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TAVHY - TAV Havalimanlari Holding AS

Guest MarkS

By Guest MarkS
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Guest MarkS

Guest MarkS

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TAV Havalimanlari Holding AS is a Turkish company that builds, manages and operates airports, along with duty free shops and cafes located in terminals. They operate several airports in Turkey, along with airports in Saudi Arabia, Macedonia, Georgia, Tunisia and soon in Cuba.  Their earnings have grown consistently the last few years and has also consistently delivered free cash flow of at least $3.00 per share for each of the last 7 years - in addition to a nice dividend. Not bad for a stock that trades here for about $17.00 per share.  Growth was interrupted last year by the terrorists attack on the Attaturk Airport but they're still profitable and should bounce back and grow once again.  Here is their latest presentation: 

 

http://www.tavyatirimciiliskileri.com/en-EN/Lists/Presentations/Attachments/73/TAV_Presentation_April_2016.pdf

 

I've started a very small  position.  I would love opinions before adding to the position.

 

Thanks

Mark

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tra9021 Newbie

tra9021

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How are you calculating free cash flow?  Even if you ignore capex, it looks like they only generated EUR 193.5M in CFFO during 2014.  At current exchange rates, that's ~TRY 778M, or only a little over 2 TRY per share.  At first glance, it does look pretty cheap on EV/EBIT and P/E, but I'm not sure your statement on FCF is correct.

 

Also, it looks like the concession on Istanbul airport (~60% of group EBITDA) expires in January 2021.  I'm no expert on concession renewals, but that seems like a pretty big risk.  Unless you believe that the renewal is a slam dunk I don't see how you could get comfortable owning this.

 

LT track record is impressive - 18% passenger CAGR, 12% revenue CAGR, and 37% EBITDA CAGR from 2006-2015.  I'd definitely be interested to look at this if it weren't for the risk that they'll lose the Istanbul concession in 2021.

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Guest MarkS

Guest MarkS

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Hi tra9021,

 

I appreciate your comments.

 

With respect to the free cash flow number, I was being lazy and used the numbers Morningstar published in their "Key Data" summary sheet.

 

http://financials.morningstar.com/ratios/r.html?t=TAVHY&region=usa&culture=en-US

 

I didn't realize that that page conflicted with their published cash flow financial statements. 

 

http://financials.morningstar.com/cash-flow/cf.html?t=TAVHY&region=usa&culture=en-US

 

My apologies.  I need to be more careful and not rely as much on Morningstar in the future.

Nevertheless, I will stand by the proposition that the company is very profitable relative to the cheap stock price.

 

Your concerns about the loss of the Attaturk concession are well founded.  The company is growing rapidly across the globe - apparently in preparation for the loss of the Istanbul concession.  I wasn't that concerned at first because - using Morningstar's numbers - the company would have earned most of the price of the shares during the four years left on the concession - plus the continued expansion worldwide.

 

I'm certainly not adding to the position now.  I may even get rid of it.  Thanks for the second opinion. 

 

Mark

 

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