In the scope of Capital Markets Board’s (“CMB”) Communique on “Rating Activities and Rating Agencies in Capital Markets”, Global Investment Holdings’ Corporate Governance Rating has been reviewed by Kobirate Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş.(Kobirate International Credit and Corpoarte Governance Rating: “Kobirate”),  in line with CMB’s Corpoarte Governance Principles. Accordingly, Global Investment Holding’s Corporate Governance Rating has been upgraded to 8.99 (out of 10.00) from 8.79, indicating that the Company is in good compliance with CMB’s Corporate Governance Principles.   

Kobirate has reviewed Corporate Governance Practices of Global Investment Holdings under four main categories, as follows; while improvements in “Public Disclosure & Transparency” and “Shareholders” categories contibuting the most to the overall rating improvement.

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JCR Eurasia Rating has evaluated GIH in an investment-level category on the national and international scales and upgraded the ratings on the Long Term National Scale from ‘BBB (Trk)’ to ‘BBB+ (Trk)’ and the Short Term National Scale from ‘A-3 (Trk)’ to ‘A-2 (Trk)’ within the scope of periodic review. The outlooks for the ratings are determined as ‘Stable’. Additionally, JCR Eurasia Rating has confirmed the Long Term International Foreign and Local Currency Ratings as ‘BBB-’.

Other notes and details of the ratings are provided below             

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Global Investment Holdings (GIH or the Group) reports consolidated revenues of TL351.8mn for the first half of 2017, representing an increase of 25% compared to the same period last year; while announcing a consolidated EBITDA of TL113.6mn.  The proceeds of Global Ports Holding LSE offering of TL 360mn as secondary and F.A.B Partners (FAB) partnership of TL 245mn is not accounted for in the EBITDA line or P/L but under the equity. Total equity increased on a consolidated basis from TL908.3 in to TL 1,703.0 representing a 87% increase.

GIH announced its financial results for Q2 2017. According to the disclosure, consolidated net revenues reached TL351.8mn compared to TL280.5mn last year, representing an increase of 25%. 

GIH also announced that, in the first half of 2017, Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) amounted to TL113.6mn, compared to an EBITDA of TL97.5mn in the same period last year.

On a divisional basis, the Group’s Port Division revenues reached TL180.9mn in the first half of 2017, representing 18% increase over the same period of 2016. A significant portion of this increase is attributable to the contributions from the Group’s commercial port operations which is unaffected by Turkish geopolitical developments and the growth was driven by strong volume growth in both container and cargo business. Although the first half of 2017 saw strong overall 14% growth in total cruise passenger numbers driven by a combination of organic growth in Valetta Cruise Port and inorganic growth from first time consolidation of small Italian ports, Cruise division financial performance impacted by ongoing weakness in consumer sentiment towards higher margin Turkish cruise ports, while we have seen a strong performance in our European portfolio of cruise ports, with revenues up at Valetta and BPI in this period.  The Port Division’s segmental EBITDA was reported as TL117.1mn in H1 2017 compared to TL101.3mn over the same period in 2016. The improvement was driven by Commercial division thanks to the increase in high-margin TEU business, increased operational efficiencies and a favorable currency environment in Turkey. The strong performance in the Commercial business has been partly offset by weakness in Turkish cruise ports (particularly Ege) due to the ongoing geopolitical tension in Turkey and the Eastern Mediterranean. Segmental EBITDA was also negatively impacted by Euro/USD fluctuations and passenger mix. All cruise ports’ revenues and Port of Adria are mainly Euro denominated and fluctuations of the average Euro/USD exchange rate compared to H1 2016 negatively impacted revenues and EBITDA reported in USD. In addition, changes in the passenger mix between turnaround and transit passengers, in favor of transit passengers, also put a cap in EBITDA expansion.

The Power/Gas/Mining Division reported revenues of TL138.0mn in the first six months of 2017, representing a 40% increase over the same period in 2016, mainly driven by the gas sales and feldspar mining operations. GIH’s Power/Gas/Mining Division EBITDA consisted of CNG, feldspar mining and energy efficiency operations. Naturelgaz revenues stood at TL76.5mn as compared to TL70.0mn over the same period in 2016, excluding pipeline gas trading. Reported sales volume of H1 2017 stood at 61.6mn m3 (excluding pipeline gas), compared to 55.8mn m3 for the same period in 2016.

