Intrinsic value of Turkcell Iletisim Hizmetleri ADR - TKC

Previous Close

$9.88

  Intrinsic Value

$9.11

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  Rating & Target

hold

-8%

Previous close

$9.88

 
Intrinsic value

$9.11

 
Up/down potential

-8%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TKC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 8.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.89
  28.50
  26.15
  24.04
  22.13
  20.42
  18.88
  17.49
  16.24
  15.12
  14.10
  13.19
  12.37
  11.64
  10.97
  10.38
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.37
  6.23
  6.11
Revenue, $m
  3,793
  4,874
  6,149
  7,626
  9,314
  11,216
  13,333
  15,665
  18,209
  20,961
  23,918
  27,074
  30,424
  33,964
  37,691
  41,602
  45,695
  49,970
  54,427
  59,068
  63,896
  68,917
  74,135
  79,557
  85,192
  91,049
  97,137
  103,469
  110,056
  116,912
  124,052
Variable operating expenses, $m
 
  3,577
  4,512
  5,597
  6,835
  8,231
  9,784
  11,495
  13,362
  15,382
  17,551
  19,866
  22,324
  24,922
  27,657
  30,526
  33,530
  36,666
  39,936
  43,342
  46,885
  50,569
  54,397
  58,376
  62,511
  66,808
  71,275
  75,921
  80,755
  85,786
  91,025
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,876
  3,577
  4,512
  5,597
  6,835
  8,231
  9,784
  11,495
  13,362
  15,382
  17,551
  19,866
  22,324
  24,922
  27,657
  30,526
  33,530
  36,666
  39,936
  43,342
  46,885
  50,569
  54,397
  58,376
  62,511
  66,808
  71,275
  75,921
  80,755
  85,786
  91,025
Operating income, $m
  916
  1,297
  1,636
  2,030
  2,479
  2,985
  3,549
  4,170
  4,847
  5,580
  6,367
  7,208
  8,100
  9,043
  10,035
  11,076
  12,166
  13,304
  14,490
  15,726
  17,012
  18,348
  19,737
  21,181
  22,681
  24,241
  25,861
  27,547
  29,301
  31,126
  33,027
EBITDA, $m
  1,484
  2,021
  2,550
  3,163
  3,863
  4,652
  5,530
  6,497
  7,552
  8,694
  9,920
  11,229
  12,618
  14,087
  15,633
  17,255
  18,952
  20,725
  22,574
  24,498
  26,501
  28,583
  30,747
  32,996
  35,333
  37,762
  40,288
  42,914
  45,646
  48,490
  51,451
Interest expense (income), $m
  115
  114
  174
  245
  327
  420
  525
  642
  771
  912
  1,065
  1,228
  1,403
  1,588
  1,784
  1,990
  2,207
  2,433
  2,670
  2,917
  3,174
  3,441
  3,719
  4,007
  4,308
  4,619
  4,944
  5,281
  5,631
  5,996
  6,375
Earnings before tax, $m
  540
  1,183
  1,462
  1,785
  2,152
  2,565
  3,024
  3,527
  4,076
  4,668
  5,302
  5,980
  6,697
  7,454
  8,251
  9,086
  9,959
  10,870
  11,820
  12,809
  13,838
  14,907
  16,019
  17,174
  18,374
  19,621
  20,918
  22,267
  23,670
  25,131
  26,652
Tax expense, $m
  114
  319
  395
  482
  581
  693
  816
  952
  1,100
  1,260
  1,432
  1,615
  1,808
  2,013
  2,228
  2,453
  2,689
  2,935
  3,192
  3,459
  3,736
  4,025
  4,325
  4,637
  4,961
  5,298
  5,648
  6,012
  6,391
  6,785
  7,196
Net income, $m
  401
  863
  1,067
  1,303
  1,571
  1,873
  2,207
  2,575
  2,975
  3,407
  3,871
  4,365
  4,889
  5,442
  6,023
  6,632
  7,270
  7,935
  8,629
  9,351
  10,102
  10,882
  11,694
  12,537
  13,413
  14,323
  15,270
  16,255
  17,279
  18,346
  19,456

