My “neutral” call on Turkcell (TKC) in August had almost nothing to do with the quality of the company or my opinion of its financial performance and everything to do with sentiment around the Turkish economy and stock market. Since then, the ADRs have barely budged despite two more good quarters, and the shares have lagged the iShares MSCI Turkey ETF (TUR), as well as the main Turkish index (up almost 50% over that time).
Whether that underperformance is due to rotation away from more defensive ideas, worries about increased capex spending in 2021, or some combination is not all that important (and would be impossible to answer definitively anyway). Higher capex spending in 2021 won’t threaten the dividend or capital structure, and should only help drive more growth over the long-term in the fiber/IPTV business.
I continue to believe that Turkcell is meaningfully undervalued on the basis of long-term revenue growth of 8% and double-digit FCF growth. I also believe that this is a tough stock to recommend and investors have to have an exceedingly high level of patience to consider this one.
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Strong Operating Performance Still Getting Turkcell Nowhere Fast
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