GIH reported a consolidated net loss of TL137.8mn in H1 2017, compared to a net loss of TL45.1mn in H1 2016. The loss does not include TL425.0mn increase in Group’s consolidated equity due to the successful IPO of the Ports Division in London Stock Exchange, where this profit is not accounted for under the P&L, but only under the equity as per IFRS 27. The main reasons behind the loss in 1H2017 were TL78.3mn one-off expenses, resulting mainly from the write-off provision of Dağören HEPP project (TL51.0mn) and project expenses incurred from intensive M&A activity at the Port segment. Additionally, the non-cash depreciation charges, and increase in net interest expenses has also impacted the bottom line. Depreciation and amortization charges have increased from TL77.7mn in H1 2016 to TL97.5mn in H1 2017. Also, the Group has incurred TL88.3mn net interest expenses in the period. Following the successful IPO of the port business, coupled with the cash commitment from FAB, net debt position of the Group has improved significantly. Consolidated Net Debt has decreased from TL2,104.9mn in Q1 2017 to TL1,216.9mn in Q2 2017. Likewise, holding stand-alone Net Debt position of TL574.1mn turned into a “Net Cash” position of TL-5.7mn, which will significantly reduce net interest expenses in the second half of the year.

Commenting on the recent developments, GIH’s CFO, Kerem Eser, underlined the significance of the partnership with FAB and Global Ports Holding’s listing on the London Stock Exchange. “The strategic partnership with FAB, an asset management firm backed by large global investors, is expected to  further accelerate Global Investment Holdings growth in Turkey as well the rest of the world as a global investor in infrastructure and energy. Global Investment Holdings’ total equity stood at TL 1,703.0mn. ” Mr. Eser also mentioned that,  “in line with its growth strategy, GPH is now listed on the London Stock Exchange, after displaying an exemplary show of dedication and team work.  Global Ports Holding received gross proceeds of 58.0mn£ (75mnUSD), which will be used to develop and expand the cruise business further into the Caribbean and Asia. Global Investment Holdings total gross proceeds in excess of 81mn£ (105mnUSD) pursuant to the Offer, will predominantly be used to pay off debt at the Holding level.”

Commenting on recent developments Chairman Mr. Mehmet Kutman , stated that “the Group will focus on its new strategy to develop regional and global enterprises only in selected core businesses, which are clean energy and infrastructure.”

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As per CMB’s approval dated April 14, 2017, Global Investment Holding’s application regarding the capital increase has been approved, and, in line with CMB’s same dated resolution, the Board of Directors of Global Investment Holdings has resolved to issue up to 100,000,000 new shares to existing new shareholders and 100,000,000 new shares to FAB.

In this context:

•  100,000,000 shares will be offered to be issued, for two days on the 12^th and 13^th of June 2017, to those who held Global Investment Holding shares as of April 14, 2017. Those willing to use their pre-emption rights will be required to deposit the participation amounts to the account named “Global Yatırım Holding A.Ş. Capital Increase Blockage Account” with Global Securities, at TL 2.45 per share and with a take up ratio up to 51.68% of the shares that they held as of April 14, 2017. Any unused preemptive rights will be cancelled.
•  Following the completion of the rights issue, 100,000,000 shares issue will be issued to and subscribed by FAB.
•  Shares issued in both issues (for both the existing shareholders and FAB) will be subject to a 1-year lock-up period.

FAB is an asset management firm backed by large global strategic investors. It is founded by ex-Goldman partner Dalinc Ariburnu and his former colleagues. In August 2016, FAB acquired CIFC, a New York based U.S. asset manager which manages USD 14 bn of assets. In October 2016, FAB advised and announced the largest fund ever raised in history, the USD 100 bn “Softbank  Vision Fund”. In February 2017, FAB arranged the acquisition of Fortress together with Softbank. Fortress is a US based asset manager, which manages USD 70 bn of assets globally.

FAB focuses on long term investments in finance, technology, hospitality, infrastructure and commodities industries.

The investment by FAB affirms the trust in the future of Turkey and Global Investment Holdings, this capital injection will further accelerate Global Investment Holdings’ growth in Turkey as well the rest of the world as a global investor in infrastructure and energy.

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GPH reports consolidated revenues of USD 114.9mn, and a consolidated EBITDA of USD 75.9mn in FY 2016. This translated into 66.1% consolidated EBITDA margin. Consolidated revenues and EBITDA registered 8.9% and 6.6% increase, respectively. When pro-forma effect of Valletta Cruise Port acquisition is taken into consideration, consolidated revenues and consolidated EBITDA remained stable in FY 2016 YoY. Segmental EBITDA grew by 9.2%, reaching USD 80.9mn in FY 2016 YoY.

Recent geo-political situation in Turkey put pressure on cruise and commercial volumes in Turkey. These events can be summarized as:
• Ongoing tensions in East Med
• The coup Attempt in Turkey in July 2016
• Investigations launched by Chinese Authorities on marble imports to China in June 2016, which partially continued in Q3 2016

However, this impact was compensated to a large extent by the contribution of GPH ports outside Turkey, and strong contribution from the commercial business. Cruise passengers in GPH ports in Turkey decreased by 41%, as opposed to an overall decrease of 67% in Turkey, thanks to world-class security measures and unique excursion choices offered by Ege Ports.