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,607
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  8,389
  8,719
  10,999
  13,643
  16,662
  20,064
  23,852
  28,023
  32,574
  37,498
  42,787
  48,432
  54,426
  60,759
  67,427
  74,423
  81,745
  89,392
  97,365
  105,667
  114,305
  123,286
  132,620
  142,320
  152,401
  162,877
  173,769
  185,096
  196,880
  209,146
  221,918
Adjusted assets (=assets-cash), $m
  6,782
  8,719
  10,999
  13,643
  16,662
  20,064
  23,852
  28,023
  32,574
  37,498
  42,787
  48,432
  54,426
  60,759
  67,427
  74,423
  81,745
  89,392
  97,365
  105,667
  114,305
  123,286
  132,620
  142,320
  152,401
  162,877
  173,769
  185,096
  196,880
  209,146
  221,918
Revenue / Adjusted assets
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
Average production assets, $m
  4,169
  5,357
  6,757
  8,381
  10,236
  12,326
  14,653
  17,216
  20,012
  23,037
  26,286
  29,754
  33,436
  37,327
  41,423
  45,721
  50,219
  54,917
  59,815
  64,916
  70,222
  75,740
  81,474
  87,433
  93,626
  100,062
  106,754
  113,712
  120,952
  128,487
  136,333
Working capital, $m
  1,590
  950
  1,199
  1,487
  1,816
  2,187
  2,600
  3,055
  3,551
  4,087
  4,664
  5,279
  5,933
  6,623
  7,350
  8,112
  8,911
  9,744
  10,613
  11,518
  12,460
  13,439
  14,456
  15,514
  16,612
  17,754
  18,942
  20,176
  21,461
  22,798
  24,190
Total debt, $m
  2,597
  2,810
  3,948
  5,267
  6,773
  8,471
  10,361
  12,443
  14,714
  17,171
  19,810
  22,627
  25,617
  28,778
  32,105
  35,596
  39,250
  43,065
  47,044
  51,187
  55,497
  59,979
  64,637
  69,477
  74,507
  79,735
  85,170
  90,822
  96,702
  102,823
  109,196
Total liabilities, $m
  4,138
  4,351
  5,489
  6,808
  8,314
  10,012
  11,902
  13,984
  16,255
  18,712
  21,351
  24,168
  27,158
  30,319
  33,646
  37,137
  40,791
  44,606
  48,585
  52,728
  57,038
  61,520
  66,178
  71,018
  76,048
  81,276
  86,711
  92,363
  98,243
  104,364
  110,737
Total equity, $m
  4,251
  4,368
  5,511
  6,835
  8,348
  10,052
  11,950
  14,040
  16,320
  18,787
  21,436
  24,265
  27,267
  30,440
  33,781
  37,286
  40,954
  44,785
  48,780
  52,939
  57,267
  61,766
  66,443
  71,303
  76,353
  81,602
  87,058
  92,733
  98,637
  104,782
  111,181
Total liabilities and equity, $m
  8,389
  8,719
  11,000
  13,643
  16,662
  20,064
  23,852
  28,024
  32,575
  37,499
  42,787
  48,433
  54,425
  60,759
  67,427
  74,423
  81,745
  89,391
  97,365
  105,667
  114,305
  123,286
  132,621
  142,321
  152,401
  162,878
  173,769
  185,096
  196,880
  209,146
  221,918
Debt-to-equity ratio
  0.611
  0.640
  0.720
  0.770
  0.810
  0.840
  0.870
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.950
  0.950
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
Adjusted equity ratio
  0.465
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  401
  863
  1,067
  1,303
  1,571
  1,873
  2,207
  2,575
  2,975
  3,407
  3,871
  4,365
  4,889
  5,442
  6,023
  6,632
  7,270
  7,935
  8,629
  9,351
  10,102
  10,882
  11,694
  12,537
  13,413
  14,323
  15,270
  16,255
  17,279
  18,346
  19,456
Depreciation, amort., depletion, $m
  568
  725
  914
  1,134
  1,384
  1,667
  1,981
  2,327
  2,705
  3,114
  3,553
  4,021
  4,518
  5,044
  5,598
  6,179
  6,786
  7,421
  8,083
  8,772
  9,489
