Terminal Grow th
0.5%
Term inal Value
174
Target Equity Value
185
IRR
12.1%
EV/ 2018 EBITDA
5.3x
Source: Company, Is Investment
Sensitivity Analysis
Our valuation for Sirnak TPP is most sensitive to average electricity price and coal extraction cost.
To depict the valuation impact of these two variables, we run a sensitivity analysis. In our base
case scenario, we use average electricity price of US$0.09, slightly higher than our DUY market
electricity price estimate of US$0.086 as we believe certain amount of the sales can realized with
bilateral contracts at a higher price. We pencil in US$34/ton coal cost for our forecast horizon.
Figure 11: Coal coast (US$/ton) / Average electricity price (US$/kWh)
30
32
34
36
40
0.08
99
83
67
51
19
0.085
158
142
126
110
78
Source: Company, Is Investment
14
0.09
217
201
185
169
137
0.095
276
260
244
228
196
0.1
336
319
303
287
255
Global Investment Holdings
Financial Highlights
Revenues
We expect Global Investment Holdings to post US$156mn of net revenues in 2014, while expect
the revenues to grow at a CAGR of 18% until 2016. The revenues grew at a CAGR of 8% since
2010 in proforma basis. Yet, the revenues in core businesses; port and CNG, grew at a CAGR of
17% in the aggregate in the same period. We expect the core businesses to grow at a CAGR of
22% until 2016; the port business to grow at a 10% CAGR, while the natural gas business to grow
at a 48% CAGR. You may see the details in related sub segments. (Note that the recent port
acquisitions of Port of Bar and Barcelona Cruise Port are not included in the numbers. The past
years‟ figures are in proforma basis and excludes the one-offs).
Figure 12: Revenues (US$ mn)
250
208
200
182
155
150
118
100
101
102
2010
2011
127
50
0
2012
Port Akdeniz
Ege Port
2013
Bodrum
2014E
2015E
Naturelgaz
2016E
Others
Source: Company, Is Investment
The major source of the revenues is port operations with 58% share, while CNG business captures
22% share in 2013. Among the ports, Antalya Port is the major contributor to the topline with 44%
share, while Ege and Bodrum Cruise Ports capture 13% and 2% shares, respectively.
Operationally benefits from weak TL. It should be noted that around 90% of port revenues,
corresponding to 54% of total consolidated revenues, is in US$. Therefore, the depreciation in TL
boost company‟s revenues and operating income.
Figure 13: Revenue Breakdown of Subsidiaries (2013)
Figure 14: Currency Breakdown of Revenues (2013)
20%
44%
46%
54%
22%
2%
Port Akdeniz
13%
Ege Port
Bodrum
Naturelgaz
US$
Others
Source: Company, Is Investment
15
TL
Global Investment Holdings
Financial Highlights
EBITDA
We forecast Global Investment Holdings to post US$47mn of EBITDA with a margin of 31% in
2014. We expect EBITDA to grow at a CAGR of 12% until 2016. The EBITDA grew at a CAGR of
14% since 2010 in proforma basis. The major contributor to the growth will be port business. The
port business is expected to reported 12% CAGR until 2016, while the natural gas business to post
60% CAGR in the same period, yet due to the its lower base, the impact to the growth in
consolidated EBITDA will be limited.
The margin of port business is expected to increase to 72% in medium term from 67% in 2013
thanks to the operational leverage and currency mismatch in revenues and expenses. Our EBITDA
margin estimates for CNG business is around 10% in average during the period (the past years‟
figures are in proforma basis and excludes one-offs).
Figure 15: EBITDA (US$) and Margin
100
50%
80
45%
40%
60
35%
40
20
27%
29%
31%
29%
31%
32%
30%
25%
24%
0
20%
-20
Port Akdeniz
-40
2010
Naturelgaz
2011
2012
Ege Port
Others
2013
15%
Bodrum
2014E
Margin
2015E
10%
2016E
Source: Company, Is Investment
The major source of the operational profit is port operations, while CNG business has limited
contribution. Other segments and solo Opex of the Holding have a dilutive impact on EBITDA.
Among the ports, Antalya Port is the major contributor to the operational profit.
Figure 16: EBITDA Breakdown of Subsidiaries (2013)
-54%
Port Akdeniz
107%
5%
5%
Ege Port
Bodrum
Naturelgaz
36%
Others
Source: Company, Is Investment
16
Global Investment Holdings
Debt Structure
Increased Debt. Global Investment Holdings‟ consolidated debt increased to US$398mn as of
YE2013 from US$127mn as of YE2012. The debt proceeds were mainly used i) to fund US$50m
payment in settlement of a disputed liability related to the Baskentgaz bid, ii) for acquisition of
additional shares in Naturelgaz and acquisitions of Port of Bar, Barcelona Cruise Port, and Straton
Maden, iii) for the repurchase of a 22% stake in the Global Ports Holding for US$92m from VEI
Capital, iv) to finance the share buyback worth ca.TL30mn. The net debt position on the other
hand (adjusted with the value of treasury stocks) stands at US$327mn as of YE2013.
Currency Breakdown of Debt. The 76% of the Holding‟s gross debt is Fx denominated; US$
denominated debt makes 69% of total, while € denominated debt makes a mere 8%. The
remaining 24% is mainly in TL. Therefore, the weakening of the TL versus these hard currencies
acts unfavorably to the Holding's indebtedness.
Figure 17: Currency Breakdown of Gross Debt (2013)
Figure 18: Segmental Breakdown of Gross Debt (2013)
8%
9%
3%
24%
51%
69%
US$ (TL equivalents)
TL
38%
Holding Standalone
€ (TL equivalents)
Ports
Energy
Real Estate
Source: Company, Is Investment
Gross Debt Breakdown of Subsidiaries. The majority of the debt is under solo holding at
US$188mn and port business at US$193mn. The debt in Energy and Real Estate segments stand
at US$35mn and US$10mn as of YE2013, respectively.
Debt Maturity Breakdown & EBITDA. The big portion of the Holding‟s debt is geared towards the
long-term, while short-term debt makes 30% of total debt as of YE2013. We expect the borrowing
maturities to shift further to the long-term going forward. Although the current cash generation of
the Holding is not sufficient to cover the short term debt, we believe the Holding will not struggle to
roll over the existing debt.
Figure 19: Maturity Breakdown of Current Debt and EBITDA (TL mn)
2014
2015
2016
2017
+2018
Total
313
856
Maturity of debt
124
90
216
113
EBITDA
103
127
151
181
Source: Company, Is Investment
Currency Risk Sensitivity. Holding‟s currency risk is related to the changes in the value of the TL
relative to the € and the US$. According to the audit report, Global has a short FX position of
TL489mn as of YE2013, mainly stemming from its FX denominated debt.
According to the audit report, the Holding‟s net income would decline by TL47mn in 2013 in the
face of a 10% depreciation of the Turkish Lira against hard currencies.
Operationally benefits from weak TL. It should be noted that the depreciation in TL boost the
Company‟s revenues and operating income, since more than half of the revenues in US$, in a way
mitigating the negative impact of financial expense due to the FX losses.
