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Have BIST-100 shares gotten even cheaper?

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Baris ERKAYA

Looking at the TL-based monthly chart on the Istanbul Stock Exchange, the month of August marks one of the longest rising candlesticks in history. Although this increase started with industrial and service companies, it continues towards the end of the month and continues again with bank shares. The BIST-100 index breaks new all-time highs and closing records every day. However, the phrase “based on TL”, which we drew attention to in the first sentence, is very, very important. Because none of these records mean anything over the dollar-based course. In dollar terms, the stock market is still at 2005 or 2009 levels. However, the captivating TL-based rally brings with it comments that selective buying may be wiser.

Therefore, price / earnings (P / L), market value / book value (pd / day), company value / profit before interest amortization, taxes (fd / EBIT), market value / main operating profit , which allows you to evaluate stock prices according to sector averages We have analyzed the status of BIST-100 shares in ratios such as (pd / efk), market capitalization / sales (pd / ns). Let’s start with how we do the analysis first. We looked at the status of all companies in each valuation report against their industry average. In this way, we found out how much below the industry average the valuation ratios of companies are. By averaging the distances from the averages (the potential rise in price to reach the average) across 5 different valuation ratios, we revealed the stocks that appear to be the cheapest in that sector. However, as many of these companies may have an element of speculation, we have chosen the BIST-100 stock with the lowest valuation ratios in that industry to minimize this risk. If the deviations are too high in a sector or if there are no BIST-100 stocks among the stocks with a very low valuation ratio, we have left the sector completely out of valuation.

So what was the result?

SITUATION ACCORDING TO FIRST QUARTER DATA

When we did this analysis for the first time in 2022/03, that is the first quarter balance sheets, the overlapping rate of the stock in circulation in the analysis we made on the half year balance sheets is 63 percent. Most stocks that were valued low relative to the sector in the first quarter of 2022 still appear to be cheap despite rising stock prices. There can be two explanations for this. First, valuations may have been cheaper than financial performance, as financial performance has risen faster, although prices have risen. Second, as valuations of other stocks in the industry have risen rapidly with rising prices or underperforming financial performance, most of these stocks have not yet kept up with the rise as much as others.

Let’s start with examples. Among brokerage firms, İş Securities was trading at 5.24p / k, 2.33p / d according to the first quarter data of our June analysis. In the analysis we did with the second quarter data and Friday’s closing prices, İş Menkul Değerler has a ratio of 5.54 p / k, 2.64 pd / day. It is well below the industry average. And despite the stock market rally in valuation ratios, there has been an average increase of 5-13 percent.

Also in other examples, the f / k ratio in İndeks Bilgisayar’s valuation ratios decreased from 4.47 to 3.81 and the pd / day ratio increased from 2.03 to 2.10. Anadolu Efes’s f / k decreased from 26.14 to 14.66, while its pd / d increased from 0.88 to 0.96. In Kardemir D, f / k decreased from 3.78 to 2.83 and pd / d decreased from 1.56 to 1.23 ‘.

RATINGS BASED ON PROFITABILITY ARE ECONOMIC

The examples can be multiplied gradually. But the general result is this. Although stock prices have risen rapidly since the first quarter of 2022 data, stocks have become even more affordable in profitability-based valuation ratios. In equity-based valuation items, prices have remained at the same levels or have risen slightly. In this, the fact that more external resources have been used in financing activities due to the inflationary context and low-cost credit, therefore, the weakening of equity in the balance sheets and the astronomical increase in profitability, always with a high inflation, have had a great effect.

There are variations in some of the stocks that represent the sector in the list of companies with the lowest valuation rations since the first quarter. Looking at the sector breakdowns, İşbank C was replaced by Akbank in the banking sector in the first quarter of 2022. Bursa Cement replaced Çimsa in the cement sector, EnerjiSA replaced ODAŞ in the energy sector, Bagfaş replaced the fertilizer factories in the fertilizer sector and agricultural products and Sabancı Holding replaced Doğan Holding in the holding companies.

SHARES THAT ARE ECONOMIC IN THE FIRST QUARTER

The companies that hold the BIST-100 stock with the lowest valuation ratio in the industry in both the first and second quarters are İş Securities in brokerage firms, İndeks Bilgisayar in IT and software, Vestel Elektronik in consumer durables, Emlak Konut GYO in real estate investment funds, Anadolu Agency in the Efes beverage sector and Selcuk Pharmaceutical Warehouse in the medicine and health services sector, Aselsan in the communications and defense sector, Kardemir D in the main metal industry, Kordsa in the automotive sub-industry , Teknosa in retail and THY in transport services.

We have added dividend data to the last column of our main valuation report table so that it can be an indicator for long-term dividend investors. It goes without saying that companies with low valuation ratios and high dividend paying habits are important to dividend investors.

How should the table be read?

It shouldn’t be misunderstood that the stocks listed here are the cheapest in the industry. The main purpose of the list is to reveal the status of the BIST-100 companies that have the lowest ratio to industry averages. But even that doesn’t mean stocks are cheap. Because there may also be a situation where the industry is generally not cheap. What makes sense here is for everyone to look at the situation on the list and analyze each company’s specific situation, their stock performance to date and if there is a reason behind their low ratios.

Watch out for these too!

It is useful to keep in mind that the data in the table will not be a standalone criterion for the viability of a stock. Because there could be many other factors that cause stocks to stay cheap. However, it is important to at least be a demonstration, especially in these days when some stocks are climbing very fast and some are far behind. While reading this data, it is also helpful to pay attention to the following:

  • Do they have high sectoral expectations or can expectations be reversed in this period which will completely change the sectoral balances?
  • If you are a dividend investor, how many dividends has the company paid in the past 5 years?
  • Is there intense speculation on company stocks? Data exchange is important in this regard
  • Are stock valuation ratios traditionally always low? If so, this data can only mean something to the long-term rather than the short-term outlook.

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