  10,235
  11,010
  11,815
  12,652
  13,522
  14,426
  15,367
  16,345
  17,363
  18,423
Funds from operations, $m
  -530
  1,588
  1,981
  2,436
  2,955
  3,539
  4,188
  4,902
  5,680
  6,521
  7,424
  8,386
  9,407
  10,486
  11,621
  12,811
  14,056
  15,357
  16,712
  18,123
  19,591
  21,117
  22,704
  24,352
  26,065
  27,845
  29,696
  31,621
  33,624
  35,709
  37,880
Change in working capital, $m
  -853
  211
  249
  288
  329
  371
  413
  455
  496
  537
  577
  615
  653
  690
  727
  763
  798
  834
  869
  905
  942
  979
  1,017
  1,057
  1,099
  1,142
  1,187
  1,235
  1,285
  1,337
  1,392
Cash from operations, $m
  323
  1,377
  1,733
  2,148
  2,626
  3,168
  3,775
  4,448
  5,184
  5,985
  6,847
  7,771
  8,754
  9,795
  10,894
  12,048
  13,258
  14,523
  15,843
  17,218
  18,650
  20,139
  21,686
  23,295
  24,966
  26,703
  28,509
  30,387
  32,339
  34,372
  36,487
Maintenance CAPEX, $m
  0
  -563
  -724
  -913
  -1,133
  -1,383
  -1,666
  -1,980
  -2,326
  -2,704
  -3,113
  -3,552
  -4,021
  -4,518
  -5,044
  -5,598
  -6,179
  -6,786
  -7,421
  -8,083
  -8,772
  -9,489
  -10,235
  -11,010
  -11,815
  -12,652
  -13,522
  -14,426
  -15,367
  -16,345
  -17,363
New CAPEX, $m
  -910
  -1,188
  -1,401
  -1,624
  -1,855
  -2,090
  -2,327
  -2,563
  -2,796
  -3,025
  -3,249
  -3,468
  -3,682
  -3,891
  -4,096
  -4,298
  -4,498
  -4,698
  -4,898
  -5,101
  -5,307
  -5,517
  -5,735
  -5,959
  -6,193
  -6,436
  -6,691
  -6,959
  -7,240
  -7,535
  -7,847
Cash from investing activities, $m
  -952
  -1,751
  -2,125
  -2,537
  -2,988
  -3,473
  -3,993
  -4,543
  -5,122
  -5,729
  -6,362
  -7,020
  -7,703
  -8,409
  -9,140
  -9,896
  -10,677
  -11,484
  -12,319
  -13,184
  -14,079
  -15,006
  -15,970
  -16,969
  -18,008
  -19,088
  -20,213
  -21,385
  -22,607
  -23,880
  -25,210
Free cash flow, $m
  -629
  -374
  -392
  -389
  -361
  -305
  -217
  -95
  62
  255
  485
  750
  1,051
  1,386
  1,754
  2,153
  2,581
  3,039
  3,524
  4,035
  4,571
  5,132
  5,717
  6,325
  6,958
  7,615
  8,296
  9,002
  9,733
  10,492
  11,278
Issuance/(repayment) of debt, $m
  1,225
  968
  1,138
  1,319
  1,507
  1,698
  1,890
  2,082
  2,271
  2,457
  2,639
  2,817
  2,991
  3,160
  3,327
  3,491
  3,654
  3,816
  3,979
  4,143
  4,310
  4,482
  4,658
  4,840
  5,030
  5,228
  5,435
  5,652
  5,880
  6,120
  6,373
Issuance/(repurchase) of shares, $m
  -17
  106
  75
  22
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,299
  1,074
  1,213
  1,341
  1,507
  1,698
  1,890
  2,082
  2,271
  2,457
  2,639
  2,817
  2,991
  3,160
  3,327
  3,491
  3,654
  3,816
  3,979
  4,143
  4,310
  4,482
  4,658
  4,840
  5,030
  5,228
  5,435
  5,652
  5,880
  6,120
  6,373
Total cash flow (excl. dividends), $m
  846
  700
  821
  952
  1,145
  1,393
  1,673
  1,986
  2,333
  2,712
  3,124
  3,567
  4,042
  4,547
  5,081
  5,644
  6,235
  6,855
  7,502
  8,177
  8,881
  9,613
  10,374
  11,166
  11,988
  12,843
  13,731
  14,654
  15,614
  16,612
  17,651
Retained Cash Flow (-), $m
  -445
  -969
  -1,142
  -1,324
  -1,513
  -1,704
  -1,898
  -2,090
  -2,280
  -2,467
  -2,650
  -2,828
  -3,003
  -3,173
  -3,340
  -3,505
  -3,668
  -3,831
  -3,994
  -4,160
  -4,328
  -4,499
  -4,677
  -4,860
  -5,050
  -5,249
  -5,457
  -5,675
  -5,904
  -6,145
  -6,399
Prev. year cash balance distribution, $m
 