17
Global Investment Holdings
Figure 20: Consolidated Financials (TL mn)
Incom e Statem ent (TL m n)
2012A*
2013A*
2014E
Revenues
166
247
337
EBITDA
44
61
103
Depreciation & Amortisation
44
60
62
EBIT
(0)
1
41
Other income (expense), net
164
113
0
Financial expenses, net
(59)
(99)
(54)
Minority Interests
9
(3)
0
Income before tax
105
30
(13)
Taxation on Income
12
(3)
3
Net income
108
29
(10)
Cash Flow Statem ent (TL m n)
Net Income
108
29
(10)
Depreciation & Amortisation
44
60
62
Indemnity Provisions
1
3
3
Change in Working Capital
24
(1)
(7)
Cash Flow from Operations
177
91
47
Capital Expenditure
156
548
26
Free Cash Flow
21
(457)
21
Rights Issue
0
0
0
Dividends Paid
0
13
15
Other Cash Inflow (Outflow )
88
(55)
102
Change in net cash
109
(525)
109
Net Cash
(274)
(798)
(690)
Balance Sheet (TL m n)
Tangible Fixed Assets
317
541
546
Other Long Term Assets
114
137
142
Intangibles
554
817
777
Goodw ill
41
44
43
Long-term financial assets
49
52
56
Inventories
26
28
36
Trade receivables
13
37
47
Cash & equivalents
59
97
90
Other current assets
161
224
116
Total assets
1,334
1,978
1,852
Long-term debt
176
608
590
Other long-term liabilities
115
220
238
Short-term debt
156
288
189
Trade payables
4
29
39
Total Debt
332
895
779
Other short-term liabilities
145
69
113
Total liabilities
597
1,252
1,170
Minority Interest
220
211
211
Total equity
517
726
681
Paid-in capital
225
225
204
Total liabilities & equity
1,334
1,978
1,852
Ratios
ROE (%)
22.8
4.7
-1.5
ROIC (%)
0.0
0.0
2.2
Invested Capital
1,020
1,531
1,508
Net debt/EBITDA (x)
6.2
13.2
6.7
Net debt/Equity (%)
52.9
109.9
101.2
Capex/Sales (%)
93.65
221.50
7.76
Capex/Depreciation (x)
3.5
9.1
0.4
EBITDA Margin
26.4
24.5
30.6
EBIT Margin
-0.1
0.3
12.3
Net Margin
65.1
11.8
-3.0
Valuation Metrics
EV/Sales (x)
3.3x
2.2x
3.2x
EV/EBITDA (x)
12.5x
8.8x
10.3x
EV/IC (x)
0.5x
0.4x
0.7x
P/E (x)
2.5x
11.3x
n.a
FCF yield (%)
8%
-139%
8%
Dividend yield (%)
0%
4%
6%
*based on average Mcap during the year
Sirnak TPP and new acquisitions of Port of Barcelona and Bar are not included
Source: Company, IS Investment
18
2015E
406
127
64
63
0
(60)
2
3
(1)
0
2016E
480
151
59
92
0
(61)
4
32
(6)
21
2017E
556
181
67
114
0
(59)
6
55
(11)
38
0
64
3
(9)
59
31
28
0
20
15
23
(666)
21
59
4
(9)
75
28
48
0
20
11
39
(627)
38
67
4
(8)
100
37
63
0
25
18
56
(572)
552
146
738
42
60
42
51
101
118
1,850
580
254
188
41
768
118
1,181
213
669
204
1,850
557
151
701
41
63
48
55
93
120
1,829
540
269
180
43
720
123
1,155
217
674
204
1,829
563
155
666
40
67
55
58
115
122
1,840
520
284
166
44
686
128
1,142
223
698
204
1,840
0.0
3.3
1,487
5.3
99.6
7.52
0.5
31.2
15.4
0.1
3.2
5.0
1,469
4.1
93.1
5.79
0.5
31.5
19.2
4.4
5.5
6.2
1,452
3.2
81.9
6.71
0.6
32.5
20.5
6.8
2.6x
8.4x
0.7x
n.a
11%
8%
2.2x
7.0x
0.7x
12.5x
18%
8%
1.9x
5.9x
0.7x
7.0x
24%
9%
Global Investment Holdings
Company Overview
Global Investment Holdings (GIH) dates back to the 1990‟s with a brokerage firm, namely Global
Securities. Later, the Company was transformed thorough a reorganizational change and Global
Investment Holdings established in 2004, shifting from investment banking & brokerage to the real
sector economy.
Active portfolio management. The unique difference of the Group from other listed holdings in
Turkey is that the Group is more flexible to enter and exit sectors as opportunities arise or the
market conditions change. Thus, the Holding‟s business investment strategy functions similarly to
a private equity firm as the Group defines itself. Currently, the Group holds diversified portfolio of
investments in fast growing sectors and offers an attractive growth potentials.
Port business is the core business comprising 82% of the portfolio. Currently, GIH has
operations in four primary business; port infrastructure, energy, real estate and financial services.
Port Infrastructure mainly consists of cruise and commercial seaport operations in Mediterranean
and Aegean region. Energy includes compressed natural gas sales & distribution, integrated coalfired thermal power plant, renewable power generation projects and mining activities. Real estate
includes planned and completed commercial mix use development projects and finance consists of
non-banking financial services, including brokerage, research, financial advisory and asset
management. The core business is port operations comprising 82% of total participation value. On
the other hand, when the Sirnak power plant become operational, the share of energy will increase
to 25% levels from current 14%.
Shareholder structure. The Holding is listed in Borsa Istanbul under the ticker symbol GLYHO
since January 2005. The major shareholder of the Holding is Mehmet Kutman, a founding
shareholder, the chairman, and the CEO, with his 25.8% direct stakes, while Erol Goker has 0.2%
stake. The Group companies, mainly its fully subsidiary GES Energy, and the Holding itself holds
29.3% stake. The remaining 44.7% stake comprises of free float as of Jan‟14. Note that the
management decided to cancel the 9.24% of the treasury stock, which has been purchased by the
Holding itself via share buyback. Following the cancelation, Mehmet Kutman‟s direct share and the
free float will increase to 28.5% and 49.2%, respectively, while the treasury stocks will decrease to
22.1%.
Figure 21: Overview of the Company
Source: Company
19
Global Investment Holdings
Business Segments
1) Global Ports Holding (82% of participation value)
Global Ports Holding is a unique “port conglomerate” with a strong excellence in commercial
and cruise ports operations throughout the Turkey and the Mediterranean region. The Group
possesses two leading cruise ports (Ege Ports and Bodrum) and a mix used commercial and
cruise port (Port Akdeniz) under its umbrella and provides strategic accesses to important trading
and touristic hinterlands of the country. Port Akdeniz is a fast growing mixed used commercial and
cruise port in Antalya on Turkey‟s Mediterranean coasts generating ca.75% of GPH‟s revenue in
2013. Ege Ports is the largest cruise port in the region providing access to unique world heritage
sites and Bodrum Cruise Port is a relatively small size operation capturing remaining 22% and %3
shares, respectively. At the end of 2013, the Group also add Port of Bar (Montenegro) and Port of
Barcelona, Malaga and Singapore cruise ports into its portfolio.
