Turkey’s Biggest Loser Picked to Become Star Performer

As global investors dump the best-performing stocks of the lockdown era and hunt for bargains, Turkish analysts are betting the nation’s biggest loser will turn into its top outperformer.

Snacks maker Ulker Biskuvi Sanayi AS, which has trailed every other share on the benchmark Borsa Istanbul 100 Index since August, may rally almost 53% in the next 12 months, according to the average price target set by 18 analysts. That’s the biggest potential return among the members of the gauge, which is itself seen jumping 22%.

The optimism over Ulker Biskuvi, and Turkish stocks in general, signals a wider shift in favor of so-called value stocks that are cheap to buy, offer healthy dividend yields and may be resilient during selloffs. The value group is outperforming the more expensive and volatile growth stocks globally for a second successive week as investors reassess equity risk amid a spike in U.S. Treasury yields.

Turkey’s Biggest Loser Picked to Become Star Performer

But the path hasn’t been easy for Ulker, owned by the world’s second-largest biscuits maker Yildiz Holding AS, also known for Godiva chocolates and McVitie’s digestives. The stock has dropped 9.2% in the past six months, failing to capitalize on a 35% rally in the benchmark index. Even though it’s one of the cheapest shares in emerging markets, with a forward price-earnings multiple of just 6.5, it’s struggled amid reports of an unofficial exports ban in Saudi Arabia and a suspension of dividends.

“Resumption of dividend payments, offering visibility about the company’s acquisition plans and short-term financial investments along with improvement in working capital and free cash flows, could act as strong catalysts,” said Metin Esendal, director of equity research at Renaissance Capital in London.

Biggest Potential Gains

Borsa Istanbul memberProjected gains over 12 months (%)
Ulker Biskuvi52.7
Yapi Kredi Bank46.7
Sok Marketler45.4

Ulker will decide on whether to end a two-year pause and pay dividends from its 2020 profit at its next annual general meeting, Chief Executive Officer Mete Buyurgan said in emailed comments.

The company will prioritize increasing its market share in Turkey, Middle East, North Africa and Central Asia in 2021, Buyurgan said. The snacks maker may also consider strategic acquisition opportunities within Yildiz Holding group that will help grow business and further strengthen its market share. The company continues to increase its capacity at its production facilities in Kazakhstan, Saudi Arabia and Egypt.

Turkey’s Biggest Loser Picked to Become Star Performer

Ulker Biskuvi’s valuation is very attractive and hard to ignore, but “the company is suffering from not presenting an imminent exciting story that could spur gains in the stock,” said Burak Isyar, ICBC Turkey Yatirim’s head of research who also has a buy recommendation on the stock.

That story may at last be emerging as investors sense an end to the Covid-19 crisis and turn to stocks that may benefit from the reopening of the economy. Ulker Biskuvi’s earnings estimates have risen 6.9% since the start of the year and the likely resumption of dividends could merit attention from bargain hunters.

©2021 Bloomberg L.P.

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