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INITIATION

COMPANY REPORT

EQUITIES RESEARCH ULKER TI

HOW WE DIFFER FROM THE STREET


BNPP Target Price (TRY) EPS 2012 (TRY) EPS 2013 (TRY) 7.20 0.36 0.47 Positive Market Recs 3 Consensus 6.62 0.41 0.47 Neutral 6 % Diff 8.8 2.4 14.9 Negative 1

ULKER BISKUVI SANAYI A.S.


TURKEY / FOOD BEVERAGE & TOBACCO

HOLD
INDUSTRY OUTLOOK

TARGET CLOSE UP/DOWNSIDE

TRY7.20 TRY6.84 +5.3%

Reinventing its strength strengths


CHANGE
The powerhouse of the Turkish snacks market With the acquisition of chocolate confectionary (Ulker Chocolate) and cake (Fresh Cake and AGS) operations, Ulker Biskuvi (Ulker) became a full-scale snacks company with a leading position in the biscuit and scale chocolate segments and a second position in the cake segment. It now has critical mass in production, marketing and distribution in the sector.

KEY STOCK DATA


YE Dec (TRY m) Revenue Rec. net profit Recurring EPS (TRY) EPS growth (%) Recurring P/E (x) Dividend yield (%) EV/EBITDA (x) Price/book (x) 2012E 2,502 123 0.36 (85.3) 19.0 12.0 11.7 2.8 79.9 13.3
Sep-11 Dec-11 Mar-12

2013E 2,748 159 0.47 29.6 15.1 1.6 9.5 2.4 62.8 17.6

2014E 2,959 174 0.51 9.2 14.3 5.4 8.9 2.3 58.5 17.5
Jun-12 81 71 61 51 41 31 21 11 1 (9)

CATALYST
New strategy and accompanying major restructuring is underway Taking inorganic growth, cost savings and new marketing initiatives into account, we expect Ulker to increase its revenues and EBITDA by an average annual rate of 13.5% (org 7.6%) and 34.6% (org 13.0%) to org TRY3,381m and TRY343m between 2011 and 2016. We expect profitability to improve as its new merchandising process takes hold erchandising hold.

Net debt/Equity (%) ROE (%)


Jun-11 8.13 7.63 7.13 6.63 6.13 5.63 5.13 (TRY)

VALUATION
Became stretched after strong run of the stock er We initiate on Ulker with a TP of TRY7.20, indicating 5.3% upside 0, potential. We derive our TP using a blended valuation, assigning 50:50 weights to DCF and peer comparables valuations. Downside risks to our . estimates include execution risk of the new strategy, commodity prices and TRY weakness. Low commodity prices pose upside risk.

Ulker Biskuvi Sanayi A.S.

(%)

Share price performance Absolute (%) Relative to country (%) Next results Mkt cap (USD m)

1 Month 3 Month 12 Month 18.4 8.6 42.6 49.2 42.1 47.4

August 2012 1,284 3.2 21 Yldiz Holding (45%) 7.78/4.80 58.0 342

COMMENT
Attractive growth potential in a market with high barriers to entry Ulker, with an almost 48% market share, is the undisputable leader of the Turkish snacks market for biscuit, cake and chocolate This market has chocolate. increased at a CAGR of 10% over last three years in value terms and 6% in volume terms. Eti is the second and only other important player with a 28% share. No other single player has more than a 5% share. Over next five years, we expect the market to grow 3.5% pa in volume and 8.0% pa in value, thanks to favourable demographics and income per capita growth. Turkeys population is growing 1.2% pa and its per capita income has increased sharply at a CAGR of 37.1% in the last eight years.

3m avg daily turnover (USD m) Free float (%) Major shareholder 12m high/low (TRY) 3m historic vol. (%) ADR ticker ADR closing price (USD) Issued shares (m)

Sources: Bloomberg consensus; Bloomberg consensus; TEB Investment/BNP Paribas estimates

Kenan Cosguner
kenan.cosguner@teb.com.tr +90 216 636 4531

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27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

CONTENTS
Investment theme highlights __________________________________________________________________ 3
Investment positives _____________________________________________________________________________________________ 3 Investment risks ________________________________________________________________________________________________ 3

Valuation ___________________________________________________________________________________ 5
DCF methodology _______________________________________________________________________________________________ 6 Peer comparison ________________________________________________________________________________________________ 6

Company dynamics __________________________________________________________________________ 8


Business structure ______________________________________________________________________________________________ 8 Ulker definitely had to change strategy to boost profitability ___________________________________________________________ 10

Profitability margins and commodity prices ____________________________________________________ 11


Working capital and procurement of raw materials __________________________________________________________________ 11 Exports have lower profitability but offer growth ____________________________________________________________________ 12

P&L, Balance Sheet and Cash Flow ____________________________________________________________ 13

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BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

