Petkim End of the Ethylene Run

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1 TURKEY OIL AND GAS DECEMBER 12, 216 Common PETKM TI Recommendation HOLD Last price TRY3.58 Target price (from TRY3.6) TRY3.9 Upside 9% Free float 44% Market cap $1,56 mln ADT, 1 days $15.2 mln Prices as of December 8, 216 Key data E 217E 218E Financials (IFRS), TRY mln Revenues 4,533 4,541 5,514 5,85 EBITDA EBIT Net income Adjusted EPS, TRY Profitability EBITDA margin 15% 17% 12% 12% EBIT margin 12% 15% 1% 9% Net margin 14% 13% 9% 9% Price ratios P/S EV/EBITDA P/E P/CF Growth Revenues 1% % 21% 5% EBITDA n/m 16% -15% 3% Adjusted EPS n/m -32% -11% 5% Price performance, % 1m 3m 6m YTD Common Relative to BIST Price performance, TRY Dec '15 Feb '16 Apr '16 Jun '16 Aug '16 Oct '16 Dec '16 Share price Relative to BIST 1 Max 4.75 (Sep 23, 16) Min 2.91 (Dec 14, 15) Source: Bloomberg, Deniz Invest Research Petkim End of the Ethylene Run Petkim posted strong operating performance in 9m16, thanks to upbeat ethylene markets buoyed by a tight supply-demand balance and soft feedstock prices. The naphtha/ethylene spread hovered around $6/tonne during the period, above the 1y average of $44/tonne and our forecast of $55/tonne for the year. However, with capacity set to increase, the spread is likely to stabilize in the $45-5/tonne range in the long term. Thus, while adjusting our 216 estimates for the stronger than expected naphtha/ethylene spread, we retain our bearish view on the long-term outlook. This yields a new target price of TRY3.9 per share, rolled forward by 1y (from TRY3.6 per share). Petkim s long-term story remains intact, with promising projects in the pipeline. Still, at a 217E EV/EBITDA of 1., versus 7.7 for peers, the stock looks rather expensive. We keep our HOLD recommendation on the stock and recommend waiting for better entry points. Strong naphtha/ethylene spread does not look sustainable in the long term. On the back of the soft feedstock prices and tight supply-demand balance, the naphtha/ethylene spread the key profitability indicator for Petkim has remained strong since 2Q15. However, the new ethylene capacity slated to come online in 217 portends an end to the spread s strength. We expect the spread to average $45/tonne in 217, in line with the recent trend, which saw the spread come down to $42/tonne in November from the 9m16 average of $6/tonne. Profitability to weaken despite natural gas price cut and lira weakness. All else being equal, we estimate that the 1% cut in natural gas tariffs at the beginning of October and 14% lira depreciation against the dollar since then will drive a 2 pp improvement in the gross margin. However, we expect operating performance to be hit by the weakening naphtha/ethylene spread. We see the gross margin falling from 21% in 9m16 to 13% in 4Q16 and hold at that level in 217. Given this, we calculate EBITDA and net earnings to slide 28% and 25% in 217 in dollar terms, respectively. Selim Kunter Selim.Kunter@denizinvest.com Rich multiples not justified by attractive long-term story. Following completion of the STAR refinery project by Petkim s parent company in 218, Petkim expects to achieve annual cost savings totaling $1 mln, thanks to lower freight and inventory costs and improved feedstock quality. Still, we think that Petkim s rich multiples, at a 217E EV/EBITDA of 1. and P/E of 1.4 (compared with 7.7 and 15.4 for the peer group), are reflecting these savings too soon. We keep our neutral view on the stock and HOLD recommendation, but we raise our target price to TRY3.9 per share. We see a 216E DPS of TRY.31, which offers a 9% yield at current levels. Key value drivers. We believe that the naphtha/ethylene spread, product margins, progress with projects (the STAR refinery in particular) and dividend performance are the key value drivers for Petkim. Sinan.Goksen@denizinvest.com, DENI on Bloomberg

