Assault weighs on Doğan shares

Hurriyet Daily News with wires

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The half-a-billion-dollar levy imposed by the Treasury against Doğan Media Group, parent company of the Hürriyet Daily News & Economic Review, pushed its value downward yesterday, worrying some analysts as others predicted interest in the shares may be buoyed by its temporary bargain value as Turkey’s biggest media company.

Shares of Doğan Holding, Doğan Media Group, Hürriyet and Doğan Gazetecilik, along with other publicly traded companies, dove Wednesday.

Market analysts told the Daily News the shares may be under significant pressure until the outcome of a possible appeal against the $490 million levy, while some said the group might opt for arbitration, accepting to pay maybe a fraction of the original levy. Doğan officials have said they reject any kind of arbitration and will seek nothing short of full exoneration.

Share performance

Doğan Holding shares lost 14 percent Wednesday, while losses at Doğan Media Group, or DMG, Hürriyet Gazetesi and Doğan Gazetecilik stood at 17.7, 12.1 and 6.7 percent, respectively. Doğan Holding fell to 0.54 lira, while DMG, Hürriyet and Doğan Gazetecilik shares closed yesterday at 0.51, 0.51 and 1.25 liras, respectively. The daily loss of Doğan Holding was 1.8 percent yesterday, while DMG and Hürriyet stayed the same. Doğan Gazetecilik gained 0.8 percent.

The latest decline has presented a big discount for investors, according to Haydar Acun of Sardis Securities. Speaking to the Daily News yesterday, Acun said the tension between the government and DMG would not last forever. "This tension has made Doğan Holding shares those with the biggest discount among holding companies," he said. Acun has "buy" recommendations for Hürriyet, DMG and Doğan Holding.

A lawsuit may be launched against the levy. "The lawsuit may last a long time," said Önder Zorba, of Ata Investment, who has a "neutral" rating on Doğan Holding. Zorba rates DMG as "under performance" and Hürriyet as "market performance."

"Foreign investors especially would not want to invest in this great risk," Sinan Gökşen of Ekspresinvest said.

"These events are beyond us," Analyst Ayşe Kanıöz Moroz of Eczacıbaşı Securities told the Daily News. "We will not have a healthy evaluation until the judiciary process ends. As tension continues, the risk level for investors is rising. Still, the company is extremely strong," said Moroz, who has a "market performance" rating on Doğan Holding.

DMG shares were rated "sell" in new coverage at BGC Partners in Istanbul yesterday. Analyst Berna Kurbay set a 12-month price estimate for DMG shares of 0.49 lira in a report to investors, reported Bloomberg.

Economist calculates 'AKP effect'

Commenting on Wednesday’s huge levy imposed on the Doğan Group, Emre Deliveli, an economist and independent consultant, said the "fracas" is another instance of the lack of value of political connections.

"In an exercise a few months ago, I found that firms that markets perceive as close to the government reacted more strongly to news, about the fate of the Justice and Development Party, or AKP," said Deliveli, who is also a Hürriyet Daily News & Economic Review columnist.

"Following the event methodology approach in the academic work on measuring political connections, I calculated the ’AKP effect’ to be around 3 percent daily, meaning that positive political news created an abnormal return of 3 percent. The effect turned out to be twice this amount for negative shocks," he said.

The figures are "on the same order of the Suharto effect in Indonesia, as evidenced in a paper by Ray Fisman more than a decade ago," Deliveli said. "It is no surprise that Doğan stocks are faring much worse than the market. The size of [Wednesday’s] fall in shares and the fact that Doğan companies not affected by the fine are affected as well reflects that a similar effect might be going on."

Daily News is a Doğan Media Group publication