Increased its share to 100%. In July 2011, VEI Capital SpA, an investment company of the Italian
Group Palladio Fnanziara had acquired 22.1% of Global Ports Holding, valuing the Company at
US$415mn. Yet, the Group acquired back the stake in February 2013 at a value of US$433mn.
Aims to become an international port operator. The Group has recently acquired Port of Bar,
Port of Barcelona and has been selected as first prefer bidder for Lisbon Cruise Port. The Group
has been pre-qualified for the tender of Greek marina and tourist ports as well. Global Ports
Holding has completed the acquisition of 62% stake in listed Port of Bar, Montenegro for a total
consideration of €8.1mn back in Nov‟13. The Group also acquired 43% stake (half of which owned
by GPH) in Creuers in a partnership with leading cruise operator Royal Caribbean Cruises back in
Nov-Dec 2013. Creuers operates Europe's largest cruise port, the Port of Barcelona with a
passenger capacity of 1.8mn, and is the majority shareholder of the Malaga Cruise Port (17%
owned by GPH) and the minority shareholder of the Singapore Cruise Port (9% owned by GPH).
Figure 22: Historical Overview of the Company
Global Ports Holding is
established as a 100%
subsidiary of Global Investment Holdings
April 2004
GPH acquired operating rights
of Port Akdeniz (40%) via a
joint venture between Celebi
Yatirim (40%) and Antmarin
(20%) October 2006
2004
2006
2005
Ege Ports of GIH is transferred to
Global Ports Holding
July 2005
Won the tender for Galata Port
(The tender was later cancelled)
September 2005
2007
GPH acquired 60%
shares of Bodrum Cruise
Port) at TL10mn
June 2008
2008
2010
Won the tender for the 30 year
operation rights of Izmir port
together with Hutchison Port
Holding, DB Infrastructure Holding and EIB-Limas. (The tender
was later cancelled).
May 2007
VEI Capital acquired
22.1% stake of GPH
valuing the Company
at US$ 414.7mn
July 2011
2011
2012
GPH purchased the remaining 60% stake of Port Akdeniz from Celebi and Antmarin
at a value of US$49mn.
July 2010
GPH acquired 62.1% of
Port of Bar and 43% of
Port of Barcelona
Nov-Dec 2013
2013
GPH acquired back the
22.1% stake of VEI capital at
a value of US$433mn.
February 2013
Source: Company
1.1) Port Akdeniz - Antalya
Antalya Port has enough capacity to accommodate future growth. Port Akdeniz is located in
the Southern part of Turkey, where export activities of cement, mining and agricultural products are
concentrated. The city of Antalya is also the capital of tourism in Turkey and one of the top ten
tourist destinations in the world.
Port Akdeniz is a multipurpose port providing commercial services like container handling, general
cargo and bulk cargo as well as the cruise and marina services. There is also a marina with a
capacity of 400 yachts under operations. Port Antalya has gross 500k TEU of container and 5mn
tons of conventional cargo capacity, which offers a significant upside potential based on the
realized container handling volume of 217k TEU and cargo volume of 1.7mn in tons in 2013.
20
Global Investment Holdings
Limited competition. Port Akdeniz is at least 350km distanced away from the nearest large size
port in the region; thereby, exposed to a limited competition. The closest ports to Port Akdeniz‟s
hinterland are Izmir, Mersin and Iskenderun Ports, and serve to different hinterlands.
Main sources of revenue. Commercial port operations make up 93% of revenues in 2013, while
cruise and rental revenues make the remaining 7%. Container revenues comprise 63% of total
revenues followed by general cargo, vessel handling and bulk cargo revenues having 14%, 11%
and 6% shares, respectively. The share of container revenues is increasing gradually due to
containerization trend and the decrease in general cargo and bulk cargo volumes in last few years.
Figure 23: Revenue Breakdown 2013
Figure 24: Volume Breakdown 2013
Container
6%
4%
3%
General cargo
13%
Container
Vessel handling
11%
23%
Bulk cargo
Bulk cargo
65%
14%
63%
General cargo
Cruise
Rental and similar
income
Other income
Source: Company
Source: Company
Mining legislation in 2010 fueled the growth. Port Akdeniz container handling volume continues
its strong growth this year reaching to 217k in 2013, corresponding to 17% YoY growth over the
last years‟ strong growth of 10%. The CAGR of container handling between 2007 - 2013 in Port
Akdeniz was 23%, substantially exceeding the total CAGR of Turkish market (10%) for the same
period. Main factors behind the boost in container volumes at the Port may be cited as: i)
increasing containerization trend in export markets, ii) surge in export volumes of metals, marble
and granites after the new mining legislation in 2010, iii) the new container shipping lines like MSC,
ZIM and CMA-CGM shifting their operations to the Port, due to the lack of modernization and
congestion at other ports.
Figure 25: Port Akdeniz: Container Growth
250
217
186
200
169
Container Volume (TEU k)
150
126
63
2009
21
2013
2012
2011
2010
2003
Source: Company
2006
2002
68
28
18
2005
11
2004
2
8
2001
0
5
2000
50
63
2008
54
2007
100
Global Investment Holdings
General and bulk cargo segment shrinked in last three years. The turmoil in Middle East has
continued to take its tolls in regions‟ trading activities in 2013. Genel cargo and bulk cargo
segments have contracted by 16% and 43%, respectively in 2013. The decreases in volumes
reached 28% and 61%, respectively in last three years due to weaker cement export volume
resulted from Middle East turmoil after displaying respective CAGRs of 38% and 40% between
2007 and 2010, surpassing Turkish cargo market growth of %6 by far in the same period.
Figure 26: Port Akdeniz - Conventional Cargo Growth
1,800
General Cargo (tons k)
1,600
Bulk Cargo (tons k)
1,400
1,244
1,200
1,165
1,058
1,023
934
1,000
1,575
1,324
1,244
1,117 1,076 1,112
1,238
731
400
617
589
572
552
600
225
288
276
328
292
287
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
115
2000
0
1,545
1,002
914
800
200
1,604
Source: Company
Dependence on a single product, and a single destination is a major risk factor. The
Company‟s container handling business is hugely dependent on marble exports. The total marble
handling volume dominates the total container volume with a 75% share. Moreover, the export of
marble is carried out mainly to China. The share of China in total trading volume is around 72%.
Thus, the slowdown in Chinese economy may seriously affect the marble exports which lead to a
serious reduction in container revenue, which captures 63% share in total Port Akdeniz‟s
revenues.
Despite its risky aspect, the dominant share of marble in total export volume was also the main
reason behind the eye-catching growth of container volume in last three years since Turkey has
the largest marble reserves in the world, mostly concentrated in the southern part of the country
and exports of marble and granite have grown significantly during the past years.