2 DECEMBER 12, 216 PETKIM END OF THE ETHYLENE RUN Investment Case Lower feedstock prices boost competitiveness of naphtha-based petrochemical producers The prevailing oil price weakness has flattened the global cost curve for petrochemical producers. US and Middle Eastern producers use ethane as feedstock, which has a unit production cost of approximately $2/tonne, according to Platts Analytics. Unit production costs for naphtha-based producers are estimated at $4-5/tonne with the oil price around $5/bbl, as opposed to $1,/tonne when the oil price was at $9/bbl. Naphtha/ethylene spreads should normalize amid new ethylene capacities On the back of the soft feedstock prices and a tight supply/demand balance driven by low inventories and strong demand, naphtha/ethylene spreads, the key profitability indicator for Petkim, remained buoyant between 2Q15 and 3Q16. During this period, the benchmark spread averaged $62/tonne, versus the 1y average of $44/tonne. However, some 6 new ethylene plants are slated to be brought online through 22 (predominantly in North America, the Middle East and Asia), and ICIS expects global ethylene output to expand by around 15% (or 32 mmtpa, net of shutdowns). According to Nexant, the new investments will mostly use ethane and coal as feedstock, which will pull down the share of higher-cost naphtha-based crackers in global ethylene capacity from the current 45% to 38% by 22. While this presages downward pressure on global ethylene prices, the recent recovery in oil prices following OPEC s output cut to 32.5 mln bpd (down 1.2 mln bpd from the October level) is likely to push naphtha prices higher. We project an average naphtha/ethylene spread of $45/tonne in 217, which is roughly in line with the recent trend (the benchmark spread came down to $42/tonne in November). Regional steam cracker production costs, $/tonne 1,5 1,2 9 6 Regional ethylene capacity addition projections for , mmtpa Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Naphtha (Europe, Asia blended) Ethane (Saudi) Source: Platts Analytics, Deniz Invest Research Apr 15 Jun 15 Aug 15 Oct 15 Dec 15 Ethane (US, Middle East blended) (3) North America China CTO Middle East Note: CTO stands for coal to olefins. Source: ICIS Asia (ex-china) China (conventional) Europe Latin America Africa Shutdowns 2 DENIZ INVEST RESEARCH

3 PETKIM END OF THE ETHYLENE RUN DECEMBER 12, 216 We see Petkim s EBITDA and net earnings contracting a respective 28% and 25% in 217 in dollar terms As a naphtha-based producer, Petkim has benefited from the feedstock price weakness and wide naphtha/ethylene spreads over the past two years, during which time it has posted its strongest ever operating and bottom-line performance. Despite the unplanned shutdown of the company s ethylene plant in 3Q16 and narrowing spreads in 4Q16, we expect EBITDA to expand 5% in 216 to a record high of $257 mln (up 16% in lira terms to TRY777 mln). However, we take a bearish view on naphtha/ethylene spreads for the next two years, so we see Petkim s EBITDA dropping 28% and net earnings sliding 25% in 217 to $185 mln and $145 mln, respectively. Naphtha/ethylene spreads, $/tonne (CIF Med spot prices) 1,5 1, Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Naphtha/ethylene spread Ethylene Naphtha Source: Platts, Petkim, Deniz Invest Research Correlation between Petkim s gross margin and naphtha/ethylene spreads* Naphtha/ethylene spread ($/tonne) R² = % % 1% 2% 3% Petkim's quarterly gross margin * excluding 3Q14 and 4Q14, when Petkim s ethylene plant was shut down for capacity expansion Source: Petkim, Deniz Invest Research Petkim benefiting from weak lira and recent cut in natural gas tariffs Petkim is operationally long dollars, as its revenue stream is dollar-denominated while 8% of its costs (raw materials) are also dollar-based. Non-feedstock costs, such as energy and labor, are lira-based. Hence, the recent lira depreciation against the dollar (we project that USD/TRY will end the year at 3.46, pointing to 13% Q-o-Q lira depreciation, followed by a 6% decline in 217) will support margins, while limiting the lira-based y-o-y declines in the operating numbers. On top of this, given the 1% cut in natural gas tariffs at the beginning of October, we estimate that Petkim will save 2 pp in operating margins in 4Q16 and 217, as we do not forecast a change in natural gas tariffs next year despite rising cost pressures on BOTAS from recovering oil prices and the weaker lira. Petkim cost breakdown EBITDA bridge, TRY mln % 9% 6% 3% Raw materials Energy Labor Other Note: Data as of 9m16. Source: Petkim, Deniz Invest Research 3Q16 EBITDA Cut in natural gas tariffs Currency impact Increase in production Naphtha/ ethylene spread 4Q16 EBITDA DENIZ INVEST RESEARCH 3