Investment theme highlights


Investment positives We initiate coverage on Ulker Biskuvi (Ulker) with a HOLD recommendation and a target price of TRY7.20/share, indicating +5.3% upside. In our view, most of the potential improvement in operating performance and enhanced transparency in corporate structure has been discounted in the stock price, which has risen roughly 40% and outperformed the benchmark by 50% in last two months. We estimate a remarkable improvement in EBITDA margin, from 4.3% in 2011 to 8.1% in 2012, due to the increasing share of higher-margin chocolate in total sales as well as recent initiatives aimed at boosting profit margins by: 1) merging three distribution arms into a single entity to increase economies of scale (should produce 15-20% savings in distribution costs by reducing the number of local distributors from 235 to roughly 100); and 2) focusing on high turnover-high margin SKUs while cutting the total number of SKUs (stock keeping units) from more than 500 to around 350. At the same time, the Company increased the leverage of star SKUs (high turnover-high margin) with advertising and marketing campaigns and eliminating unprofitable ones. Ulker also believes that the increasing share of high turnover products should also reduce product returns as average shelf life diminishes, resulting in a further improvement in profitability. Over the next five years, we expect the snacks markets for biscuit, chocolate and cake to grow an average 3.5% pa in volume and 8.0% pa in value, thanks to favourable demographics and potential per capita income growth. With more than 43% of all citizens under the age of 24, Turkey has an annual population growth of 1.2%. Its per capita income has increased sharply at a CAGR of 37.1% in the last eight years. Between 2008 and 2011, the total snacks market for biscuits, chocolate confectionary and cake increased at a CAGR of 10% in value terms to TRY4.7b and 6% in volume terms to 505,000 tonnes in 2011. Per capita biscuit and chocolate consumption in Turkey are 3kg and 2kg, respectively, versus 8.5kg and 4kg in Europe. We see considerable barriers to the Turkish confectionary market. Although the capital expenditure requirement for production facilities is relatively low, the challenge lies in: 1) brand building by delivering products that satisfy consumer tastes; 2) establishing a large network and maintaining its economic viability by feeding it with high volumes and product variety; and 3) providing working capital. Moreover, intensive price and product competition between two major players Ulker and Eti also discourage others entering the sector and form another major barrier for potential entrants. Although dividend yield was remarkably high in 2012, we do not expect it to be sustained at that level. Investment risks Past acquisitions were priced at the high-end of the range. Ulker acquired a 24.9% stake in Godiva at an acquisition multiple of 15.0x EV/EBITDA in late 2007. Last August, Ulker acquired a 91.7% stake in Ulker Cikolata from Yldz Holding and Dynamic Growth for TRY825m, valuing it at TRY900m. With roughly TRY250m net debt and 2011 EBITDA estimate of TRY60m, we derived an EV/EBITDA multiple of 19.1x for the acquisition. High acquisition multiples should also reflect Ulkers synergy expectations from the acquisition. However, those transactions could be value dilutive for minority shareholders. Any secondary public offering in the medium term. Yildiz Holding and the Ulker family members hold Aand B-type shares, which constitute less than 0.0001% of total outstanding shares. This entitles them to appoint five of the seven members of the board of directors. The remaining two independent members of the board are elected by the General Assembly. Though we do not expect a secondary public offering in the short term, Yildiz Holding and the Ulker family do not need to hold a significant stake to control the company. Though we expect Ulker to be able to maintain its current high market share, the company has lost 5-7ppt market share in biscuit, chocolate and cake categories to arch rival Eti over the last four years, according to AC Nielsen. There are certainly execution risks inherent regarding the new strategy that may further hurt Ulkers market share. In our view, competitive response is a major risk factor with Eti having previously pursued a similar (SKU-focused) strategy. As both Ulker and Eti focus on similar SKUs as their major source of income, competition could grow intense. Last March Yldz Holding merged all distribution arms serving traditional channels into a single company, Horizon Dagitim (Horizon). Potential cost savings will be fully attained from 2013 onwards. Ulker has no stake in Horizon, where cost savings from the merger of distribution channels could accrue. Not that before that merger Ulker owned distribution arms serving traditional channels. We assume that savings from the merger will help Ulker reduce distribution expenses, as Horizon will not be profit-driven and will effectively return savings to Ulker.

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

The declining share of traditional channels over modern channels poses a major risk to Ulkers profitability as it derives almost 70% of its revenues and more than 85% of operational income from traditional channels (small retail and grocery stores), according to our estimates. The strong growth of hard discounters is another major risk: they tend to build their own private labels. However, Ulkers exposure to private label production via Biskot, in which Ulker has a 44% stake, partly makes up for the adverse effect of private labels. Biskot accounts for roughly 11% of Ulkers consolidated revenues in 2012, according to our estimates. Biskot has its own brands and is a major supplier of the largest hard discount and retail chain, BIM (BIMAS TI; BUY), which has a 14% share in the biscuit market. Prices have increased below inflation in the between 2008 and 2011. Major raw materials accounts for 70% of total production costs. Therefore, Ulker struggles to pass on any major increases in wheat, cacao, sugar and palm oil prices which subsequently hit profitability margins. Any major TRY weakness would also hurt profitability, as roughly 50% of raw material prices are USD-denominated. Ulker procures almost 40% of its raw material requirements from sister companies and generates any revenue via sales and marketing companies owned by Yildiz Holding on an arms length basis.

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

Valuation
We derive our target price based on a blended valuation, assigning 50:50 weights to DCF- and peercomparison methodologies. EXHIBIT 1: Summary valuation
Method Value (TRY m) Discounted cash flow Peer group multiples 2,181.4 2,251.2 Weight (%) 50 50 Weighted value (TRY m) 1,090.7 1,125.6

Estimated fair value

2,216.3

Issued shares (m)

342.0

Current price (TRY/share) 12-month target price (TRY/share) Upside (%) Source: TEB Investment/BNP Paribas estimates

6.84 7.20 5

EXHIBIT 2: Income statement forecasts


Year-end 31 Dec (TRY m) Sales volume (000 tonnes) Growth (y-y %) Biscuits Growth (y-y %) Chocolate Growth (y-y %) Cake Growth (y-y %) Revenues COGs Gross profit Operating expenses Operating profit EBITDA EBITDA margin (%) Other income, net Net financial income (exp.) Profit before MI & tax Minority interest Tax expense Net profit 1,799 1,435 364 319 45 77 4.3 54 621 720 (12) (51) 657 2,502 1,866 636 480 156 203 8.1 22 (12) 166 (10) (33) 123 33 56 240 2011 328 2012E 408 24 241 1 116 108 51 2013E 423 4 248 3 121 4 54 6 2,748 2,024 724 517 207 256 9.3 20 (12) 215 (13) (43) 159 2014E 439 4 255 3 127 5 57 6 2,959 2,178 781 554 227 282 9.5 20 (12) 235 (14) (47) 174 2015E 456 4 262 3 134 5 60 5 3,167 2,322 845 589 255 314 9.9 20 (12) 263 (16) (53) 195 2016E 473 4 269 3 140 5 63 5 3,381 2,475 907 626 281 343 10.1 20 (12) 289 (17) (58) 214 2017E 491 4 277 3 147 5 66 5 3,610 2,638 973 664 308 373 10.3 20 (12) 316 (19) (63) 234 2018E 508 4 285 3 153 4 70 5 3,844 2,804 1,040 703 337 405 10.5 20 (12) 345 (21) (69) 255 2019E 523 3 291 2 159 4 73 5 4,043 2,947 1,096 735 360 431 10.7 20 (12) 368 (22) (74) 272 2020E 536 2 294 1 165 4 77 5 4,237 3,088 1,149 766 383 457 10.8 20 (12) 391 (23) (78) 289

Sources: Ulker Biskuvi; TEB Investment/BNP Paribas estimates

We assume the share of exports over total revenues declines gradually to 10% from 15%. Apart from cost savings from distribution and an increasing share of higher-margin chocolate sales, we expect the new marketing strategy (leveraging high-margin high-turnover products and eliminating unprofitable ones) to work out well for profitability margins from 2013. We do not forecast a major increase in raw material costs that Ulker cannot pass through to customers, nor do we expect major competition from Eti to hurt profitability.

