Lining up for Istanbul listing

ISTANBUL – Turkish firms are lining up to list on Istanbul’s stock market this year, giving domestic and foreign investors a chance to buy into airports, appliance manufacturing and a Coca-Cola unit in Turkey’s fast-growing economy. Investors will also have to weigh competing opportunities in Russia and other booming emerging economies, as well as risks from a possible drying up of global liquidity and even from bird flu. Analysts are confident, however, that the $2 billion to $3 billion (1.6-2.5 billion euros) in initial public offerings expected in Turkey this year, up from last year’s $1.7 billion (1.4 billion euros), will have no trouble attracting buyers. «There is sufficient liquidity that one could expect the market to swallow up new equity fairly easily,» said fund manager Jonathan Toub at F&C Asset Management. Bankers and fund managers expect some IPOs to be as much as 10 times oversubscribed, as investors are keen to buy into an economic success story with the trump card of EU entry talks. Even the formerly state-owned maker of raki, Turkey’s famed aromatic liquor, has received presentations from banks for a possible IPO, one banker said, although MEY’s chief financial officer, Kamil Yavuz, ruled out a deal for the time being. «Right now we don’t have such a plan,» he told Reuters this week. A key driver of this IPO enthusiasm is a hefty 59 percent rise in Istanbul’s main stock index last year, with trading volumes surging as foreigners were lured to the market by the start of EU membership talks. This year has seen continued gains, although analysts expect some of the heat to come out of the market as the initial lift from what will be a protracted EU process fades. MSCI’s stock indices show that Turkish stocks have risen 17 percent so far this year alone. Fund inflows But Istanbul is not the only emerging market in the Europe, Middle East and Africa (EMEA) region to chalk up such hefty gains. Russian shares have risen nearly 30 percent, while South African shares are up 10 percent. The IPO deals expected in Turkey this year will be dwarfed by Russian oil firm Rosneft, which is preparing an IPO it hopes will raise $20 billion (16.6 billion euros) and which will compete for investors’ time and assets. But fund managers and analysts say that, as long as global liquidity remains plentiful, there will be enough cash to go around. «The amount of cash coming into the (EMEA) region is phenomenal,» said Morgan Stanley analyst Neil Wedlake. «The availability of new supply will be a good thing as it will help absorb a lot of the demand.» He added that dedicated emerging market fund inflows so far this year are already at 72 percent of the figure for the whole of last year. Growth in the region remains robust. Turkey’s economy, which suffered a deep crisis five years ago, grew 7 percent in the third quarter, the same as Russia, and the government is targeting growth of 5 percent this year, although this is 1 percentage point less than Russia. Coke float The Turkish unit of The Coca-Cola Co, airport operator TAV, and Vestel White Goods have all said they are planning IPOs, and sources familiar with the situation say others are also on the cards. The Turkish unit of Coca-Cola has sought permission for a 20 percent IPO, after two postponements in 2004. Analysts and bankers say this time around the deal looks more attractive, partly because the Central Asian business has been added to the company being sold. «That time it was only the domestic business but this time around they’ve added Efes Invest business onto the company that’s going to be IPO’d, which is much higher growth and in much sexier markets,» UBS analyst Feyza Sensoy said. «It’s become not only a mature business, but also high-growth areas have been added.» A banker said the IPO was expected in the first half. Another deal likely to prompt interest is airport operator TAV Investment Holding, which a source familiar with the company has said is expected to value the firm at $1.5 billion (1.25 billion euros). TAV has not gone into details about the IPO, except to say it will be for less than half the firm and in the third quarter. The banker, however, said: «I think what will be subject to IPO is their Turkish operations. It’s just in the early stages.» The prospect of Turks getting richer, coupled with increasing tourist numbers – the figure rose 20 percent last year – adds to airports’ attraction, although an outbreak of bird flu has hurt tourism this year. «Clearly there’s an argument longer term for growth in tourism. This year might be difficult… but it’s easy to imagine this sector attracting attention,» said one analyst, who declined to be named. The Coca-Cola IPO is not the only deal coming after previous attempts. Vestel Elektronik has renewed its application for permission to launch an IPO for its unit Vestel White Goods, after the deal was called off last year. A 29 percent rise in shares of its rival Arcelik so far this year – outperforming the market – may indicate likely demand. Istanbul gas distributor Igdas will also be privatized this year through an IPO, sources familiar with the matter have said, while the government is seeking advisers for the sale of Halkbank, as part of its IMF-backed sell-off program. Builder Tek-Art Insaat has also applied for a listing.

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