Turkcell Continues Climb Despite Drama

The company's news sounds like a soap opera, but hasn't hurt gains

   
Turkcell Continues Climb Despite Drama

best stocks for 2012 logo1 Turkcell Continues Climb Despite DramaThere is never a dull moment when owning Turkish telecom provider Turkcell (NYSE:TKC). As I’ve highlighted in recent articles, the company is still embroiled in a multi-year, intercontinental boardroom struggle that rival a daytime soap opera for melodrama and intrigue.

Two rival shareholder factions are fighting for control, and after bouncing around courtrooms in Turkey and the Caribbean, the case is now being reviewed by Britain’s Privy Council.

Yes, the Privy Council of the Queen of England … for a Turkish mobile phone company. I couldn’t make this up if I wanted to.

And now, Turkcell is involved in another international scandal that involves Iranian espionage, UN vote rigging and Republican presidential hopeful Mitt Romney.

Turkcell is suing South African mobile giant MTN for $4.2 billion over allegations that the company won contracts by bribing Iranian officials with promises of weapons and South African support for Iran at the United Nations.

No, this isn’t a movie script — it’s business as usual in this part of the world.

The dispute, though, has managed to spill over into U.S. politics. One of President Obama’s chief advisors took $100,000 from MTN to deliver speeches, leading Republicans to allege that the President has an Iranian fifth columnist in his ranks. Meanwhile, Mitt Romney is a shareholder in Turkcell, meaning that he has a vested interest in the outcome of the lawsuit against MTN.

In spite of all of this drama, Turkcell’s management has done a fine job of running the company. And as investor risk appetites have returned, the stock has seen a monster rally in its shares.

TKC 300x212 Turkcell Continues Climb Despite Drama
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Since hitting a bottom in late May, Turkcell is up nearly 40%. Barring a relapse into crisis by the eurozone, I believe it also has much further to run, as TKC is priced at only 11 times expected 2013 earnings.

And at the risk of sounding like a broken record, this boardroom fiasco will soon will be put to rest. When it is, investors will likely enjoy a large cash bonus from past unpaid dividends along with a regular payout in the ballpark of 3% to 4%.

I chose Turkcell as my entry in InvestorPlace’s Ten Best Stocks for 2012 contest because I considered it a conservative way to play the emergence of Turkey and its up-and-coming middle class. Thus far, the pick has performed even better than expected, with gains of 26% year to date. Coming down the homestretch of the last quarter, Turkcell is in second place, trailing only Capital One (NYSE:COF).

So stay tuned — and not just for the drama. The finish line for the contest is right around the corner, and Turkcell remains a top contender.


Article printed from InvestorPlace Media, http://investorplace.com/2012/09/turkcell-continues-climb-despite-drama/.

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