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

DCF methodology Utilization levels at production facilities are at a relatively low 70-75%. So, despite our forecasting a 20% increase in unit sales over the next five years, investment of just 2% of total revenues should cover any major capacity expansion. On the working capital front, we expect lower inventory and receivable days as the company focuses on faster-moving products. Over the forecast horizon (between 2012 and 2020), we forecast a CAGR of 6.5% in revenues, 10% in EBITDA and 20% in free cash flow. We adjust our DCF valuation for the value of Ulkers Godiva stake and receivables from Yildiz Holding as well as for non-controlling shareholdings In Biskot, in which they own a 56% stake. EXHIBIT 3: DCF valuation
Year-end 31 Dec (TRY m) Revenues Growth (y-y %) EBITDA Margin (%) EBIT Unlevered taxes Effective tax rate (%) NOPAT Capital expenditures Depreciation & amortisation Change in working capital Unlevered free-cash-flow 2011 1,799 18.1 77 4.3 39 (8) (20) 31 65 38 15 (10) 2012E 2,502 39.1 203 8.1 160 (32) (20) 128 77 43 (51) 145 2013E 2,748 9.8 256 9.3 211 (42) (20) 169 76 46 27 111 2014E 2,959 7.7 282 9.5 234 (47) (20) 187 74 48 23 138 2015E 3,167 7.0 314 9.9 263 (53) (20) 211 72 50 23 166 2016E 3,381 6.8 343 10.1 290 (58) (20) 232 73 53 24 188 2017E 3,610 6.8 373 10.3 318 (64) (20) 254 73 55 25 212 2018E 3,844 6.5 405 10.5 347 (69) (20) 278 72 58 26 238 2019E 4,043 5.2 431 10.7 371 (74) (20) 297 71 60 22 264 2020E 4,237 4.8 457 10.8 395 (79) (20) 316 70 62 21 287

WACC at target D/TC of 20% (%) Discount multiplier Cost of equity (%) Cost of debt (after tax) (%)

9.7 1.00 10.4 7.1

10.9 0.90 11.5 8.4

12.3 0.80 13.2 8.5

12.2 0.72 13.3 7.8

11.4 0.64 12.4 7.4

10.9 0.58 11.8 7.0

10.6 0.52 11.4 7.6

11.3 0.47 12.2 7.5

11.2 0.42 12.1 7.5

11.2 0.38 12.1 7.5

NPV FCF Terminal value@%3 Value of company Minority interest Equity participation & receivables Net debt Implied equity value 979 1,380 2,463 172 392 501 2,181

Sources: Ulker Biskuvi; TEB Investment/BNP Paribas estimates

Peer comparison We select a wide array of global food and confectionary companies as Ulkers peers. However, we note: there are not many comparable confectionary companies of a similar size, business structure and product portfolio; and Ulker fundamentally differs from many of its peers in two aspects: 1) many global peers have low growth rates in their major markets, although they have a significant exposure to emerging markets where they enjoy significant growth rates; and 2) Ulker enjoys a moderate level of growth in its major market but does not have any direct exposure to emerging markets.

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

EXHIBIT 4: Peer comparison


Market Company BBG code cap (USD m) Developed markets Kraft Foods General Mills Kellogg Co Hershey Co Flowers Foods Campbell Soup Co Conagra Foods Inc Nestle Sa Barry Callebaut Ag Lindt & Spruengli Ag Petra Foods Ltd Mayora Indah Pt Want Want China Holdings Grupo Bimbo Peer group average Ulker Biskuvi ULKER TI 1,284 KFT US GIS US K US HSY US FLO US CPB US CAG US NESN VX BARN SW LISP SW PETRA SP MYOR IJ 151 HK BIMBOA MM 66,771 24,643 17,290 14,822 3,037 9,953 10,330 185,338 4,479 7,602 1,077 1,706 15,613 10,038 16.5 15.0 14.1 22.9 22.5 12.1 13.4 17.4 16.3 28.0 17.5 39.3 39.8 20.5 17.1 3.4 14.9 14.5 14.4 20.2 21.2 13.0 13.9 16.7 16.7 26.6 15.1 24.9 28.9 22.6 15.8 19.0 13.4 13.5 13.3 18.5 18.3 13.0 13.0 15.5 14.5 24.3 13.4 18.9 23.3 17.9 14.2 15.1 12.3 12.7 12.3 17.4 17.4 12.5 12.5 14.2 12.8 22.2 13.0 15.1 19.1 15.8 13.1 14.3 10.5 10.2 9.7 12.6 11.1 7.9 7.7 11.8 10.8 15.0 12.8 21.1 27.6 10.9 10.2 28.8 9.9 9.8 9.7 11.4 10.0 8.4 7.8 11.3 11.8 14.6 10.9 14.3 19.7 10.8 10.0 11.7 9.2 9.2 8.9 10.6 8.8 8.3 7.3 10.5 10.8 13.5 10.1 11.5 15.7 9.6 9.3 9.5 8.6 8.7 8.4 10.0 9.0 7.9 6.9 9.6 9.8 12.5 9.5 9.5 13.1 8.0 8.6 8.9 1.7 2.2 1.7 2.7 1.2 1.6 1.0 2.2 1.1 2.5 0.9 2.0 5.3 1.3 1.5 1.2 1.7 1.9 1.6 2.5 1.1 1.6 1.0 2.2 1.1 2.5 0.9 1.6 4.2 1.1 1.4 1.0 1.6 1.8 1.5 2.4 1.0 1.6 0.9 2.0 1.0 2.3 0.8 1.3 3.4 1.0 1.4 0.9 1.5 1.8 1.4 2.2 1.0 1.6 0.9 1.9 1.0 2.2 0.8 1.1 2.9 0.9 1.3 0.9 ---------------- P/E ---------------2011 (x) 2012E (x) 2013E (x) 2014E (x) -------------- EV/EBITDA ----------2011 (x) 2012E (x) 2013E (x) 2014E (x) ------------- EV/Sales -------------2011 (x) 2012E (x) 2013E (x) 2014E (x)

