Turkish Airport Operator TAV Tipped to Outperform with 40% Surge

2023-08-09 17:26

A tourism boom will send shares in Turkish airport operator TAV Havalimanlari surging more than 40% over the

A tourism boom will send shares in Turkish airport operator TAV Havalimanlari surging more than 40% over the coming year, analysts predict, outperforming all other Istanbul-listed stocks.

The average share price target of 13 analysts is 159.28 liras ($5.89), data compiled by Bloomberg show. That’s 43% above the current 111.70 lira level, and the biggest potential return among other constituents of Turkey’s benchmark Borsa Istanbul 100 Index.

Turkish aviation stocks are in favor, amid expectations for strong summer travel demand and relatively cheap share valuations, while lira weakness offers positive foreign currency exposure. But TAV, with gains of 22% year-to-date, is lagging Turkey’s national carrier Turkish Airlines which is up 86% so far this year, while shares in discount airline Pegasus Hava have soared 92%.

“The potential surge in passenger numbers in the airports operated by TAV, due to strong tourism season, will be a key catalyst to watch for,” said Atasav Tuglu, deputy research manager at Seker Investment in Istanbul. Airport lounge spending and increased hard-currency sales to international passengers are “reasons to be hopeful about a potential catch-up,” Tuglu added.

Turkey targets 60 million tourists in 2023 and $56 billion in tourism income, culture and tourism Minister Mehmet Nuri Ersoy was quoted as saying in June by the state-run Anadolu Agency. That’s up from last year’s earnings of $46.3 billion.

TAV expects passenger numbers to return to pre-Covid levels in all of its airports this year, CEO Serkan Kaptan said last month. It also sees full-year passengers at the high end of its latest guidance of 81 million to 91 million this year.

TAV trades at 12.5 times 12-month forward earnings, well above 5.5 times at Turkish Airlines and 6.3 times at Pegasus Hava. But analysts expect TAV’s ongoing capacity investments to start paying off, leaving potential for a share-price catch-up. The firm owns a stake in Kazakhstan’s Almaty airport and has pledged to double passenger capacity there.

“TAV is at the beginning of its investment cycle in Kazakhstan, Antalya and Ankara, therefore their significant positive impact on valuation is not much visible to stock investors yet,” TEB Investment’s analyst Erdem Kayli said.