Over the past three months Turkish telecommunications provider
Turkcell (
TKC
,
quote
) has seen its share price, like many emerging market
equities, tumble. Is now the time to step into the mobile
conglomerate?
[caption id="attachment_56513" align="alignright" width="300"
caption="Turkcell is the third largest GSM operator in Europe in
subscriber numbers"]
[/caption]
Turkcell shares have dropped from around $13.50 to under $11
over the past three months, almost 20% lower.
Over the short-term the move to the downside in Turkcell
may not be over. Turkcell is still about 10% above its 52-week low,
and given Turkey's significant exposure to Europe, the stock could
very easily retrace back to the $10 level.
However, investors with a longer-term time horizon may start to
see value here . The stock is approaching its 2008 low and its
forward P/E has become quite compelling at a mere 8.87.
Furthermore, the company has recently sought to resolve
potential structural impediments to a move higher in the equity.
There have previously been
accusations of bribery in an Iranian concession
acquisition attempt
; however, Turkcell has recently been quite forthcoming and
transparent in its attempts to clarify any perceived
improprieties.
As well,
the divisive rhetoric of arguing factions within
the company's board of directors
has hampered growth, indecision over dividends and the current
chairman of the board has resulted in negative pressure on the
stock.
However, the board of directors is holding a meeting to discuss
the abovementioned problems in a June 29th meeting. If the board of
directors are able to resolve said issues, investors would then be
able to focus on the
bullish fundamental trend of emerging market
telecommunication firms
. Turkcell, with its exposure to emerging middle classes not only
in Turkey, but CIS nations like the Ukraine, Kazakhstan, and
Azerbaijan, will be able to take advantage of these trends.
As the middle classes in these countries become progressively
wealthier, these citizens are likely to spend more money on nicer
phones and, in turn, more lucrative 3G services.
While Turkcell is starting to look cheap, investors should wait
until the board of directors reach some sort of consensus on the
way forward for the company in terms of yield and leadership.