Premium/discount to Peer group average (%) (80) 21 7 9 181 17 2 4 (18) (34) (35) (34)

Target value, TRY m

2,251

Sources: Bloomberg consensus estimates; except for Ulker Biskuvi which are TEB Investment/BNP Paribas estimates

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

Company dynamics
Business structure Ulker Biskuvi is the largest snacks and confectionary producer with a 49% market share in biscuits and crackers, a 49% share in chocolate confectionary and a 39% share in the cake market in Turkey. The company is controlled by Yildiz Holding, the largest FMCG food and beverage group in Turkey with more than TYR11b of revenues in 2011. Apart from snacks and confectionaries, the Yildiz group is also a major player in dairy products, edible oils, beverages, ice cream and frozen foods. Yildiz Holding is also the major shareholder of Bizim Toptan, Turkeys largest cash and carry chain and Sok, a hard discount retail chain. The group formed a JV with leading international food players Hero, Kelloggs, McCormick and Granini. Yldz Holding also owns Godiva Chocolate, a luxury, hand-made chocolate producer, in which Ulker has a 19.2% stake. Ulker Biskuvi controls Biskot Gida, which produces biscuits, chocolates, cakes and non-Ulker brands. For the marketing of Ulker and non-Ulker brand products, the company employs Horizon for traditional channels (small retail shops and corners), and Pasifik Dagitim for modern channels (retail chains and cash and carry markets). Export sales are made by Istanbul Gida. EXHIBIT 5: Business structure
Production

Ulker Cikolata (91.7%) Chocolate production (Ulker brand only)

Biscuit and cake production (Ulker brand only)

Biskot Biskuvi (43.9%) Biscuit, cake and chocolate production

Marketing & sales

Pasifik Dagitim Modern channels


Companies controlled by Ulker Biskuvi are shown in green Source: Ulker Biskuvi Sanayi A.S.

Horizon Dagitim Traditional channels

Istanbul Gida (91.4%) Export sales

Ulker created a much simpler business structure by divesting non-core businesses and shareholdings in last three years. Using proceeds from the divestitures, Ulker acquired other production entities to complete its product portfolio. This was also positive for Yildiz Holding as the acquisitions eliminated internal competition between production companies and distribution companies, paving the way for synergies. Recently, Ulker Cikolata and Fresh Cake were acquired from Yildz Holding. Also, Ideal (biscuit producer) and Birlik (flour producer) were merged with Ulker while Biskot acquired a non-Ulker brand cake manufacturer. As a result, all the groups snack companies, except candy and gum, are now fully consolidated under Ulker.

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

EXHIBIT 6: Shareholders of Ulker


Free Float 20.7% Yldz Holding 44.5%

lker Family 11.8%

Dynamic Growth Fund 20.9%


Source: Ulker Biskuvi Sanayi A.S.

Onem Gida 2.1%

Biscuit, chocolate confectionary and cake consumption has increased respectively over the last three years at CAGRs of 4%, 6% and 9% by volume and 9%, 10% and 15% by value. EXHIBIT 7: Biscuit, chocolate and cake sales by volume
(000 tonnes) 300 250 200 150 100 50 0 2008 2009 2010 2011
Sources: AC Nielsen; Ulker Biskuvi; TEB Investment/BNP Paribas estimates

Biscuit

Chocolate

Cake

EXHIBIT 8: Biscuit, chocolate and cake sales by value


(TRY m) 2,500 2,000 1,500 1,000 500 0 2008 2009 2010 2011
Sources: AC Nielsen; Ulker Biskuvi; TEB Investment/BNP Paribas estimates

Biscuit

Chocolate

Cake

Turkish snacks market for biscuit, cake and chocolate have been dominated by two large players, namely, Ulker and Eti (not listed), which together currently account for 88% volume market share in biscuits, 88% in cake and 60% in the chocolate confectionary market.

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

Based on 2011 estimates of AC Nielsen (market data excluding BIM) for the biscuit segment, Ulker is the leading player with a 49% volume share followed by Etis 39% share, while private labels, Bifa, Saray, and Solen among others share the remaining pie. International players have almost no presence in the segment. EXHIBIT 9: Volume share in snacks market for biscuits, cake and chocolate
Others 15.0% Nestle 4.0% Ulker 48.0%

Saray 5.0%

Eti 28.0%
Sources: AC Nielsen; Ulker Biskuvi and TEB BNP Paribas estimates

In the chocolate segment, Ulker is the market leader with a 49% share, followed by Eti and Nestle, each with an 11% market share. In the segment, some other international (Kraft, Mars) and local players (Solen, Sanset) as well as private-label products exist. The chocolate confectionary segment is not as concentrated as the biscuit and cake segments. In the cake segment, Eti has the largest share with 49%, followed by Ulker with 39%. Among others, Bifa, Saray, Uno, Solen and private-label products share the rest of the pie. Some multinationals are also active in the segment, but their presence is not significant. Reaching 175,000 sales points, Ulkers distribution system is its major competitive advantage. Like all other food companies, Ulker uses two distribution channels to sell its products in the local market: 1) traditional channels (include small grocery and convenience stores) account for 70% of its total domestic revenue, and 2) modern channels include retail chains and supermarkets. Ulker definitely had to change strategy to boost profitability Despite Ulkers large distribution network, well-recognized brand and cost advantages, Eti pursued a successful sales and marketing strategy that helped it not only to increase market share across all categories but also to produce higher profitability than it would have otherwise. According to AC Nielsen data, in the last four years, Eti has gained 5-7ppt market share in biscuit, chocolate and cake categories at the expense of Ulkers market share in biscuit, chocolate and cake, which slid from 57%, 56% and 47% in 2008 to 49%, 49% and 39% in 2011. According to Eti, consumers are indifferent between Ulker and Eti brands and would substitute one for the other and, hence, product availability, freshness and visibility are key success factors for the products. To make the best out of its total shelf-space, Eti managed three major substitute snack categories biscuits, chocolates and cakes under a single category, among which boundaries get blurred with the increasing number of hybrid products occupying the shelves. Eti used a single distribution channel and network for all the three categories so as to be more responsive to consumer demand. The company reduces the number of SKUs (stock-keeping-units) and focuses on highmargin fast-moving products to boost profitability in order to employ self-space more efficiently and effectively. Eti limits the number of SKUs and drops unprofitable SKUs to make room for potentially profitable new ones. The company also identifies key profitable products and concentrates its advertising and marketing efforts on those products to support them.