  852
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  583
  -321
  -373
  -367
  -312
  -225
  -104
  53
  245
  474
  739
  1,039
  1,373
  1,740
  2,139
  2,567
  3,024
  3,508
  4,018
  4,553
  5,114
  5,698
  6,306
  6,938
  7,594
  8,274
  8,979
  9,710
  10,467
  11,252
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  559
  -294
  -324
  -302
  -242
  -163
  -70
  33
  141
  249
  351
  443
  522
  584
  628
  652
  658
  646
  619
  579
  529
  473
  413
  353
  295
  241
  193
  150
  114
  85
Current shareholders' claim on cash, %
  100
  98.5
  97.7
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5

Turkcell Iletisim Hizmetleri AS is engaged in establishing and operating a Global System for Mobile Communications (GSM) network in Turkey and regional states. The Company's segments include Turkcell Turkey, which includes the operations of Turkcell Superonline, Turkcell Satis ve Dagitim Hizmetleri A.S., group call center operations of Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri A.S., Turktell Bilisim Servisleri A.S., Kule Hizmet ve Isletmecilik A.S., Turkcell Odeme Hizmetleri A.S. and Turkcell Gayrimenkul Hizmetleri A.S; Turkcell International, which includes the operations of Kibris Mobile Telekomunikasyon Limited Sirketi, Eastasian Consortium BV, lifecell LLC, UkrTower LLC, LLC Global Bilgi, Turkcell Europe GmbH, Lifetech LLC, Beltower LLC and Fintur Holdings BV, and Other, which comprises the information and entertainment services in Turkey and Azerbaijan, and non-group call center operations of Turkcell Global Bilgi and Turkcell Finansman AS.

FINANCIAL RATIOS  of  Turkcell Iletisim Hizmetleri ADR (TKC)

Valuation Ratios
P/E Ratio 54
Price to Sales 5.7
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 67.1
Price to Free Cash Flow -36.9
Growth Rates
Sales Growth Rate 11.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.4%
Cap. Spend. - 3 Yr. Gr. Rate 3.4%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 43.3%
Total Debt to Equity 61.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 7.5%
Return On Total Capital 6.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.4%
Return On Equity 10%
Return On Equity - 3 Yr. Avg. 10.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 35.5%
Gross Margin - 3 Yr. Avg. 37.8%
EBITDA Margin 32.2%
EBITDA Margin - 3 Yr. Avg. 32.1%
Operating Margin 24.2%
Oper. Margin - 3 Yr. Avg. 22.6%
Pre-Tax Margin 14.2%
Pre-Tax Margin - 3 Yr. Avg. 16.6%
Net Profit Margin 10.6%
Net Profit Margin - 3 Yr. Avg. 14.2%
Effective Tax Rate 21.1%
Eff/ Tax Rate - 3 Yr. Avg. 28.2%
Payout Ratio 3.5%

TKC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TKC stock intrinsic value calculation we used $3793 million for the last fiscal year's total revenue generated by Turkcell Iletisim Hizmetleri ADR. The default revenue input number comes from 2016 income statement of Turkcell Iletisim Hizmetleri ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TKC stock valuation model: a) initial revenue growth rate of 28.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TKC is calculated based on our internal credit rating of Turkcell Iletisim Hizmetleri ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Turkcell Iletisim Hizmetleri ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TKC stock the variable cost ratio is equal to 73.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for TKC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.2% for Turkcell Iletisim Hizmetleri ADR.