The same risk also exists in conventional cargo business. Dominating 67% of total
conventional cargo, cement and clinker product group, is crucial in future revenue growth of cargo
segment. That was the main reason behind the decrease in the volume of bulk and general cargo
segments in last three years since cement exports to Middle East was down significantly due to the
turmoil. At the other end of the spectrum, Turkey is the 3rd largest and fast growing cement
exporter globally, still supporting the long term growth in conventional cargo business.
Figure 27: Container Product Breakdown (2013)
Figure 28: Conventional Product Breakdown (2013)
9%
Bulk Cement &
Clinker
4%
17%
4%
Marble
Coal
4%
4%
Aluminum
Hydroxide
Paper
4%
Fertilizer
75%
Particleboard
12%
Others
67%
Fertilizer
Others
Source: Company
Source: Company
22
Global Investment Holdings
Total freight handling in Turkish ports has been increasing gradually between 2003 - 2013.
The total trading volume of Turkey has grown at a CAGR of 13% since 2003, while the trading
volume in the hinterland cities of Port Akdeniz has grown at a CAGR of 18% in the same period.
On the back of accelerating foreign trade growth, the total freight handling in Turkish ports has
steadily risen by a CAGR of 7% and reached to 385mn tons in 2013. The region‟s freight handling
volume outpaced the Turkey‟s volume at a CAGR of 9% in the same period.
Figure 29: Total Handling in Turkish Ports (tons mn)
400
Transit (CAGR:17%)
350
Export (CA GR: 7%)
R: 7%
Domestic ( CA GR: 6%)
CAG
Total
Imp ort (CAGR: 6 %)
300
64
28
250
200
150
5
30
6
28
55
54
103
121
126
2003
2004
2005
11
29
36
11
31
39
58
139
153
152
140
2006
2007
2008
2009
47
54
91
90
192
188
2012
2013
82
84
73
54
44
38
38
69
63
74
46
100
50
51
57
64
163
174
2010
2011
0
Source: Undersecretariat for Maritime Affairs
Region’ exports, mainly driven by mining and cement sectors, are on the rise. Following the
new mining legislation, easing the mining license distribution in 2010, there has been a visible
increase in mining activities in region. This legislation also has affected Port Antalya‟s trading
business positively since Antalya has rich marble and chrome reserves, mostly exported via
containers. Moreover, cement exports of the region is tremendously increasing on the back of
increasing demand from North Africa and Middle East although the turmoil in the Middle East has
negatively affected the volumes in past few years. We believe the growth of cement exports should
positively impact the conventional cargo business in future. Accordingly, the export performance of
its hinterland cities of Port Akdeniz namely, Antalya, Konya, Denizli, Afyon, Burdur, and Isparta,
have been growing at a CAGR of 17% in last ten years, slightly higher than the average growth
rate of exports in Turkey (16%) in the same period. The Group should benefit from growing export
activities since exported products makes 80% of total handling volume of the Group.
The pace of containerization in Port Akdeniz outpaces GDP growth. Total container handling
volume in Turkey has risen to 7.9mn TEU in 2013 from 2.5mn TEU in 2003 corresponding to a
CAGR of 12% and to 2.5x of GDP growth rate in the same period. The containerization rate of the
Port Akdeniz is even higher than Turkish ports. Port Akdeniz displayed a 38% CAGR in total
container handling volume since 2003 corresponding to ca.8x of GDP growth. Rich marble and
chrome reserves, whose trading volumes were fueled after the new mining legislation in 2010,
were the essential factors that made Port Akdeniz outperform its peers.
Figure 30: TEU Growth of Turkey, Antalya Port vs. Macro Indicators
800
GDP
700
Foreign Trade
600
TEU Volume (Turkey)
500
TEU Volume (Antalya)
400
300
200
100
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Undersecretariat for Maritime Affairs, Is Investment estimates of 3.7% is used for 2013E GDP growth
23
Global Investment Holdings
Under-penetrated container market offers strong growth opportunity for both Turkey and
Antalya. The containerization rate of Turkey in the sea transportation is still quite low compared to
the global averages. Total TEU per thousand population was around 103 in 2013 (80 in 2010) in
Turkey while the figure was around 190 in the Mediterranean Region in 2010. Besides, the
containerization rate in Antalya region has been higher than Turkey‟s average growing at an
average multiple of 2.8x over total container handling growth in Turkey in last ten years. Taking
into account that container handling business offers higher margins than the conventional cargo
business, we think that the positive trend of containerization in Turkish foreign trade will support
Port Akdeniz‟s profitability and bottom line in the near future.
Figure 31: Container growth rate and penetration (TEU / thousand people) of global markets 2000 - 2010
20% 19%
1000
18%
914
900
16%
700
8% 8% 8%
7% 7%
7%
8%
681
600
5% 5% 5%
4%
500
3%
463
400
304 299
300
237 235
200
0%
207 191 190
176 179
142 142 136 136 133 125
110 101
80 75 66 65
48
26 23
0
Belgium
Netherlands
Cyprus
Finland
Spain
Ireland
Malta
Estonia
Germany
Mediterranean
Average
Slovenia
United Kingdom
Sweden
Denmark
Portugal
Italy
Norway
Lithuania
Latvia
Turkey
Greece
France
Romania
Croatia
Bulgaria
Poland
No rth Eur ope
No rth America
We st E urope
Oceania
South Europ e
Latin A me rica
Ca rib/C.America
Source: Drewry, UMA
South East Asia
Wo rld
S.A me rica
Far Ea st
South Asi a
Turkey targets to attain an export level of US$500bn in 2023; at the centenary of foundation of
Turkish Republic. Assuming a similar increase in import level, Turkey‟s total trading volume may
reach over US$1,000bn at that year. This huge growth potential has triggered new investments
ments in the sector. Given ca.55% of the total foreign trade is handled through sea transportation,
the increase in foreign trading activities will positively affect the sector in upcoming years.
Port Akdeniz’s cruise and marine activities. GPH primarily aims to convert Port Akdeniz to a
“home-port” for cruises, rather than a “port of call”. The ports location coupled with strong city
infrastructure and broad range of facilities and proximity to historical and touristic places makes it
an ideal home port for the cruise passengers. Antalya is one of the top ten most visited cities in the
world. In line with the opportunities offered by the city, one of the most important cruise lines in the
world, new Cruise Lines, has gradually made Port Akdeniz a home-port while discussions and
negotiations with other cruise lines are ongoing. The effect of the new cruise strategy has already
been reflected to passenger numbers reaching 168k in 2013, a significant growth over 2009 figure
of 14k.