10

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

Profitability margins and commodity prices


Prices of chocolate confectionary products, on average, are twice as much as those of biscuit product. Cake prices are slightly higher than biscuit prices in general. While chocolate products have the highest gross profit margin, private label and export products have the lowest gross profit margins, at less than 20%. Gross profit margins of chocolate confectionaries vary from 23 to 30%, while that of biscuit from 20 to 25% and that of cake from 15 to 20%. EXHIBIT 10: Breakdown of production costs
Overhead & labour 12.0% Flour 11.2% Palm oil 15.0% Other 15.3%

Nuts 9.7% Packaging 13.3%


Sources: Ulker Biskuvi Sanayi A.S.; TEB Investment/BNP Paribas estimates

Cacao 8.2% Sugar 15.3%

Major production inputs are sugar, palm oil, packaging, flour, nuts and cacao. Nuts and cacao are major ingredients for chocolate confectionary while flour is major ingredient for biscuits and cakes. Sugar, palm oil and packaging are main ingredients and inputs for all categories. According to our estimates, raw materials account for 85% of total production cost and roughly 50% of the total raw material cost is denominated in USD. Our analysis also shows that unit price increases in the snacks market for biscuit, chocolate and cake products remained below consumer inflation and increases in input costs in the last three years. We estimated that average unit prices increased 5.1% while input costs and consumer prices increased 7.4% and 7.7%, respectively in the past three years. Despite the weak TRY against the USD, the recent decline in commodity prices due to global economic slowdown help the profitability margins of producers in the sector. We do not expect an adverse impact from commodity prices on profit margins. However, it is an important risk factor to the companys profitability. We expect unit prices to move in tandem with unit costs. EXHIBIT 11: Commodity Price changes and the impact of a potential 10% increase in prices on EBITDA*
(%) Flour Palm oil Cacao Sugar Nuts *Assuming that the company does not pass through any cost increase Source: TEB Investment/BNP Paribas estimates Price increase in last three years 7.5 16.5 14.5 5.0 13.0 Impact on the companys EBITDA* (8.9) (11.9) (6.5) (12.1) (7.7)

Working capital and procurement of raw materials We assume the cash cycle of Ulker will be 40 days based on 70 collection, 70 inventory and 100 payment days. We expect a major improvement in the cash cycle on the back of the new strategy that would increase inventory and receivable turnover. Ulker procures wheat from the local market during the harvest season between May and September and holds it on inventory for use until the next harvest season. The company does not need to hold inventory for palm oil, sugar or cacao. The company supplies sugar from the local market and palm oil and cacao from its sister companies.

11

BNP PARIBAS

27 JUNE 2012

Ulker Biskuvi Sanayi A.S.

Kenan Cosguner

Exports have lower profitability but offer growth The share of exports in Ulkers total revenue ranged from 14% to 17% in the last four years. As exports offer little to profitability, we believe Ulker would have no major drive to grow its export sales significantly in the medium term. As chocolate product exports are much lower share in total revenues, the share of exports in total revenues will decline to 10% level, going forward. The company exports to more than 80 countries mainly in the Middle East and Gulf, Europe and South Africa. Ulkers exports mostly target the Turkish population in the Middle Eastern countries and Germany. Profitability of exports is lower than domestic sales, due to the higher transportation and distribution costs. In the short term, Ulker is unlikely to expand its international operations via a JV/ acquisition or establish a production facility since it is focused on implementing a new strategy for its domestic operations. However, Yildiz Holding has a significant presence in the region with production facilities in KSA, Egypt, Romania, Ukraine, Kazakhstan, and Pakistan. The group also built its own distribution systems in those countries. The Groups ambition to grow in these regions is evident by recent acquisitions. Ulker may invest in one of those production facilities in the future.

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Financial statements
Ulker Biskuvi Sanayi A.S.
Profit and Loss (TRY m) Year Ending Dec Revenue Cost of sales ex depreciation Gross profit ex depreciation Other operating income Operating costs Operating EBITDA Depreciation Goodwill amortisation Operating EBIT Net financing costs Associates Recurring non operating income Non recurring items Profit before tax Tax Profit after tax Minority interests Preferred dividends Other items Reported net profit Non recurring items & goodwill (net) Recurring net profit Per share (TRY) Recurring EPS * Reported EPS DPS Growth Revenue (%) Operating EBITDA (%) Operating EBIT (%) Recurring EPS (%) Reported EPS (%) Operating performance Gross margin inc depreciation (%) Operating EBITDA margin (%) Operating EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout on recurring profit (%) Interest cover (x) Inventory days Debtor days Creditor days Operating ROIC (%) Operating ROIC - WACC (%) ROIC (%) ROIC - WACC (%) ROE (%) ROA (%)
*Pre exceptional, pre-goodwill and fully diluted