Corporate tax rate of 27% is the nominal tax rate for Turkcell Iletisim Hizmetleri ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TKC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TKC are equal to 109.9%.

Life of production assets of 7.4 years is the average useful life of capital assets used in Turkcell Iletisim Hizmetleri ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TKC is equal to 19.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4251 million for Turkcell Iletisim Hizmetleri ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 889.005 million for Turkcell Iletisim Hizmetleri ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Turkcell Iletisim Hizmetleri ADR at the current share price and the inputted number of shares is $8.8 billion.

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COMPANY NEWS

▶ Turkcell Launches Turkeys Search Engine Yaani   [Oct-26-17 12:44PM  Business Wire]
▶ Turkcell Iletisim Hizmetleri: Third Quarter 2017 Results   [Oct-25-17 11:24AM  Business Wire]
▶ Turkcell Rolls Out NarrowBand-IoT Network across Turkey   [Aug-24-17 03:41AM  Business Wire]
▶ [$$] 2 Steady Stocks in a Volatile Post-Coup Turkey   [Jul-29-17 12:01AM  Barrons.com]
▶ Turkcell Iletisim Hizmetleri: Second Quarter 2017 Results   [Jul-27-17 11:46AM  Business Wire]
▶ Turkcell Moving Fast on the Way To 5G   [Jun-16-17 10:28AM  Business Wire]
▶ 12 Emerging Market Headlines: Earnings, Oil & Risk   [Apr-26-17 07:04PM  Barrons.com]
▶ Turkcell Files Its 2016 Annual Report on Form 20-F   [Mar-20-17 05:15PM  Business Wire]
▶ Turkcell Earnings Socked By Weak Lira   [Feb-15-17 01:59PM  at Barrons.com]
▶ Turkey: Lira & Stocks Hit New Lows Despite Bank Action   [Jan-10-17 03:59PM  at Barrons.com]
▶ Turkey: Central Bank Holds Rates; Syria Peace?   [Dec-20-16 10:30AM  at Barrons.com]
▶ Is Aramark (ARMK) Worthy of Your Portfolio?   [Dec-01-16 12:06PM  at Insider Monkey]
▶ Turkcell Feud Unresolved as Fridman Buyout Option Expires   [Nov-28-16 01:41PM  at Bloomberg]
▶ S&P Ups Turkey Credit Outlook, Eyes 100,000 In Coup Purge   [Nov-04-16 02:08PM  at Barrons.com]
▶ VimpelCom To Pay U.S. Dividend, Shares Rise 5%   [Nov-03-16 02:26PM  at Barrons.com]
▶ Turkcell Slips 3%, Coup Attempt Hurt 3Q Earnings   [Nov-02-16 12:50PM  at Barrons.com]
▶ Turkcell CEO Kaan Terzioglu Elected to the GSMA Board   [Oct-31-16 08:51AM  Business Wire]
▶ Moodys Maintains Turkcells Investment Grade Rating   [Sep-27-16 04:06PM  Business Wire]
▶ Turkey Market Analysts & Media Silenced In Post-Coup Purge   [Jul-29-16 02:10PM  at Barrons.com]
▶ Turkey: When a Coup Doesnt Destroy a Market   [11:05AM  at 24/7 Wall St.]
▶ [$$] Turkcell Plans Overseas Expansion to Beat Slowing Sales in Turkey   [Jun-30-16 09:56AM  at The Wall Street Journal]
▶ Turkcell Opens Turkeys Largest Data Center   [Jun-03-16 06:36AM  Business Wire]
Financial statements of TKC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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