Figure 32: Port Akdeniz - Development of Cruise Revenues
180
160
Cruise Ships
140
168
160
Cruise Passengers (k)
139
140
133
120
121
111
100
86
80
86
42
36
40
37
31
16
20
34
15
70
60
43
25
14
2007
40
77
61
54
51
2006
60
25
14
Source: Company
24
2013
2012
2009
2008
2005
2004
2003
2002
2000
0
2001
Afr ica
Turkey
Mid dle East
Easter n E urope
100
2011
12%
800
11% 11%
2010
12% 12%
Global Investment Holdings
1.2) Ege Ports - Kuşadası
Ege Ports-Kuşadası is the most frequently visited cruise port in Turkey. Ege port is a market
leader in cruise calls with 29.7% shares, while holds second position in terms of cruise passengers
with 27.1% share with over half a million visitors in 2012. The port is located nearby Ephesus, the
Temple of Artemis, one of the seven ancient wonders of the world, attracting 1.7mn visitors per
year as well as the House of the Virgin Mary and the Basilica of St. John, one of the most visited
sites in the vicinity of Ephesus. Ege Ports is located on a 23.000m2 area with 2,000 ship capacity
per year.
Concession terms. A joint venture formed by Global Investment Holding and RCCL signed a
Transfer of Operating Rights Agreement (TOORA) for Kuşadası Port on July 2003 to operate the
port for a term of 30 years in return for a payment of US$24.3 million. The concession agreement
of the port will end in 2033.
Ownership structure. Global Ports Holding holds 72.5% stake at the port, while RCCL, a leading
cruise line in the world, holds the remaining 27.5% of the shares.
The competition is limited. Ege Ports directly competes with Izmir Port, as well as with other
cruise ports like Marmaris port and the Eastern Mediterranean cruise ports. However, the proximity
of Ege Ports to important historical sites, including Ephesus and the House of the Virgin Mary,
provides a strong competitive advantage and limits the competition risk.
Main sources of revenue. Ege Ports offers a variety of port services and also generates rental
income from yachts, the shops that are operating in the Scala Nuova shopping mall and the offices
in the terminal building. Duty free revenues from Setur and landing fees per passenger from the
cruises are additional sources of revenue for the Port. Ege Ports is free to set its own tariff at its
discretion. As of 2013, 75% of the revenues came from the cruise segment, whereas rental
income, ferry revenues and Setur duty free revenues held 16%, 4% and 6% shares, respectively.
GPH has renewed the five year revenue-sharing contract, expiring in September 2015, for the duty
-free stores of Setur, one of the largest duty-free operators in Turkey and a subsidiary of Koc
Holding (30% of duty-free revenues belongs to the Port).
Figure 33: Ege Port - Revenue Breakdown (2013)
4%
6%
Cruise Revenue
16%
Rental Income
Ferry Revenue
Setur Duty Free
Revenues
75%
Source: Company
25
Global Investment Holdings
A diversified portfolio of cruise lines. Ege Ports serves 35-40 different cruise lines in a season.
The main customers of the port are Greek Cruise Lines, Louis Cruise line and RCCL (the world's
second largest cruise ship operator, holding a minority share at the port). Other than these lines,
boutique calls organized by different small and middle sized international cruise operators also
support the traffic at the port.
Market leader in cruise calls. Ege port is a market leader in cruise calls with 29.7% shares, while
holds second position in terms of cruise passengers with 27.1% share with over half a million
visitors each year. Yet, the number of cruise passengers and calls have been decreasing since
2011 mainly due to the current economic turmoil in Greece as Greek Cruise lines makes 25% of
passenger traffic. The recovery in 2013 is only at 3% in number of cruise passengers. However,
the new bookings are made by larger vessels than the previous year‟s implying higher GRT/call
figure, which has a positive impact on earnings through both increasing passenger fees and
pilotage & towage revenues acquired by the vessels.
Figure 34: Ege Ports: Cruise Calls and Passengers
800
700
679
Cruise Passengers (k)
668
Cruise Calls
663
646
613
616
600
499
500
400
565
536
393
488
331
312
487
369
347
313
215
2003
2004
315
491
451
295
300
200
578
568
558
467
444
583
2013
2012
2011
2010
2009
2008
2007
2006
2005
2002
2001
0
2000
100
Source: Company
The effect of decrease in ferry calls is limited. There is a gradual deterioration in number of
ferry passengers and calls in recent years. Yet, it has limited impact on the revenues as ferry
revenues comprises only 4% of total revenues of Ege Port.
Figure 35: Ege Ports: Ferry Calls and Passengers
100
90
80 677
704
738
717
711
698
70
685
714
680
500
74
40
69
68
66
61
60
484
484
59
62
68
64
63
56
20
62
400
300
200
100
Source: Company
26
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
10
0
800
600
76
50
900
700
607
675
60
30
Ferry Passengers (k)
Ferry Calls
782
0
Global Investment Holdings
1.3) Bodrum Cruise Port
Bodrum, located on the Aegean coast of Turkey, is one of the most popular premium holiday
resorts in Turkey for international visitors. Build in 2006, Bodrum port is one of the newest cruise
terminals in Turkey and is positioned to service cruise and ferry traffic around the Bodrum
peninsula and between Turkey and Greece. The operating rights of the port was awarded within
the BOT scheme. The port is positioned to harbor two big cruise ships concurrently with 4 ferries. It
has a capability to host military ships as well. Its terminal building offers a duty-free shop, coffee &
restaurants, travel agencies and other shopping stores. The main customers of the port are
currently RCCL and Thomson Cruises.
In December 2007, Global Ports Holding acquired 60% of Bodrum Cruise Port. The remaining
shares are belong to Yuksel Çaglar and Setur with their respective shares of 30% and 10%.
Competition with municipality squeezes the margins. Bodrum‟s municipal pier, which currently
receives ferry traffic between Bodrum and the Greek Islands is the closest competitor of Bodrum
Port. For long time the Company did not charge ferry customers to compete with municipal port,
aiming to compensate its revenue losses through the indirect revenues collected from Setur Duty
Free stores. However, they both re-introduced passenger fees starting from 2012, albeit at a
limited degree. Other than the Bodrum region, Bodrum Cruise Port directly competes with the
Group‟s Ege Ports-Kuşadası. Additionally, it competes with Izmir, Marmaris and various other
Eastern Mediterranean cruise ports.
Main sources of revenue. Bodrum Cruise Port‟s net sales are mainly consist of cruise revenues
with a 41% share in 2013. Setur shares 30% of its total gross revenues with Bodrum Cruise Port,
making up 24% of total revenues. Yacht and ferry revenues make up 16% and 9%, respectively.
Rental revenues makes 10% of total revenues.
Figure 36: Revenue Breakdown (2013)
10%
Cruise
9%
Setur Duty Free
41%
16%
Yacht
Ferry
24%
Rental
Source: Company
27
Global Investment Holdings
2014 will be another tough year. We saw a significant decrease in number of cruise passengers
and ferry calls in 2013 and expect 2014 to be no better than 2013 due to the low demand from
Europe. Yet, the number of passenger and calls is expected to pick up again starting from 2015.