2010A 1,576 (1,161) 415 4 (266) 153 (36) 0 117 179 0 0 0 296 (32) 264 (7) 0 0 258 0 258

2011A 1,799 (1,396) 402 54 (319) 137 (38) 0 99 621 0 0 0 720 (51) 669 (12) 0 0 657 0 657

2012E 2,502 (1,823) 679 22 (480) 221 (43) 0 178 (12) 0 0 0 166 (33) 133 (10) 0 0 123 0 123

2013E 2,748 (1,978) 769 20 (517) 273 (46) 0 227 (12) 0 0 0 215 (43) 172 (13) 0 0 159 0 159

2014E 2,959 (2,130) 829 20 (554) 295 (48) 0 247 (12) 0 0 0 235 (47) 188 (14) 0 0 174 0 174 In 2011, sale of Bimas stake boosted the bottom line Taking inorganic growth, cost savings and new marketing initiatives into account, we expect Ulker to increase revenues and EBITDA by 39.1% and 61.3% y-y in 2012

0.96 0.96 0.00 9.9 46.1 11.5 162.8 162.8 24.0 9.7 7.4 16.3 10.9 0.0 47.4 74.7 109.1 14.2 6.4 19.9 3.0

2.45 2.45 0.00 14.1 (10.7) (15.8) 155.1 155.1 20.2 7.6 5.5 36.5 7.1 0.0 39.5 94.7 89.3 8.5 5.3 53.4 1.7

0.36 0.36 0.82 39.1 61.3 80.5 (85.3) (85.3) 25.4 8.8 7.1 4.9 20.0 228.1 14.8 46.8 78.7 94.7 12.2 10.1 13.3 5.5

0.47 0.47 0.11 9.8 23.4 27.6 29.6 29.6 26.3 9.9 8.3 5.8 20.0 23.1 18.9 59.3 69.0 102.1 15.4 12.8 17.6 6.8

0.51 0.51 0.37 7.7 8.2 8.7 9.2 9.2 26.4 10.0 8.3 5.9 20.0 73.2 20.6 59.9 69.7 103.1 16.2 13.5 17.5 7.0

Sources: Ulker Biskuvi; Bloomberg consensus; TEB Investment/BNP Paribas estimates

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Cash Flow (TRY m) Year Ending Dec Recurring net profit Depreciation Associates & minorities Other non-cash items Recurring cash flow Change in working capital Capex - maintenance Capex - new investment Free cash flow to equity Net acquisitions & disposals Dividends paid Non recurring cash flows Net cash flow Equity finance Debt finance Movement in cash Per share (TRY) Recurring cash flow per share FCF to equity per share Balance Sheet (TRY m) Year Ending Dec Working capital assets Working capital liabilities Net working capital Tangible fixed assets Operating invested capital Goodwill Other intangible assets Investments Other assets Invested capital Cash & equivalents Short term debt Long term debt * Net debt Deferred tax Other liabilities Total equity Minority interests Invested capital 1.09 0.57 2010A 892 (334) 558 301 860 0 0 369 704 1,933 (619) 451 508 340 0 65 1,459 68 1,933 2.59 1.00 2011A 1,418 (497) 921 543 1,463 0 0 275 29 1,768 (405) 764 270 629 0 41 1,003 95 1,768 0.48 0.41 2012E 1,476 (606) 870 576 1,446 0 0 275 29 1,750 (275) 764 270 759 0 41 845 105 1,750 0.60 0.30 2013E 1,555 (658) 897 607 1,504 0 0 275 29 1,808 (353) 764 270 681 0 41 968 118 1,808 0.65 0.36 2014E 1,622 (703) 920 633 1,553 0 0 275 29 1,857 (364) 764 270 670 0 41 1,014 132 1,857 2010A 258 36 0 0 294 (66) 0 (75) 153 0 0 240 393 7 178 577 2011A 657 38 0 0 695 (362) 0 (65) 268 (94) (55) 378 497 26 75 598 2012E 123 43 0 0 166 51 0 (77) 140 0 (280) 0 (140) 10 0 (130) 2013E 159 46 0 0 205 (27) 0 (76) 102 0 (37) 0 65 13 0 78 2014E 174 48 0 0 222 (23) 0 (74) 124 0 (127) 0 (3) 14 0 11

Kenan Cosguner

* includes convertibles and preferred stock which is being treated as debt

Per share (TRY) Book value per share Tangible book value per share Financial strength Net debt/equity (%) Net debt/total assets (%) Current ratio (x) CF interest cover (x) Valuation Recurring P/E (x) * Recurring P/E @ target price (x) * Reported P/E (x) Dividend yield (%) P/CF (x) P/FCF (x) Price/book (x) Price/tangible book (x) EV/EBITDA (x) ** EV/EBITDA @ target price (x) ** EV/invested capital (x)
* Pre exceptional, pre-goodwill and fully diluted

5.43 5.43 22.3 11.8 1.9 2010A 7.1 7.5 7.1 0.0 6.3 12.0 1.3 1.3 15.1 15.8 1.2

3.73 3.73 57.3 23.5 1.4 2011A 2.8 2.9 2.8 0.0 2.6 6.9 1.8 1.8 17.5 18.3 1.4

2.47 2.47 79.9 28.8 1.3 19.1 2012E 19.1 20.1 19.1 12.0 14.1 16.7 2.8 2.8 13.0 13.5 1.8

2.83 2.83 62.8 24.2 1.3 15.8 2013E 14.7 15.5 14.7 1.6 11.4 23.0 2.4 2.4 11.6 12.1 1.7

2.97 2.97 58.5 22.9 1.4 17.6 2014E 13.5 14.2 13.5 5.4 10.5 18.8 2.3 2.3 10.6 11.1 1.7

** EBITDA includes associate income and recurring non-operating income

Sources: Ulker Biskuvi; Bloomberg consensus; TEB Investment/BNP Paribas estimates

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Kenan Cosguner

NOTES

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Kenan Cosguner

NOTES

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Kenan Cosguner

Disclaimers and Disclosures


ANALYST(S) CERTIFICATION
Kenan Cosguner, TEB Investment, BNP Paribas JV, +90 216 636 4531, kenan.cosguner@teb.com.tr. The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, relate to the specific recommendation or views expressed herein; and (iii) is not aware of any other actual or material conflicts of interest concerning any of the subject securities, companies or issuers referenced herein as of the time of this certification. Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE and/ or FINRA regulations.

