The Market Impacts From The Turkish Tourism Collapse

Credit Suisse analyst Onur Muminoglu reports that the precipitous fall in Turkish tourism in recent years continued to hit Turkish companies hard in Q1. Of the 13 major consumer-related Turkish companies under Credit Suisses coverage, only four managed to beat consensus EBITDA expectations in the most recent quarter.

Weak tourism activity and the unrest in big cities after terrorist attacks hurt the operating performance in airlines and beverages, Muminoglu noted.

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In fact, following a lackluster Q1, Credit Suisse has downgraded European-listed Efes (Anadolu Efes Biracilik ve Malt Sanayi AS (OTC:AEBMY) (IST: AEFES)) from Neutral to Underperform and Turkish Airlines (IST: THYAO) from Outperform to Neutral.

In addition to terrorism fears, wages made a large negative impact in Q1, especially on food retailers. Muminoglu noted that the minimum wage hike has yet to filter down to domestic consumption in Turkey.

Management at top Turkish companies remains optimistic. Despite weak earnings, most companies maintained their full-year guidance.

Even with a pair of downgrades, Credit Suisse is still bullish on top picks Ford Otosan (FORD OTOMOTIV SANAYI (OTC:FOVSF) (OTC:FOVSY) (IST: FROTO)) , Koc Holding (IST: KCHOL) and Coca-Cola Icecek (IST: CCOLA).

Muminoglu said that all three European-listed stocks have both attractive valuations and long-term growth potential.

Even in light of a weak Q1, the Ishares Msci Turkey Inv Market Index Fd (NYSE:TUR) is up 7.1 percent so far in 2016.

Disclosure: The author holds no position in the stocks mentioned.

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