4 DECEMBER 12, 216 PETKIM END OF THE ETHYLENE RUN Strong dividend outlook due to lack of heavy capex for the near future The company pays out all distributable income in dividends, so its improved operating profitability, healthy balance sheet structure and low capex requirement should translate into a strong and sustainable dividend outlook. Given that it pays out 8% of net income (versus 75% in 215), we estimate a 216 DPS of TRY.31, implying a 9% yield at current levels. This is one of the highest figures among BIST 3 stocks. We do not expect the company to change its dividend policy unless the management sets out an aggressive investment plan, such as for a capacity increase. Upcoming projects make for a promising long-term story Petkim is uniquely located on a 19 mln m 2 peninsula that is set to be converted into a fully integrated petrochemicals hub including a feedstock refinery, container port and power generation facilities. In this context, the owner, SOCAR Turkey Enerji, has set forth an investment program geared toward making Petkim an integrated, market-dominating player with secure feedstock and energy supplies, efficient logistics and significant cost synergies. The most encouraging factor in this process is that Petkim has already completed most of the investments mandated to it (ethylene capacity expansion and most of the port), spending only $65 mln in capex in E; the remaining capex is the responsibility of the parent company. Once these operations are fully ramped up, we estimate a boost of around $15 mln (after tax) to Petkim s net income, or 45% of Petkim s 22E net income. This excludes a cogeneration plant and real estate projects, which have been put on hold for the time being. Petlim Container Port (7% Petkim, 3% Goldman Sachs International): The initial phase of the Petlim Container Port project was completed in April and became operational in December. With the completion of the second and final phase in 1H17, annual container handling capacity at the port will reach 1.5 mln TEU, making it the largest container seaport in Western Turkey. Petkim has a 28-year concession agreement with the Maersk-owned APM Terminals for operating rights at the port, which offers a revenue-sharing model. We expect $17 mln fee generation from port operations for Petkim in 217 (11% of 217E consolidated net income). Petkim sold a 3% stake in Petlim Container Port to Goldman Sachs International in 215 for $25 mln, implying a total valuation of $833 mln. This was well above our fair value calculation of $344 mln. STAR refinery (1% owned by SOCAR Turkey Enerji). This 1 mmtpa refinery project is the main component in SOCAR s long-term goals for Petkim. Construction is scheduled for completion in 218. The refinery will use high-quality feedstock and is expected to provide Petkim with $15-18 mln in annual cost savings in the form of lower procurement and inventory costs as well as shared maintenance and security costs. Petkim has a 2-year offtake agreement with the STAR refinery for the procurement of 1.6 mmtpa of naphtha and.27 mmtpa of mixed xylene. Petkim s management intends to use the $25 mln proceeds from the Petlim Container Port stake sale to acquire a minority stake (7-9%) in the STAR refinery. While we think news flow on this front could act as a catalyst for the stock, any positive sentiment is likely to prove short-lived since the use of Petkim s cash to acquire a minority stake will inflate its