GENERAL DISCLAIMER
This report was produced by TEB Investment BNP Paribas a member company of the BNP Paribas Group. "BNP Paribas is the marketing name for the global banking and markets business of BNP Paribas Group1. This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set forth herein. BNP Paribas analysts prudently perform analysis and create quantitative models and estimates derived from their own review of publicly available data without any assistance from any represented company. BNP Paribas analyst estimates and models reflect the analysts current judgment only; they are neither all-inclusive nor can they be guaranteed. The analysts analysis and models are subject to change based on various other factors. Valuations are based on internal quantitative models and qualitative interpretation. No representation or warranty, express or implied, is made that such information or analysis is accurate, complete or verified and it should not be relied upon as such. Analysts' compensation is not linked to investment banking or capital markets transactions performed by BNP Paribas or the profitability or revenues of particular trading desks. BNP Paribas analysts may participate in company events such as site visits and are prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the recipients own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this report may not be available for sale in certain jurisdictions. BNP Paribas is not aware of any other actual or material conflicts of interest concerning any of the subject securities, companies or issuers referenced herein as of the time of publication of the research report. Australia: This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street Sydney NSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no. 238043 and therefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. By accepting this document you agree to be bound by the foregoing limitations, and acknowledge that information and opinions in this document relate to financial products or financial services which are delivered solely to wholesale clients (in terms of the Corporations Act 2001, sections 761G and 761GA; Corporations Regulations 2001, division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the Corporations Act 2001). Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Hong Kong: This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whose business involves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a subsidiary of BNP Paribas, is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities and providing automated trading services. For professional investors in Hong Kong, please contact BNP Paribas Securities (Asia) Limited for all matters and queries relating to this report. India: In India, research is prepared and distributed by BNP Paribas Securities India Pvt. Ltd. (a member of the BNP Paribas Group), having its registered office at 5th Floor, BNP Paribas House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400 051. BNP Paribas Securities India Pvt. Ltd. is a joint venture with Geojit Financial Management Services Private Limited and is a Securities and Exchange Board of India (SEBI) registered subbroker of Geojit BNP Paribas Financial Services Ltd., which is a stockbroker having membership in the Equities and Futures & Options segments of National Stock Exchange of India Ltd. (INB231337230/INF231337230) and Bombay Stock Exchange Ltd. (INB011337236/INF011337237). Indonesia: This report is distributed by PT BNP Paribas Securities Indonesia, having its registered office at Menara BCA, 35th Floor, Grand Indonesia, Jl. M.H.Thamrin No.1, Jakarta, 10310, Indonesia. PT BNP Paribas Securities Indonesia is a fully subsidiaries company of BNP Paribas SA and is licensed under Capital Market Law No. 8 of 1995 and the holder of broker-dealer and underwriter licenses issued by the Capital Market Supervisory Agency. PT BNP Paribas Securities Indonesia is also a member of Indonesia Stock Exchange. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association and the Financial Futures Association of Japan. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd.

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Singapore: This report is distributed in Singapore by BNP Paribas Securities (Singapore) Ptd Ltd ("BNPPSSL") and may be distributed in Singapore only to an Accredited or Institutional Investor, each as defined under the Financial Advisers Regulations ("FAR") and the Securities and Futures Act (Chapter 289) of Singapore, as amended from time to time. In relation to the distribution to such categories of investors, BNPPSSL and its representatives are exempted under Regulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore, regarding the disclosure of certain interests in, or certain interests in the acquisition or disposal of, securities referred to in this report. For Institutional and Accredited Investors in Singapore, please contact BNP Paribas Securities (Singapore) Ptd Ltd for all matters and queries relating to this report. South Africa: In South Africa, BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial Services Board. Taiwan: Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co., Ltd. Such information is for your reference only. The reader should independently evaluate the investment risks and is solely responsible for their investment decision. Information on securities that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities. BNP Paribas Securities (Taiwan) Co., Ltd. may not execute transactions for clients in these securities. This publication may not be distributed to the public media or quoted or used by the public media without the express written consent of BNP Paribas. Thailand: Research relating to Thailand and Thailand based issuers are produced pursuant to an arrangement between BNP Paribas Securities (Asia) Ltd and ACL Securities Co. Ltd. ACL Securities Co. Ltd. is otherwise unaffiliated with BNP Paribas. This report is being distributed outside Thailand by members of BNP Paribas. Turkey: This report is prepared by TEB Investment. It is being distributed in Turkey by TEB Investment and outside Turkey jointly by TEB Investment and BNP Paribas. Notice Published in accordance with Communiqu Regarding the Principles on Investment Consultancy Activities and the Investment Consultancy Institutions Series: V, No: 55 issued by the Capital Markets Board. The investment related information, commentary and recommendations contained herein do not constitute investment consultancy services. Investment consultancy services are provided in accordance with investment consultancy agreements executed between investors and brokerage companies or portfolio management companies or non-deposit accepting banks. The commentary and recommendations contained herein are based on the personal views of the persons who have made such commentary and recommendations. These views may not conform to your financial standing or to your risk and return preferences. Therefore, investment decisions based solely on the information provided herein may fail to produce results in accordance with your expectations. United States: This report may be distributed in the United States only to to U.S. Persons who are major U.S. institutional investors (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major U.S. institutional investor. U.S persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp., a USregistered broker dealer and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. Certain countries within the European Economic Area: This report is solely prepared for professional clients. It is not intended for retail clients and should not be passed on to any such persons. This report has been approved for publication in the United Kingdom by BNP Paribas London Branch. BNP Paribas London Branch is authorised and supervised by the Autorit de Contrle Prudentiel and authorised and subject to limited regulation by the Financial Services Authority. Details of the extent of our authorisation and regulation by the Financial Services Authority are available from us on request. This report has been approved for publication in France by BNP Paribas, a credit institution licensed as an investment services provider by the Autorit de Contrle Prudentiel whose head office is 16, Boulevard des Italiens 75009 Paris, France. This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Paribas Niederlassung Frankfurt am Main, regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin). Other Jurisdictions: The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into whose possession this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by the foregoing instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on a particular stock, please contact the relevant BNP Paribas research team or the author(s) of this report.
1

No portion of this report was prepared by BNP Paribas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711.

