Turkey, while the biggest, is far from Turkcell’s only market. The company also is a major player across Eastern Europe and the Middle East, and Turkcell is the market leader in five of the nine countries in which it operates. The key to take away from this is that telephony still is a growth industry in most emerging markets, and Turkcell is a fine company in a great position to profit from that growth.
In Turkcell, we have:
- A world-class company with a dominant market position in a dynamic emerging economy.
- A company that sells service that has become a basic necessity for both consumers and businesses — meaning that it is recession-resistant.
- Great opportunity for growth.
- A direct play on the Turkish consumer.
Turkcell also is a conservatively financed company. The company has no net debt, and a third of its balance sheet is cold, hard cash. Turkcell has $3.73 per share in cash; not bad considering the stock price is currently less than $12.
Skeptical investors might well be wondering: What’s the catch?
If investing were this simple, it wouldn’t be fun. Turkcell’s board of directors has had an on-again, off-again power struggle between two shareholder groups that reached a boiling point earlier in 2011. The company missed its dividend payment, not because it couldn’t afford it (it most assuredly could), but because the board couldn’t stop bickering long enough to approve it. Markets hate uncertainty, and the uncertainty plaguing this stock explains a fair bit of its underperformance of late.
The board situation will get fixed soon. In the meantime, life goes on, and the company continues to grow and prosper. When the dividend payment is resumed, I expect it to be in the ballpark of 5%. In the meantime, investors can buy a piece of one of the finest emerging-market telecom companies in existence trading for just 9 times expected 2012 earnings.
Disclosure: Turkcell is a recommendation of the Sizemore Investment Letter and is held by Sizemore Capital clients.
Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter, and the chief investment officer of investments firm Sizemore Capital Management. Sign up for a FREE copy of his new special report: “Top 5 Contrarian Stocks for 2012.”