Driven by GPH’s well diversified cruise port network, GPH ports excluding Turkey managed to increase total cruise passengers by 26.8% YoY in FY 2016. The increase was mainly driven by Barcelona, Malaga, Singapore, Valletta and Lisbon. When Turkey is included, total passenger base still indicates a pleasing 10.8% YoY inorganic growth in FY 2016.

Despite the Perfect Storm environment, GPH managed to maximize revenue and EBITDA creation in FY 2016 on the back of:

• Inorganic growth: Valletta Cruise Port (Malta) and Venice Cruise Port (Italy) acquisitions
• Increasing share of turnaround passengers in total passenger mix, driven by Barcelona and Malaga; as well as extension of the cruise season
• A general traffic shift from East Med to West Med
• Tariff adjustments thanks to the tariff flexibility at operational ports due to underlying concessions
• 11.1% depreciation of TL against USD in FY 2016 compared to FY 2015, which translated into c.2.3% increase in EBITDA, as approximately 70% of costs are in TL in Turkish port operations

Total consolidated revenues came out at USD 114.9mn in FY 2016, as opposed to USD 105.5mn in FY 2015, indicating an 8.9% inorganic increase. Revenue increase is mainly driven by cruise revenues, which went up to USD 53.6mn in FY 2016, posting 14.0% growth YoY. When pro-forma effect of Valletta Cruise Port acquisition in FY 2015 is included, consolidated revenues indicate a slight 0.7% decline, while cruise revenues imply 6.3% decline due to the shrinkage at Turkish cruise ports.

On the EBITDA front, total segmental EBITDA (composed of operational companies only, excluding GPH solo expenses) posted 9.2% growth in FY 2016 YoY, at USD 80.9mn. EBITDA maximization was driven by both commercial and cruise segments. Cruise EBITDA registered 7.2% growth in FY 2016 YoY, reaching USD 36.9mn; while commercial EBITDA increased by 10.9% in the same period YoY, at USD 44.0mn. When pro-forma effect of Valletta Cruise Port acquisition in FY 2015 is included, segmental EBITDA imply 3.0% organic growth, while cruise EBITDA indicate 5.1% drop due to the shrinkage at Turkish cruise ports.

Cruise EBITDA margin lost a couple of points in FY 2016 YoY due to lower contribution from Ege Ports (Turkey) which operated at 82% EBITDA margin in FY 2015, yet still standing at a satisfactory 68.8% level. On the contrary, driven by the per TEU and per ton revenue increase at Port Akdeniz, coupled with higher yield project cargo effect at both Port Akdeniz and Port of Adria, commercial EBITDA margin posted 400bps increase (reaching 71.9%) in FY 2016 YoY. As a reminder, cruise EBITDA margin and commercial EBITDA margin for FY 2015 had stood at 73.2% and 67.9%, respectively. Strong revenue performance was mainly driven by Port Akdeniz – Antalya (commercial), Creuers (Barcelona including Malaga) and Malta; while solid EBITDA development YoY in FY 2016 was driven by Port Akdeniz – Antalya (commercial), Creuers (Barcelona including Malaga), Malta, Adria, and minorities (Venice, Lisbon and Singapore).

Net Debt / EBITDA stood at 3.7x in FY 2016 compared to 3.6x 2015YE.

Gross Debt / EBITDA stood at 4.4x in FY 2016, in line with bond covenants.

Cruise Port Operations:
Thanks to its well diversified portfolio and successful recent acquisitions, GPH managed to expand its cruise passenger base by a significant 10.8% in FY 2016 YoY, through organic and inorganic growth. Barcelona, Malaga, Singapore, Valletta (Malta) and Lisbon were the main contributors to compensate for the shrinkage at Turkish cruise ports to a large extend. Total cruise revenues and total cruise EBITDA recorded 14.0% and 7.2% growth, respectively. Cruise EBITDA margin went down from 73.2% in 9M 2015 to 68.8% in FY 2016. The decline in cruise EBITDA margin is mainly attributable to Valletta Cruise Port, which structurally has lower EBITDA margin due to retail operations; and the lower contribution from Ege Ports in Turkey in FY 2016, which operates at 70%-80% EBITDA margin (FY 2015 EBITDA Margin of Ege Ports was 82%).