60 700
136
80
101
66
60
92
85
46
38
40
53
32
29
20
0
2013
2012
2011
2010
2009
0
2008
0
50 600
500
40
400
30
300
20
200
10 100
641
684
495
363
88
88
2013
140
120
100
Ferry
Passengers (k)
Ferry Calls
2012
140
70 800
Cruise
Passengers (k)
Cruise calls
73
68
12
23
3
5
2011
169
2009
160
2008
180
Figure 38: Ferry Calls and Passengers
2010
Figure 37: Cruise Calls and Passengers
100
90
80
70
60
50
40
30
20
10
0
Source: Company
Source: Company
The progress of the Turkish cruise industry outpaced the European countries. Total number
of cruise passengers reached to 2.1mn in 2012, implying an annual average growth rate of 16% in
since 2005 thanks to 6% growth in international tourist arrivals and increasing share of cruisers.
The share of cruise passengers in total international passenger arrivals reached 6.7% in 2012 from
3.7% in 2005.
To demonstrate the strength of the positive trend in the Turkish market, we compared CAGR of
Turkish Cruise Market with the growth figures attained at European countries. Accordingly, Turkish
Cruise market has grown by an average 16% between 2005-2012, while this figure was 10% in EU
countries over the same period. Moreover, cruise market of Turkey is much less saturated
compared to the EU countries, offering a significant room for future growth.
Figure 39: Cruise Passenger Volume of Turkey
2.5
7.5%
Cruise Passengers lhs (mn)
6%
R: 1
Cruise Share in Int. Tourist Arrivals rhs (%)
7.0%
CAG
2.0
6.5%
6.0%
1.5
5.5%
1.7
1.0
2.2
1.4
1.6
2.1
1.8
4.5%
4.0%
1.0
0.5
5.0%
3.5%
0.8
0.0
3.0%
2005
2006
2007
Source: Ministry of Culture and Tourism
2008
28
2009
2010
2011
2012
Global Investment Holdings
2) Global Energy
Global Investment Holdings’ energy division operates through Global Energy. Global Energy
currently has investments in CNG distribution, thermal power generation and mining, and is
currently developing projects in solar power generation and energy efficiency projects for SMEs.
The Holding exited the distribution arm back in July 2012 selling its 50% stake in Energy
Investment Holding (EIH) to STFA for a total value of US$75mn.
The Holding‟s primary strategic focus in energy is Naturelgaz and Galata Energy (Sirnak thermal
power plant project), in which the Holding holds a 49-year generation license. However, the
Company pursues growth with a well-balanced and diversified power generation portfolio that also
includes high growth renewable energy sources in Turkey.
2.1) Naturelgaz
50% overall market share in CNG distribution market. Naturelgaz operates in sale and
distribution of bulk compressed natural gas (CNG) since 2004 providing bulk CNG to industrial
facilities and commercial consumers such as hotels and shopping malls. Naturelgaz is the market
leader with a 70% market share in bulk segment and 50% overall market share. Besides pursuing
growth in its core business of sales and distribution of CNG, Naturelgaz aims to further expand its
existing core business into the transportation area.
GIH holds 80% of Naturelgaz. Energy Investment Holding (EIH), the 50-50 JV of GIH and STFA,
acquired 50% stake in Naturelgaz for ca.TL17mn back in May 2011. The shares corresponding to
25% of Naturelgaz that GIH indirectly owns through EIH have been transferred to Global Energy
following the divesture of EIH. Afterwards, the Group increased its stake to 80% by i) acquiring
30% stake from the founders of the Company for US$12mn back in Dec‟12, and ii) acquiring 25%
of Naturelgaz from STFA for US$10mn back in Jan‟13. Each transaction valued the Company at
US$40mn. The remaining 20% is owned by Aksel Goldenberg, the CEO of the Company.
The major growth expected to come from CNG consumption in transportation sector.
Naturelgaz intends to expand into transportation sector. The Company aims to supply required
technology to convert public busses, garbage trucks and intercity heavy and mid-size commercial
vehicles with diesel engines into CNG and to supply CNG establishing a fueling station network
that will cover central and western part of Turkey. CNG consumption in transportation is a very
new concept in Turkey and Naturelgaz is aiming to benefit from this immature market. We expect
this market to grow significantly as it offers approximately 35% and 45% fuel savings compared to
diesel and LPG. Besides the efficiency it provides, it is also preferred by municipalities due to
environmental issues thanks to lower carbon emissions.
CNG consumption in public transportation is rapidly increasing. Turkish Metropolitan
Municipalities like Istanbul, Ankara, Kocaeli, Kayseri, Bolu have purchased over 1000 CNG buses
and garbage trucks in the last few years. Ankara Municipality has not purchased any bus except
original equipment manufacturer (OEM) busses since 2007 and currently 60% of its bus park
consist of OEM busses. Furthermore, Istanbul, Gaziantep and some other municipalities open
tender for the conversation of diesel public transportation vehicles. We believe the imports of new
busses and conversation of the existing buses to CNG will be the continues process in the near
future and Naturelgaz will be a main beneficiary thanks its strong position in the market.
The Company won new contracts and others are on the way. The Company has recently
signed new contracts including conversion of İstanbul Anatolian side‟s garbage trucks, conversion
of Afyon‟s in city transportation vehicles. The Company won Bolu and Kayseri municipalities tender
as well. The Bolu tender includes the installation and operation of CNG refueling station for 15
years with BOT method and Kayseri municipality‟s includes a three-year rental contract to operate
a natural gas station in Kayseri. The stations will serve to all public busses and garbage trucks of
municipality as well as private vehicles. Mind that Naturelgaz aims to participate all municipality
CNG station tenders in upcoming years. Lastly, the Company has signed a contract with Reysas
Group, one of the largest logistic company in Turkey.
29
Global Investment Holdings
Distribution network. Naturelgaz continues its operations under the licenses issued by EMRA. It
supplies natural gas directly from Botas, the state-owned enterprise. With the liberalizations of
energy sector, the Company has started to purchase its gas from regional distribution companies
also. The Company distributes CNG directly from the “mother stations” under its ownership and
through secondary stations “daughter stations” that are either owned by the Company or local
dealerships who receive commissions based on the sales volume. In mother stations natural gas
supplied from the pipeline compressed into CNG, than it is stored and delivered to consumers in
tanks which are transported in specialized trucks. In daughter stations gas is not supplied from
pipeline but from the mother stations via trucks and then distribute to consumers.
Figure 40: Supply Chain of the Company
Source: Company
The Company plans to established 22 more stations until 2016. The Company currently has
11 CNG mother stations and 1 daughter and 7 dealer stations as of January 2014. The
management aims to have 6 more “mother stations” and 16 “daughter stations” in 2014-2015
period.
Figure 41: Proposed Station Network
Source: Company
30
Global Investment Holdings
CNG business in Turkey is in its infancy phase yet. Currently, CNG is mainly consumed by
hotels, asphalt plants, industrial facilities and other small enterprises due to the lack of natural gas
pipeline infrastructure. However, it is currently getting popular transportation sector due to both
economic and environmental issues. Turkey‟s CNG consumption is increasing at a CAGR of 14%
since 2007 and we expect it to continue in accelerated pace on the back of increasing usage in
transportation business. The transportation segment makes only 17% of total consumption as of
2012. We believe the interest of municipalities will help the development of CNG consumption in
road transportation.
