OREANDA-NEWS. September 10, 2012. Renaissance Capital, the leading emerging markets investment bank, has initiated coverage of Turkey’s Enka Insaat with a HOLD rating and TP of TRY4.96, implying 1% potential upside. The report authored by Ilgin Erdogan is titled “Turkey: Enka Insaat - High quality, widely known”, provides an estimate value of USD 7,617mn for the company, and notes that Enka is perceived as being low-risk and defensive. This reputation is well deserved, in Renaissance’s view, based on the company’s stable and predictable cash generation from its Russian real estate and Turkish power-generation businesses, as well as revenue that is almost fully linked to hard currencies.

Recent trends in backlog generation indicate that the construction segment began to bottom out in 1H12, while the company appears to have found a partial use for its USD 2.0bn cash pile, planning new power-generation investments in Turkey and abroad.

With the MENA-based backlog increasing its share in the total to 48% in 2012, from 13% in 2008, Renaissance Capital believes that Enka is increasingly seeking its fortunes in this region. The power-generation investments/tenders in which the company plans to participate are all in MENA, and form the majority of Enka’s contracts in this region.

Enka’s premium to its peers appears to be above historical levels and to Renaissance does not represent a particularly attractive entry opportunity at this stage. Renaissance sees an upside risk to its valuation from potential power-generation projects, which may boost backlog and energy revenue.

Renaissance Capital currently provides in-depth coverage of 27 Turkish stocks with a combined weight of 86% in MSCI Turkey index, and has expanded its research footprint to include banking, oil & gas, telecoms, consumer & retail, construction & building materials, as well as automotive & transport. The Firm has been trading on the Istanbul Stock Exchange since 2011.