multiples. Real estate project. In 215, Petkim amended the zoning plan for the 1.18 mln m 2 plot of land that is currently being mainly used for lodging. The new plan includes a 534, m 2 commercialresidential and tourism area, 17, m 2 commercial and tourism area, 72, m 2 small industrial area and (a total of 96, m 2 ) for a gas station area and school. The amended zoning plan has been approved by the Environment and Urban Planning Ministry, but the project has been suspended for the time being due to a lawsuit filed by the Izmir branch of the Chamber of City Planners calling for the amendments to be cancelled. 4 DENIZ INVEST RESEARCH

5 PETKIM END OF THE ETHYLENE RUN DECEMBER 12, 216 Nevertheless, assuming an approximate price tag of TRY25-5 per m 2 for lands with similar zoning permits in the region, if the legal issue is resolved the value of this asset should stand at TRY2-4 mln ($6-12 mln), or 4-8% of Petkim s current market value. Petkojen project. Although currently on hold, another potentially promising investment planned by SOCAR Turkey Enerji is Petkojen, a 295 MW coal-fired cogeneration plant at an estimated cost of $78 mln. This would be expected to reduce Petkim s steam and energy costs by as much as 3%. although expensive multiples are not justified if spreads normalize Petkim shares have gained 35% over the past 12 months, outperforming the benchmark BIST 1 index by 3%, thanks to its strong operating performance through 9m16. The stock has also outperformed the MSCI Europe Chemicals index by 7% despite having seen a 3% plunge in its share price since September (in dollar terms), when naphtha/ethylene spreads started to slide. On our normalized naphtha/ethylene spreads, the stock is trading with a wide premium versus peers (217E EV/EBITDA of 1. versus 7.7 for the peer group average). The premium disappears on 219E multiples (219E EV/EBITDA of 6.1), when we pencil in $1 mln cost savings from the STAR refinery. This, in our opinion, reflects the expected earnings momentum following completion of the promising projects in the company s pipeline. However, we believe the market is pricing in the benefits too soon, considering that these investments will start fully contributing only after m forward EV/EBITDA Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Price performance, dollar terms Dec 15 Feb 16 Apr 16 Jun 16 Aug 16 Oct 16 Dec 16 Petkim Source: Bloomberg, Deniz Invest Research MSCI Europe Chemicals Note: December 215 = 1.. Petkim MSCI Europe Chemicals BIST1 Source: Bloomberg, Deniz Invest Research Valuation risks Our valuation for Petkim is highly sensitive to volatility in petrochemical margins; hence, the risks to our valuation and view on the stock primarily lie in deviations in naphtha/ethylene spreads and product margins. The scale of benefits set to be achieved by the container port investment, STAR refinery and real estate projects will determine the company s long-term profitability. Potential delays and capex overruns with the planned projects and/or changes in SOCAR s long-term goals for Petkim are other risks to our target price. Furthermore, the valuation employed in the planned acquisition of a 7-9% stake in the STAR refinery could lead us to amend our forecasts. DENIZ INVEST RESEARCH 5

6 DECEMBER 12, 216 PETKIM END OF THE ETHYLENE RUN Valuation We value Petkim using a sum-of-the-parts (SOTP) methodology. We use a DCF analysis and peer comparison for the core chemicals business and assign equal weights to both. For the port operations (Petlim), we calculate the NPV of potential fee generation from APM Terminals. Our new target price of TRY3.9 per share, rolled forward by one year (from TRY3.6 per share), reflects the stronger than expected operating performance driven by upbeat naphtha/ethylene spreads throughout 216, the 1% cut in natural gas prices and our new FX forecasts (end 217 USD/TRY of 3.7, versus our previous call of 3.49). We now employ a higher WACC of 9.8% due to a.5 pp increase in our dollar risk-free rate assumption to 6.5%. Our SOTP valuation yields a fair value of $1.6 bln for Petkim. Our target value implies a 217E EV/EBITDA of 1.5 and P/E of 11.3, versus a respective 7.7 and 15.4 for the peer group. In our DCF model, in addition to our 6.5% risk-free rate, we use a 5.