On the other hand, cruise revenues and EBITDA outside Turkey posted 11.5% and 22.2% increases in FY 2016 YoY, respectively, mainly due to:
• 4.7% YoY organic growth in passenger numbers outside Turkey
• The increasing share of turnaround passengers in Barcelona and Malaga
• Ancillary revenues in Malta (commercial berthing, heavy machinery, duty free)
• EBITDA contribution from recently acquired Venice and increasing EBITDA contribution
from Lisbon and Singapore through equity pick-up

Creuers’ (Barcelona including Malaga) revenues increased by 9.8% in FY 2016 YoY, reaching USD 27.1mn, while EBITDA increased by 11.4%, reaching USD 18.0mn. Accordingly, EBITDA margin registered 95bps increase, reaching 66.5% in FY 2016. Barcelona and Malaga cruise ports’ share of turnaround passengers which are more profitable increased considerably in FY 2016 YoY, contributing to revenue and EBITDA generation. As the Eur/USD parity was flattish in FY 2016, the increase in Creuers’ revenues and EBITDA in USD terms was very similar to that in Eur terms.

Valletta Cruise Port (Malta), the recently acquired cruise port with its unique position for West Med and East Med itineraries, contributed significantly to GPH’s FY 2016 passenger, revenue and EBITDA performance. In line with GPH’s strategy to increase efficiency at the ports it acquires; Valletta Cruise Port’s revenues went up by 15.6% at USD 11.8mn revenues, indicating 15.6% increase YoY; while EBITDA surged by a solid 31.0% at USD 5.9mn in FY 2016 YoY, implying 583bps increase in EBITDA margin.

Additionally, a 20% tariff increase in Lisbon started to be applied in FY 2016, which is in line with GPH’s strategy to rationalize and optimize prices at the ports it operates.

Ege Ports (Kuşadası) revenues and EBITDA declined by 32.8% and 36.7%, respectively, in USD terms in FY 2016 YoY, due to the 36.4% shrinkage in the port’s passenger numbers due to the recent events in Turkey. Yet, Ege Ports has been among the least affected and most resilient ports in Turkey, thanks to the world-class security measures and unique excursion choices it offers. Ege Ports’ standalone captured 56% market share in Turkey in FY 2016, while GPH cruise ports in Turkey composed 73% of Turkey’s cruise ports market in the same period (as opposed to 42% in FY 2015).

Commercial Port Operations:
The impact from the general investigation launched by Chinese officials for imports of marble by the end of May 2016 was over by the end of 2016; Port Akdeniz managed to increase container levels in Q4 2016 YoY. TEU throughput of Port Akdeniz increased by 3.0%.

Meanwhile, total commercial revenues and EBITDA registered a 4.8% and 10.9% growth rates, respectively, in FY 2016 YoY, implying 395bps increase in commercial EBITDA margin (FY 2016 Commercial EBITDA Margin: 71.9%).

Tariff flexibility, depreciation of TL, a recently introduced revenue item (Verified Gross Mass – VGM) as well as other ancillary revenues (ie. container storage revenue and stuffing revenue), and project cargo element translated into stronger EBITDA and margins at Port Akdeniz. Container yield increased by 11.3% in FY 2016 YoY, reaching USD 205.9, continuing to support the margins. Almost half of the container yield increase was driven by the aforementioned new revenue items and side revenues, while the rest was attributable to tariff increase. Mainly driven by project cargo, general & bulk cargo yield surged by 18.2% in FY 2016 YoY, reaching USD 8.4 per ton. Additionally, 11.1% depreciation of TL in FY 2016 YoY, led to c.2.3% increase in EBITDA, as approximately 70% of costs are in TL in Turkish port operations. Commercial Revenues and EBITDA of Port Akdeniz increased by 6.9% and 10.2%, respectively, in FY 2016 YoY, translating into 236bps improvement in EBITDA margin in FY 2016 YoY, which stood at a solid 77.4%.

As for Port of Adria, TEU throughput registered 7.1% increase in FY 2016 YoY, while cargo volume dropped in FY 2016 YoY. This is mainly due to the change of hands of a main exporter in the region. This factory has been acquired by a Chinese company, which is expected to start operations in 2017. Container yields came out at USD 99.9/TEU in FY 2016 at Port of Adria, 2.9% higher than FY 2015 figure. Meanwhile, the weighted average container yield for combined commercial ports operations stood at USD 185.2/TEU in FY 2016, indicating a strong 9.4% increase YoY. Driven by the project cargo, general cargo revenue per ton climbed to USD 32.6 in FY 2016 from USD 9.2 in FY 2015, supporting revenue and EBITDA generation at Port of Adria. Project Cargo elements are basically the machinery, equipment and / constructions to be utilized at regional development projects. Port of Adria’s EBITDA grew by 21.5%, reaching USD 2.7mn, and implying 826bps increase in EBITDA margin.

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