x Abu Dhabi, UAEMonday 24 July 2017

Patience may be a just reward on stock of Turkish company Akfen

Afken Holding, a Turkish infrastructure firm, is expected to reward its investors by exiting from its property and energy assets.

Turkish infrastructure company could provide solid returns for those investors willing to be patient.

Akfen Holding's property and energy assets are well positioned, but the question is whether the company can sell them at reasonable prices, said Ekspres Invest, a research house in Istanbul.

Akfen Holding was founded as a contractor, but after diversifying into maritime services and aviation businesses, the group was restructured as a holding company.

It has already made a partial exit from its subsidiary, Akfen REIT, reducing its stake to 52 per cent through an initial public offering. The 123.4 million Turkish liras offering, which took place on May 6, was three times oversubscribed.

Akfen REIT has an exclusive 25-year agreement with Accor, an international hotel manager, for its Ibis and Novotel brands in Turkey and Russia. Akfen is only a project developer for these hotels and leases them to Accor to receive a rental fee that is a portion of revenues or operating profits, whichever is higher.

"The REIT business is expected to benefit from a rise in demand for three and four-star hotels in the country," said Behlul Katas, an analyst at Ekspres Invest.

Mr Katas initiated coverage of Akfen Holding with an "outperform" rating and a target price of 15.05 Turkish liras a share, implying a potential for a 35 per cent rise. Shares of Akfen Holding have already rallied 21 per cent to 11.10 liras since hitting a low in March.

Akfen Holding has also invested in hydro-power plants, where the operational capacity could more than triple in the next three years, said Mr Katas.

"The company's projects have recently become more valuable due to rising environmental concerns," he said. "In the medium to long term, the management plans to dispose of these assets."

The company sold one of its projects last year for €10 million.