% equity risk premium and a beta of.8, which results in our average WACC of 9.8%. We use a % terminal growth rate. Upside risks to our valuation lie in a higher than expected contribution from the port business and greater cost savings from the STAR refinery, a smaller than expected impact from the upcoming capacity increase on ethylene prices and the potential kick-start of the real estate and Petkojen projects. Petkim valuation, $ mln Equity value Weight Core business 1,338 DCF 1,57 5% Peer comparison 1,62 5% Petlim 258 Petkim fair value 1,596 Target price, TRY per share 3.9 Current price, TRY per share 3.58 Upside 9% Multiples comparison Bloomberg EV/EBITDA P/E ticker 217E 218E 217E 218E Developed markets Du Pont DD US Basf BAS GR Lanxess LXS GR Westlake Chemical WLK US Celanese CE US Arkema AKE FP Sumitomo Chemical 45 JT Asahi Kasei 347 JT Emerging markets Formosa Plastics Corp 131 TT n/m n/m Nan Ya Plastics Corp 133 TT Yanbu National Petrochemical YANSAB AB Saudi Basic industries SABIC AB Saudi Kayan Petrochemical KAYAN AB n/m n/m Industries Qatar BRKM5 BZ Median Petkim Premium to peers 3% 3% -33% -32% Implied value for Petkim, $ mln 1,62 Source: Bloomberg, Deniz Invest Research Forecast revisions for Petkim 216E 217E Old New Diff Old New Diff Revenues 5,315 4,541-15% 5,719 5,514-4% EBITDA % % EBITDA margin 11.5% 17.1% 1.7% 12.% Net income % % Comparison of estimates for Petkim 216C 216E E/C 217C 217E E/C Revenues 4,797 4,541-5% 5,238 5,514 5% EBITDA % % EBITDA margin 14.9% 17.1% 12.2% 12.% Net income % % Net margin 11.1% 12.8% 7.9% 9.4% Source: Bloomberg, Deniz Invest Research 6 DENIZ INVEST RESEARCH

7 PETKIM END OF THE ETHYLENE RUN DECEMBER 12, 216 Sensitivity analysis EBITDA AND NET INCOME We forecast a 15% y-o-y drop in EBITDA in 217 (down 28% in dollar terms) under our normalized naphtha/ethylene spread assumption ($45/tonne). Our calculations indicate a 12% increase in 217 EBITDA for every $5/tonne change in the benchmark spread. As the company is operationally long dollars, for every 1% depreciation in the lira against the dollar, we calculate a 1 pp improvement in the EBITDA margin and 21% boost to EBITDA in lira terms. The bottom line is less sensitive than EBITDA to changes in USD/TRY due to the $2 mln short position on the company s balance sheet. All in all, Petkim benefits from a weaker lira. 217E EBITDA sensitivity, TRY mln 217E net income sensitivity, TRY mln % % % % 15% 5 (5) 33 (21) 1% % -1% 2 (2) (4) (17) 7 1% 5% % -5% +$5/tonne naphtha/ethylene spread 1% cut in natural gas tariff 1% higher production volume 1% higher opex 1% higher USD/TRY +$5/tonne naphtha/ethylene spread 1% cut in natural gas tariff 1% higher production volume 1% higher opex 1% higher USD/TRY 1% higher fee income from Petlim TARGET PRICE SCENARIO ANALYSIS Bull case. Naphtha/ethylene spread of $55 mln in 217 and beyond, and $15 mln in annual cost savings from the STAR refinery. We use a 6.% risk-free rate (11.% COE). Base case. Naphtha/ethylene spread of $45 mln in 217 and beyond, and $1 mln in annual cost savings from the STAR refinery. We use a 6.5% risk-free rate (11.5% COE). Bear case. Naphtha/ethylene spread of $35 mln in 217 and beyond, and $5 mln in annual cost savings from the STAR refinery. We use a 7.% risk-free rate (12.% COE). Scenario analysis for target price, TRY per share Target price bridge, TRY per share Bear case Base case Bull case Target price Last close* * as of December 8, Base case $55 mln naphtha/ethylene spread $15 mln cost saving from STAR refinery 6% risk-free rate Bull case DENIZ INVEST RESEARCH 7

8 DECEMBER 12, 216 PETKIM END OF THE ETHYLENE RUN 217E EBITDA and net income scenario analysis, TRY mln Bear case Base case Bull case 217E EBITDA 217E net income Scenario analysis for 217E multiples 217E P/E E EV/EBITDA Bear case Base case Bull case 8 DENIZ INVEST RESEARCH

