Istanbul: Will 2018 prove to be a bumper year for Turkish initial public offerings? The early signs aren’t particularly good.
Two deals in the past week attracted interest at the bottom of their proposed valuation ranges, and that’s after one of them cut the asking price by 21 per cent. A third sale was postponed amid the bloodbath in global equity markets.
Germany’s E. ON SE and Turkish partner Haci Omer Sabanci Holding AS sold a stake in their Enerjisa Enerji AS electricity distributor at the lower end of their expectations, while weak demand forced MLP Saglik Hizmetleri AS, majority owned by private equity firm Turkven, to lower its price range before going public. Burger King’s biggest franchise outside the US, TFI TAB Gida Yatirimlari AS, said on Tuesday it was putting off a Nasdaq IPO planned for this week, without giving reasons.
“Investors want attractive prices in IPOs,” Emre Akcakmak, a portfolio adviser at East Capital AB in Dubai, which bought 3.38 million shares in MLP Saglik, said in an email. “Additionally, Turkish stocks trade at a discount of about 35 per cent to emerging market peers and the IPO price cut could be interpreted as a reflection of this fact.”
BlackRock Inc, Fidelity Investments emerged as among the top buyers in Enerjisa and Singapore state investment firm Temasek Holdings Pte in MLP Saglik as about 85 per cent of the stock on offer went to international institutional investors.
Turkish companies are weighing IPOs in what has been billed potentially the best year ever for share sales. About a dozen IPOs are in the works, with the aim of raising as much as $4 billion (Dh14.7 billion), according to Istanbul-based brokerages Unlu & Co. and Is Investment. That would surpass the record set in 2007 as companies bet that a surge in demand for emerging-market equities will draw buyers to Turkey too.
After strong gains in January that backed up talk that timing was favourable for public offerings, global equity markets made a rocky start to February, just as Turkey’s IPO hopefuls were beginning to court investors. European stocks lost 5.1 per cent, US stocks fell more than 4.5 per cent and emerging market equities declined 6.2 per cent.
The volume of shares heading for the Turkish market this year will test investor appetite, particularly at a time when sentiment may prove fragile.
“The pipeline was too big for the Turkish market,” Anastasia Levashova, a fund manager at Blackfriars Asset Management in London, said in emailed comments on the year’s first sales. “Two sizeable IPOs for Turkey, and at the same time, is a lot.”
With an IPO, “you are buying an unknown asset, so you need to find an asset really appealing from many angles to change the current positioning,” given the limited funds allocated to a portfolio, said Ekaterina Iliouchenko, a money manager at Union Investment Privatfonds GmbH in Frankfurt. “In the cases for Enerjisa and MLP Saglik, I preferred to put the companies on the watch list for further development. Sometimes you put the companies immediately in the ‘non investment’ bracket, but that was not the case this time.”
Clothing retailers DeFacto Perakende and Beymen Magazacilik AS, discount grocer Sok Marketler AS and hospital operator Memorial Saglik Yatirimlari AS are all slated for share sales later this year as the companies consider IPOs as an alternative means to raise cash over borrowing from financial markets after a surge in local lending rates.
“I think there is too much on offer for the market size at this point,” said Levashova. “We’re estimating about $4 billion in planned offerings this year. That is about 5.4 per cent of Borsa Istanbul 100 Index’s free float, and that is big.”
Enerjisa advanced as much as 15 per cent in its trading debut in Istanbul Thursday, and was 9 per cent higher at 6.80 liras as of 10:59am.
Enerjisa increased the domestic investor allocation to 24 per cent from 15 per cent because of high demand, Sabanci Holding Chairman Guler Sabanci said at the opening bell ceremony at the Istanbul bourse.