Mesut Ellialtioglu of Talas Turkey Value Fund presented his in-depth investment thesis on Arcelik A.S. (Turkey: ARCLK) at Best Ideas 2019.

Thesis summary:

Arcelik, Turkey’s leading household appliance manufacturer, produces and markets consumer durable goods, consumer electronics, small home appliances and kitchen accessories as well as in the provision of after-sales services. With eighteen factories in seven countries (Turkey, Romania, Russia, China, South Africa, Thailand, and Pakistan), marketing and sales organizations in 33 countries, Arcelik provides goods and services in 130+ countries.

Arcelik is by far the leader in Turkey with roughly 50% market share. It is also the third-largest home appliance company in EMEA, the UK, France, and Poland. Arcelik is the number-one appliances company in Romania, South Africa, and Pakistan. Arcelik’s focus is on international growth via market share gains and organic growth in the underpenetrated markets of Sub-Saharan Africa, India, and South East Asia.

Operations outside Turkey comprise 65% of Arcelik’s revenue. The economic slowdown in Turkey has led to a substantial 55% decline (in USD terms) in Arcelik’s share price. The recent market capitalization of Arcelik is near a ten-year low of $1.9 billion, as compared to $4.2 billion in 2017. Arcelik trades at a 2020E P/E of 6x, EV/EBITDA of 4x, and EV to revenue of 0.4x.

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About the instructor:

Mesut Ellialtioglu, the Fund’s Turkey Investment Officer, has 23 years of Turkey focused equity research and fund management experience and focuses on value investing opportunities in the Turkish equity market. Prior to forming Talas Capital with Mr. Matthew Peterson, Mr. Ellialtioglu worked with Bankers Trust Company as an associate, Korfez Securities (Garanti Bank) as Co-Head of Research, UB Ulusal Securities (formerly SAMBA Saudi American Bank) as Managing Director for research and asset management, Kent Securities as Head of Asset Management, and ABN AMRO Asset Management Turkey as Chief Investment Officer. Mr. Ellialtioglu graduated with BS in Economics degree from the Wharton School of Business of the University of Pennsylvania in 1993.