IMPORTANT DISCLOSURES
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report:
Company Disclosure (as applicable) -

BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It beneficially owns 1% or more or the market capitalization of this company. 5. It makes a market in securities issued in respect of this company. 6. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in securities issued by this company or derivatives thereof. 7. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company. Additional Disclosures Within the next three months, BNP Paribas may receive or seek compensation in connection with an investment banking relationship with one or more of the companies referenced herein. Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this note or your BNP Paribas representative. All share prices are as at market close on 25 June 2012 unless otherwise stated.

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RECOMMENDATION STRUCTURE
Stock Ratings Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price. BUY (B). The upside is 10% or more. HOLD (H). The upside or downside is less than 10%. REDUCE (R). The downside is 10% or more. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.
* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.

Industry Recommendations Improving ( ): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months. Neutral ( ): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months. Deteriorating ( ): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months. Country (Strategy) Recommendations Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity.

RATING DISTRIBUTION (as at 26 June 2012)


Total BNP Paribas coverage universe Buy Hold Reduce 540 306 174 60 Investment Banking Relationship Buy Hold Reduce (%) 4.20 1.70 3.30

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report. 2012 TEB Investment BNP Paribas

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HONG KONG
BNP Paribas Securities (Asia) Ltd 63/F, Two International Finance Centre 8 Finance Street, Central Hong Kong SAR China Tel (852) 2825 1888 Fax (852) 2845 9411

BEIJING
BNP Paribas Equities (Asia) Ltd Beijing Representative Office Room 2016, 20/F China World Tower 1 Jianguomenwai Avenue Beijing 100004, China Tel (86 10) 6561 1118 Fax (86 10) 6561 2228

BNP Paribas Equities (Asia) Ltd Shanghai Representative Office Room 2630, 26/F Shanghai World Financial Center 100 Century Avenue Shanghai 200120, China Tel (86 21) 6096 9000 Fax (86 21) 6096 9018

SHANGHAI

BANGKOK
(In cooperation with BNP Paribas) ACL Securities Co Ltd 990 Abdulrahim Place, 12/F Rama IV Road, Bangrak Bangkok 10500 Thailand Tel (66 2) 611 3500 Fax (66 2) 611 3551

JAKARTA
PT BNP Paribas Securities Indonesia Grand Indonesia, Menara BCA, 35/F JI. M.H. Thamrin No. 1 Jakarta 10310 Indonesia Tel (62 21) 2358 6586 Fax (62 21) 2358 7587

BNP Paribas Capital (Malaysia) Sdn Bhd Vista Tower, Level 48C The Intermark, 182 Jalan Tun Razak 50400 Kuala Lumpur Malaysia Tel (60 3) 2179 6222 Fax (60 3) 2179 6226

KUALA LUMPUR

BNP Paribas Securities India Pvt Ltd BNP Paribas House 1 North Avenue, Maker Maxity Bandra Kurla Complex Bandra East Mumbai 400 051 Tel (91 22) 3370 4000 Fax (91 22) 3370 4386

MUMBAI

SEOUL
BNP Paribas Securities Korea Co Ltd 22/F, Taepyeongno Building 310 Taepyeongno 2-ga Jung-gu, Seoul 100-767 Korea Tel (82 2) 2125 0500 Fax (82 2) 2125 0593

SINGAPORE
BNP Paribas Securities (Singapore) Pte Ltd (Co. Reg. No. 199801966C) 10 Collyer Quay 34/F Ocean Financial Centre Singapore 049315 Tel (65) 6210 1288 Fax (65) 6210 1980

TAIPEI
BNP Paribas Securities (Taiwan) Co Ltd 72/ F, Taipei 101 No. 7 Xin Yi Road, Sec. 5 Taipei, Taiwan Tel (886 2) 8729 7000 Fax (886 2) 8101 2168

TOKYO
BNP Paribas Securities (Japan) Ltd GranTokyo North Tower 1-9-1 Marunouchi, Chiyoda-Ku Tokyo 100-6740 Japan Tel (81 3) 6377 2000 Fax (81 3) 5218 5970

CAPE TOWN
BNP Paribas Cadiz Securities (Pty) Ltd Ground floor, Fernwood House The Oval, 1 Oakdale Road, Newlands Cape Town South Africa 7700 Tel (27 21) 657 8300 Fax (27 21) 657 8301

ISTANBUL
TEB Investment (A JV between TEB Bank and BNP Paribas) TEB Kampus D7 Saray Mahallesi Sokullu Sok No 7 Umraniye 34768 Istanbul Turkey Tel: (90 216) 636 44 44 Fax: (90 216) 631 44 00

NEW YORK
BNP Paribas The Equitable Tower 787 Seventh Avenue New York NY 10019, USA Tel (1 212) 841 3800 Fax (1 212) 841 3810

BASEL
BNP Paribas Aeschengraben 26 CH 4002 Basel Switzerland Tel (41 61) 276 5555 Fax (41 61) 276 5514

FRANKFURT
BNP Paribas Mainzer Landstrasse 16 60325 Frankfurt Germany Tel (49 69) 7193 6637 Fax (49 69) 7193 2520

GENEVA
BNP Paribas 2 Place de Hollande 1211 Geneva 11 Switzerland Tel (41 22) 787 7377 Fax (41 22) 787 8020

LONDON
BNP Paribas 10 Harewood Avenue London NW1 6AA UK Tel (44 20) 7595 2000 Fax (44 20) 7595 2555

MADRID
BNP Paribas SA, sucursal en Espana Hermanos Becquer 3 PO Box 50784 28006 Madrid Spain Tel (34 91) 745 9000 Fax (34 91) 745 8888

MILAN
BNP Paribas Equities Italia SIM SpA Piazza San Fedele, 2 20121 Milan Italy Tel (39 02) 72 47 1 Fax (39 02) 72 47 6562

PARIS
BNP Paribas Equities France Socit de Bourse 20 boulevard des Italiens 75009 Paris France Tel (33 1) 4014 9673 Fax (33 1) 4014 0066

ZURICH
BNP Paribas Talstrasse 41 8022 Zurich Switzerland Tel (41 1) 229 6891 Fax (41 1) 267 6813

MANAMA
BNP Paribas Bahrain PO Box 5253 Manama Bahrain Tel (973) 53 3978 Fax (973) 53 1237

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