9 PETKIM END OF THE ETHYLENE RUN DECEMBER 12, 216 Ownership structure SOCAR Turkey Petrokimya 51.% SOCAR Turkey Enerji 1.3% Others 3.7% Free float 44.% Petkim IFRS financials, TRY mln E 217E 218E 219E INCOME STATEMENT Revenues 4,159 4,133 4,533 4,541 5,514 5,85 5,911 Gross income ,12 Gross margin 6.5% 2.3% 15.8% 18.5% 13.3% 12.9% 18.6% SG&A EBITDA ,33 Adjusted EBITDA ,33 EBITDA margin 5.6% 1.1% 14.7% 17.1% 12.% 11.7% 17.5% DD&A (79) (9) (114) (112) (136) (147) (153) EBIT 152 (44) Interest income Forex gain (71) (11) (9) (115) (62) (39) (13) Revaluation gain Other gains (34) (14) EBT 54 (62) ,94 Income tax (5) 7 65 (93) (13) (137) (214) Minority interest (2) (13) (19) (22) (26) Net income Adjusted net income Net margin 1.2%.2% 13.8% 12.8% 9.4% 9.4% 14.5% EPS, TRY Adjusted EPS, TRY BALANCE SHEET Assets Cash and equivalents , Receivables Inventories Other current assets Total current assets 1,7 1,768 2,768 2,14 1,757 1,617 1,83 Total non-current assets 1,545 2,21 2,693 3,892 4,381 4,721 4,789 Total assets 3,246 3,788 5,461 5,96 6,138 6,338 6,619 Liabilities Short-term borrowings Payables , ,12 1, Other current liabilities Total current liabilities 1,22 1,137 1,584 1,516 1,7 1,774 1,721 Long-term borrowings ,58 1, Other non-current liabilities Total non-current liabilities ,71 1,265 1,238 1,184 1,89 Total liabilities 1,538 1,65 2,655 2,781 2,938 2,958 2,89 Minority interest Equity 1,78 2,132 2,741 3,52 3,123 3,3 3,729 Total liabilities and equity 3,246 3,788 5,461 5,96 6,138 6,338 6,619 Net debt/(cash) (22) 727 1,18 1, CASH FLOW STATEMENT Net income Minority interest DD&A Working capital change (278) 29 (512) 385 (18) 3 38 Other assets change 382 (156) 771 (881) (296) (184) (62) Operating cash flow 232 (31) Capex Other investments (16) Investing cash flow (235) 159 (735) (373) (39) (327) (334) Change in debt Dividends paid (473) (464) (415) (437) Share issues/(purchases) Other (21) (39) Financing cash flow (11) (331) (422) (381) (416) Forex effects Net change in cash (13) (57) (39) (196) 234 RATIOS P/E 73.2 n/m EV/EBITDA 23.5 > P/BV Net debt/ebitda.3.4 neg Total debt/ebitda ROE 2.9%.3% 25.7% 2.% 16.8% 17.% 24.3% ROIC 2.1%.3% 15.1% 11.5% 1.2% 1.7% 15.9% Dividend per share, TRY Dividend yield 8.8% 8.6% 7.7% 8.1% 12.7% P/S P/CF 15.4 neg Revenue growth -4% -1% 1% % 21% 5% 2% EBITDA growth 926% -8% n/m 16% -15% 3% 52% EPS growth 99% -87% n/m -32% -11% 5% 56% Source: Company, Deniz Invest Research DENIZ INVEST RESEARCH 9

10 DECEMBER 12, 216 PETKIM END OF THE ETHYLENE RUN Analyst certification I (Selim Kunter) hereby certify that the views expressed in this research report accurately reflect my personal opinions about the companies and the securities discussed herein. This report has been submitted to the issuer of the financial instrument it relates to before its publication. Like all employees of Deniz Yatirim, the remuneration can be based in part on the results of Deniz Yatirim as a whole. No part of our compensation was or is related to any recommendation or opinion expressed in this report. Company specific regulatory disclosures Deniz Yatirim or any entity of Denizbank can perform commercial banking, brokerage and advisory services for or on behalf of any of the companies or organizations referred to in this report. Furthermore, Deniz Yatirim or any entity of Denizbank may hold a position either independently or for the benefit of third parties, or trade in the securities of any company or organization referred to this report, as a broker, market maker, or in any other role. The following disclosures relate to relationships between Denizbank or its subsidiaries and companies covered by the equity research division of Deniz Yatirim and referred to in this research. Denizbank may have from time to time non-securities related banking relationships with the companies covered by its research department. Measures preventing conflicts of interest To the extent permitted by law, Deniz Yatirim, or its officers, employees or agents, may have