Figure 42: Turkey CNG Volume (mn m³)
60
4%
R: 1
CAG
50
56
55
2011
2012
46
40
37
30
34
29
20
10
0
2007
2008
2009
2010
Source: EMRA
High growth potential in price sensitive Turkish market. In the last decade, we have
experienced the success of a similar business model, namely LPG. Turkey LPG market has
reached 3.7mn tons of consumption and ranked 1st in Europe in terms of total consumption with a
total turnover of US$5bn. Auto gas segment comprises 71% of LPG consumption in 2012 and
ranked 2nd in the world. The total LPG vehicles reached to 3.5 million, while the number of
stations stands at over 9,300. Currently, market players has captured around 40% of the
passenger car park. Currently, over 300k vehicles are converted each year.
Currently CNG is taxed at same level as LPG and offers 35% and 45% price advantage over
diesel and LPG, respectively. We expect the penetration level of CNG vehicles in Public
transportation and heavy and mid-size commercial vehicles to exponentially increase on the back
of significant fuel savings advantage and increasing availability of CNG stations. We believe
Naturelgaz‟s growth targets will be tested in 2014-2015 period as the Company will be completing
major portion of its investment to increase the station network during the period.
Nationwide station network is required. Although we expect CNG usage in transportation
market to continue in accelerated pace, it will take at least a few years to see major improvements
since Turkish CNG market is still at its investment phase and companies operating in this market
tries to enhance the station network for more convenient usage to increase its markets‟ size. We
believe if the nationwide station network can be established, we may see huge increase in number
of NGV among public and commercial vehicles.
31
Global Investment Holdings
CNG market in the World in growing rapidly. The CNG market has jumped from 1.3mn to
16.7mn vehicles around the world, with an average growth rate of 22% since 2002. The number of
stations is extended to 22k. The rapid growth is due largely to economic factors, but is also
attributed to increasing environmental awareness. Increasing number of CNG refueling stations
network is essential for rapid growth.
Top ten countries reached a significant 19% penetration level. Top ten countries in number of
vehicles accounts for 86% of NGV car park as of 2012, lead by IRAN based on NGVA Europe. If
sufficient station network can be established, we can see very high penetration levels as we have
experienced in examples of Pakistan, Bangladesh and Armenia with their respective penetration
levels of 80%, 62% and 55%. The aggregate penetration level in top ten countries on the other
hand stands at 25%. However, the penetration level in the world is still very low standing at 1.6%
as of 2012 since in many countries the usage of CNG in transportation does not exist. In the light
of these news, we expect the usage of CNG in transportation business in Turkey to grow at an
accelerated pace. Yet, we do not expect to see such high penetration levels in Turkey as many of
these countries have rich natural gas resources and usage of CNG in transportation in these
countries are incentivized by the government.
Figure 43: Number of NGV and Stations Worldwide
32
# of Stations rhs
2012
2011
2010
2009
2008
2007
2002
# of NGV (mn, lhs)
Source: NGV Global, NGVA Europe
2006
0
2005
0
2004
5,000
2003
4
2001
10,000
2000
8
1999
15,000
1998
12
1997
20,000
1996
16
1995
25,000
1991
20
Global Investment Holdings
2.2) Galata Energy
The Holding’s primary strategic focus in energy will be Galata Energy (Sirnak thermal
power plant project). The Group holds a 49-year power generation license for the asphaltite-fired
thermal power plant with an initial installed capacity of 270MW. The capacity may be increased up
to 1,500 MW, based on the estimated asphaltite reserves at the site, according to preliminary
studies. The Holding has already agreed with China National Electric Engineering Co. (CNEEC) for
the construction of the plant. The project is estimated to cost US$350mn investment, requiring
ca.US$95mn equity assuming a 65%/45% debt to equity ratio and US$30mn supplier credit. We
expect the plant to be fully operational in 2018. Since the financing of the project is not closed yet,
we do not include the plant into our valuation.
Favorable coal coast. The plant will be located in Sirnak, in eastern Turkey near to a asphaltite
mine that is owned by Gelis Mining, 85% owned by the Group, which will source the needed
asphaltite to the plant. Gelis Mining currently holds 30-year concession to operate eight known
pylons in the region. The Company is now extracting asphaltite from only one of them, namely
Avgamasya. According to analysis made in the phylon there is an asphaltite reserve of 40mn tons,
enough to supply the required asphaltite for the power plant for 30 years. The extraction cost of the
asphaltite is around US$32-34.
Obtained Incentives for the plant. Galata Energy‟s application to the Ministry of Economy with
the purpose of obtaining a “Regional Investment Incentive Certificate” for the Sirnak power plant
has been approved and Galata Energy was granted the “Investment Incentive Certificate” back in
Dec‟2013. Sirnak thermal plant project falls within the scope of “State Incentive Practices” given its
location in the 6th region and the use of locally-procured raw material. As such, the Group will
benefit from exemptions in custom duty and VAT, tax reductions (of 90% in corporate and income
tax) and support in interest, insurance premium and withholding taxes.
Akkok Group will be a strong partner. The Holding reached a preliminary agreement with Akkok
Group for the partial transfer of ownership in the Sirnak power plant. Following the due diligence
and approvals of the Energy Market Regulatory Board and Turkish Competition Authority, 55%
stake of both Gelis Mining and Galata Enegy will be transferred to Akkok Group. Following the
share transfer Global Investment Holdings will be holding 30% stake in the project.
2.3) Straton Maden
Global Investment Holdings enters the mining industry. Straton Maden, in which Global
Energy, a fully owned subsidiary of Global Investment Holdings, holds 75% stake, acquired
feldspar and logistical mining operations including substantial feldspar reserves (250k tons of
annual production) in Mugla - Yatagan (Aegean region of Turkey) for a total consideration of
TL11mn. The transaction is completed in June 2013 and price will be recalculated based on the
3.0 times of next 12-month- EBITDA of the Company.
Turkey is the global leader in feldspar mining with 5mn tons of production per annum,
accounting for 24% of the world’s production. Straton Maden is among the top five feldspar
producers in Turkey with 250k tons (5% market share) of feldspar production per annum of which
80% is exported. In 2012, Turkey´s feldspar exports of 3.9mn tons generated US$135mn
revenues, amounting to 3.2% of Turkey´s mine exports.
The Group targets to multiply EBITDA by 3-4 times following the completion of a new
investment. The Company has secured €6mn loan to undertake a new investment to be able to
increase the clarity of feldspar. Following the completion of the investment, the Company targets to
multiply the EBITDA by around 3-4 times to TL10-12.5mn in 2014. If the Holding achieves its
target, it will create additional value, which is not included in our valuation.
33
Global Investment Holdings
2.4) Renewable Energy
Intends to benefit of the advantageous geographical positions of Turkey. Although the
primary focus of the Group is the development of Sirnak coal-fired power plant and the CNG
distribution business, the Company pursuing growth with a well-balanced and diversified power
generation portfolio that also includes high growth renewable energy sources in Turkey. The Group
intends to benefit of the advantageous geographical positions of Turkey especially in terms of solar
radiation.
