Updated September 1, 2008

   According to the results of the August trades at the Istanbul Stock Exchange (ISE), the price of stocks of one of the largest Russia’s general contractors, the Turkish company Enka, fell by 22%. However, the ISE index fell by 7% only. In Enka explain the severe capitalization drop by the problems of their European customers that can’t finance the projects. The international analysts say that the stocks fell on the background of the war conflict with South Ossetia, and the investors are afraid for the success of Enka’s business in Russia because of Turkey’s membership in NATO.

   According to the results of August, Enka’s stocks lost 22% at the ISE and settled at 10,6 of the Turkish lira (TRY). The company’s dollar capitalization fell by 24%, to $10,8 billion (taking to account the dollar to TRY rate fall). The ISE index fell as well, but by 7% only. Even the company’s reporting for 2Q 2008 published at the end of August didn’t stop the quotations’ drop, though, according to it, the company’s net income totaled TRY 436,5 million ($397 million), and that exceeds the last year’s results more than 2,3-fold (TRY 185,84 million). Enka’s revenue grew to TRY 2,118 billion as compared to TRY 1,654 billion in the last year.

   "Enka was severely punished for its wide presence at the Russian market. The investors afraid that the business of the Turkish companies can bear losses in Russia because of Turkey’s membership in NATO", as Ekspresinvest’s trader Stuart Hakket says. Bloomberg agency marks that Enka’s stocks started falling since August, 8, when "the Russian and Georgian troops started fighting for South Ossetia and Abkhazia".

   The quotations’ drop at the Istanbul Stock Exchange is the consequences of the financial crisis in Europe, as the source in Enka states. "The European customers cooperating with Enka lack financial resources. Therefore, some projects on the infrastructure construction in the Eastern Europe, in Romania in particular, were suspended", the source says. However, this statement sounds unconvincing. According to Enka’s reporting for 1Q 2008, the company received $82,4 million due to the European projects, and the company’s business in Russia, Ukraine, Tajikistan and Kazakhstan brought almost the same revenue ($746,9 million), as its business in Turkey ($798 million).

   According to the August results, the stocks of one of the largest general contractors of Europe – the Austrian Strabag (25% belongs to Oleg Deripaska) – lost only 2,3%.

Neither the representative of Enka’s Moscow office, nor Enka’s headquarters in Istanbul commented the situation.

   The Turkish holding Enka was established in 1957. The company is engaged in constructing the industrial, infrastructure and civilian objects in Turkey, Europe, North Africa and in the CIS. The company is operating in Russia since 1988. Enka’ developer portfolio in Russia comprises the business center Naberezhanaya Tower in the International Business Centre Moscow-City (265 600 sq.m.) and 60% in the integrated project with MCG within Taganskaya subway station (500 000 sq.m). Enka owns the chain of Ramstor supermarkets as well. According to Enka’s reporting, as of March, 31, 2008, the company’s property in Russia was estimated at $505 million, in Turkey – at $12 million only. Along with the civilian objects, the company is engaged in the construction of strategic projects, for instance, the construction of new terminals in Sheremetievo airport. According to the rating results of the Russian Forbes for 2007, Enka occupies the 3rd place in the country by the revenues from the space leasing ($ 517 million) after IKEA and the business group of Zarakh Iliev and God Nisanov.

   The short-term drop of stocks’ quotations shouldn’t affect the company’s activity, if the business is successful and the situation is related only to the political risks, the managing director of KIT Finance Sergey Zharov is convinced. He does not eliminate that the price drop of Enka’s stocks is a result of the stock speculators’ activity which have used the political risks for the bearish operations. "The overall inactivity of the large investors in August assisted them, since all key managers are on vacation and there is no one to take decisions about the purchase of large stocks’ volumes", the expert explains. In Sergey Zharov’s opinion, Enka’s owners can get the high revenue, as they can buy the cheap stocks up and sell them when quotations recover.

   The Russian developers cooperating with Enka confirm that the company’s business develops quite successfully in Russia. "Enka is engaged in almost all MCG’s objects, even in Ukraine: the price of contracts exceeds $1 billion", the chairman of MCG directors’ board Pavel Fuks says. AFI Development, Coalco and Eurasia Logistic are also cooperating with Enka. Capital Group’s business manager Aleksey Belousov estimates the price of contracts with Enka at $100 million.