bought or sold the securities mentioned in this report, or may do so in the future. Analysts' remuneration can be based in part on the results of Deniz Yatirim which may include investment banking revenues. Analysts are required to respect the information sharing policy that restricts disclosure of recommendations to third parties or to any other department of Deniz Yatirim prior to the distribution or the public disclosure thereof. Similar information barriers apply to the staff involved in the corporate banking, corporate finance and structured finance activity in order to prevent conflicts of interest. They are not allowed to enter into transactions involving securities of a listed company for their own account or for the account any third party, when involved in the customer relationship with such company nor communicate on the relationship with such company outside the corporate department without the prior authorization of the Compliance Officer. 1 DENIZ INVEST RESEARCH

11 This document has been produced under the responsibility of Deniz Yatirim, a subsidiary of Denizbank. Deniz Yatirim is licensed and supervised by the Capital Markets Board of Turkey, the regulatory body. This document is exclusively intended for persons that qualify as 'eligible counterparties' or 'professional clients' and it is not intended to be distributed or passed on, directly or indirectly, to 'retail clients' (as such terms are defined under Directive 24/39/EC of the European Parliament and of the Council). This document is intended only to provide general information and constitutes investment research. It cannot be construed as an investment advice or a personal recommendation as it has been prepared without regard to the individual financial and other circumstances of persons who receive it. This document does not constitute an offer or solicitation for the sale, purchase or subscription of any financial instrument in any jurisdiction. It cannot be considered as an offer for the provision of investment services either. Although all reasonable care has been taken by Deniz Yatirim to ensure that the information contained in this document is accurate, neither Denizbank nor their affiliated companies, nor their directors, advisors or employees can be held liable for any incorrect, incomplete or missing information, or for any direct or indirect damages, losses, costs, claims, liabilities or other expenses which would result from the use of, or reliance on, this document, except in case of willful misconduct and fraud. All opinions, estimates and projections contained in this document are those of Deniz Yatirim as of the date hereof and are subject to change without notice. Investors should carefully read the entire document and any references made therein in order to obtain complete information concerning the analyst's views. This document or any part of it cannot be reproduced, distributed or published without the prior written consent of Deniz Yatirim. Our salespeople, traders and other professionals may provide oral or written comments to our clients that reflect opinions that may differ from the opinions or recommendations expressed in this document. The asset management area, proprietary trading desks and investment businesses of Denizbank, its affiliates may make investment decisions that are inconsistent with the recommendations expressed in this document. Any entity of Denizbank reserves the right to perform banking, brokerage and advisory services for or on behalf of any entity referred to in this document. Furthermore, any entity of Denizbank may trade or hold a position in any financial instrument referred to in this document or any other financial instrument, as a broker, market maker, or in any other role, either independently or for the benefit of third parties. This document is not intended to be distributed to citizens of United States and does not constitute an offer to sell securities or a solicitation of an offer to buy securities within the United States. DENIZ YATIRIM 216