Turkcell Still Called a Hold

Turkcell Iletisim Hizmetleri AS (TKC - Analyst Report) exceeded our estimates for the third quarter of 2008 in terms of revenue, and earnings were also stronger than expected on higher interest income and higher gross margin.

We were encouraged by the strong growth in revenues and earnings at its affiliates in the quarter, although some of this growth has to do with the weakness in the US Dollar against all major currencies. This has led us to maintain our revenue and earnings outlook for remainder of 2008 as we expect growth to slow slightly in 2008 as the Turkish market closes in on its saturation point.

We continue to rate shares of TKC a Hold at this time. We would also like the current turmoil in world markets to pass before initiating a ratings change. We are encouraged to see a strong performance of its subsidiaries despite current market turmoil.

We have fixed our target price at $14.50 based on the company selling at 4.8x our new 2009 EPADS estimate as the company's expansion in Belarus and the recent outlook upgrade from S&P bodes well for the future while high churn rate and its 3G build out should keep its margins in check.

Udayan Mukherjee contributed to the report.

Read the full analyst report on TKC