The renewable energy law brings guaranteed tariffs. Turkey has initiated a major renewable
energy program that aims to increase its clean energy share to 30% by 2023, in the hundredth
anniversary of the republic. The revised renewable energy law was passed by Turkish National
Assembly on January 2011. According to the law, the renewable energy plants will benefit from the
guaranteed electricity prices between 7.3 cent and 13.3 cent per kW/h. The solar energy plants will
be awarded by the high end of the range at 13.3 cent. If the equipment and components
manufactured in domestic market are used, than additional US$0.4 to US€2.4 will be added to the
tariff rate for a period of ten years.
Plans to reach 450MW capacity in long term. Global Energy has developed a portfolio of 25
solar power plant projects with a total production capacity of 450MW, located mainly in eastern and
southeastern part of Turkey and completed applications for pre-qualification for 80MW in June
2013. Preliminary designs, yield calculations and initial lease agreements for the land plots have
been completed. We do not include these projects in our valuation since they are under
development stage, therefore any development in this area may bring additional upside potential.
2.5) Tres Energy
Targets to reach 67MW capacity in 2014. The Company designs, constructs and operates turnkey small to mid-size power plants for industrial and commercial customers consuming power for
electricity, heating and cooling purposes. Global Energy established Tres Energy in 2012. Tres
Energy so far signed contracts for 16MW capacity and initiated the construction process of the
facilities. Tres Energy plans to finalize additional contracts with a number of industrial and
commercial consumers in the near future, and grow its cogeneration capacity throughout the
country. As such, Tres Energy targets to exceed 67MW capacity by 2014.
34
Global Investment Holdings
3) Real Estate Division
3.1) Pera REIT
The Group operates in real estate sector via Pera REIT since 1992 under the ticker of PEGYO.
The Holding owns 48.4% of Pera, while the remaining is in free float. Pera is converted into real
estate investment trust in 2006, earlier it had been managed as a closed-end funds. The Company
develops its real estate portfolio and makes investments in real estate backed securities in line
with objectives and scopes identified in Capital Market Board's regulations for real estate
investment trusts. The major investments held by the Company are Vakifhan No.6 building and
Denizli Sumerpark projects. The other investments are Van Land Development and Aqua Dolce
Resort and they both are still in development phase.
Denizli Sumerpark
Denizli Sumerpark project is a mixed-used development that includes a shopping mall, 608
residential units, a hotel complex and hospital located along the Izmir-Denizli highway, which is in
the southwest of Turkey. The necessary permits for the zoning and possible construction of the
apartments, the hospital and the hotel have been obtained. Under the first phase of the project,
The Sumerpark Mall opened to the public in March 2011. The tenants of the shopping mall
includes the leading retailers like Tesco Kipa, C&A, Electroworld and Tekzen and the occupancy
rate of mall stands at 95%. In 2012, the mall received 5 million visitors. The Company has an
annual rental revenue of TL6mn from Sumerpark Mall. As being part of the projects, residential
unit is scheduled for completion in three phases and the first phase was completed on June 2012.
Vakifhan No. VI
The project is based on ROT type office re-development of historic Vakifhan No.VI building which
has an area of 1600m2 located in Karakoy, north of the Golden Horn on the European side of the
Bosporus. The rehabilitation and restoration of the Vakifhan building was completed in August
2006. The building is used as office space and houses a restaurant as well with an occupancy rate
of 100%. The Group receives US$0.3mn in rental income per year.
35
Global Investment Holdings
4) Finance Division
GIH‟s finance division consist of Global Securities and Global Asset Management. The Holding
plans to exit from this segment in the future.
4.1) Global Securities
Global Securities (GLBMD) founded in 1990 and went thorough the restructuring in 2004
becoming a wholly owned subsidiary of GIH. On June 2011, Global Securities went to public,
offering 25% of its share and raise TL 16.5mn. GIH currently holds 67.4% of the Company. Global
Securities has established IEG-Global Financial Consultancy Company in May 2011 with IEG
Investment Banking Group, one of the leading international investment banking advisory
companies in Europe as equal partners. According to agreement, the joint partnership provides
professional advisory services for merger and acquisition, debt financing, structuring and
privatization transactions to small and medium size enterprises.
In 2013, Global Securities ranked 20th among all brokerage firms in Turkey with market share of
1.7% and equity trading value of TL27.4bn.
4.2) AZ Global Asset Management
AZ Global Asset management is an affiliate of GIH and AZ International Holding SA, a subsidiary
of Azimut Holding, the Italian asset management company with a portfolio size of €25bn. Az
International Holding has acquired 60% of Global Asset Management back in March 2012. AZ paid
a total of TL 3.8mn for the majority share of the Company. The Holding currently has the remaining
40% share in the Company.
36
Global Investment Holdings
Price / Recommendations
150
TL
NR
140
130
120
110
100
03/14
03/14
02/14
02/14
01/14
01/14
01/14
12/13
12/13
11/13
11/13
10/13
10/13
09/13
09/13
08/13
08/13
07/13
07/13
07/13
06/13
06/13
05/13
05/13
04/13
04/13
03/13
03/13
02/13
02/13
01/13
01/13
01/13
90
Relative to BIST1 00
Source : BIST/ Is Investment Estimates
Rec. Breakdown for Coverage (%)
Sectoral Recommendations
10
9
Number of
Companies
8
19
7
6
51
19
5
4
6
3
6
2
Conglomerate
Utilities
Banking
Petroleum and Energy
Glass
Construction
NR
Agricultural Chemicals
Food
Iron Steel
Transportation
Technologly
Retail Trade
UR
Real Estate Investment Trust
UP
Automotive & Parts
Media
Mining
Chemicals
MP
Airlines&Ground Handling…
OP
Communication
Livestock
Other
Cement & Concrete
Integrated Textile
Insurance
Pharmaceutical and Health
Auto part
Beverages
Tyre Production
Paper
Consumer Durables
0
Leasing & Factoring
1
OUTPERFORM
NOT RATED
MARKETPERFORM
UNDER REVIEW
UNDER PERFORM
This report has been prepared by “İş Yatırım Menkul Değerler A.Ş.” (İş Investment) solely for the information of clients of İş Investment.
Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services
are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies,
investment banks and the clients. Opinions and recommendations contained in this report reflect the personal views of the analysts who
supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be
suitable for all investors. Investors must make their decisions based on their specific investment objectives and financial positions and
with the assistance of independent advisors, as they believe necessary.
The information presented in this report has been obtained from public institutions, such as Istanbul Stock Exchange (ISE), Capital
Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of
Turkey (CBT); various media institutions, and other sources believed to be reliable but no independent verification has been made, nor is
its accuracy or completeness guaranteed.
All information in these pages remains the property of İş Investment and as such may not be disseminated, copied, altered or changed in
any way, nor may this information be printed for distribution purposes or forwarded as electronic attachments without the prior written
permission of İş Investment. (www.isinvestment.com)
This research report can also be accessed by subscribers of Capital IQ, a division of Standard & Poor's.
37
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Global Investment Holdings