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Dogus Drops on Volkswagen Distribution Reports: Istanbul Mover

May 20 (Bloomberg) -- Dogus Otomotiv Servis & Ticaret AS, the Turkish importer of Volkswagen AG vehicles, tumbled the most in three weeks amid reports the German carmaker is planning to take back distribution rights.

Dogus, which denied the reports, fell 5.2 percent in the biggest decline since April 30, closing at 12.65 liras in Istanbul and bringing a three-day drop to 6.3 percent. More than 720,000 shares were traded, or about 1.5 times the three-month daily average, according to data compiled by Bloomberg. The Borsa Istanbul National 100 index retreated 1.9 percent.

Volkswagen may consider producing cars in Turkey if it can take over distribution rights of its brands from Dogus, Vatan newspaper reported today, without saying where it got the information. Zaman newspaper said Volkswagen may seek to buy the 65.5 percent Dogus Group stake in Dogus Otomotiv, citing unidentified sources in the industry. Dogus denied both reports in a filing to the bourse today, saying it hadn’t had talks with Volkswagen on the subject.

“The market is pricing the uncertainty after these reports,” Alper Ustunisik, an analyst at Yatirim Finansman Securities in Istanbul, said in a phone interview. A “considerable chunk” of the company’s revenues comes from distribution and the potential loss of such a big operation “would be material,” he said.

Dogus last week reported a 12 percent drop in first-quarter net income to 63.8 million liras ($35 million). The company, whose shares have rallied 47 percent this year, trades at a forward price-to-earnings multiple of 11.3, according to data compiled by Bloomberg. That compares with 7.9 times for Israel’s Delek Automotive Systems Ltd.

Eleven analysts recommend investors buy Dogus shares while seven say hold them, data compiled by Bloomberg show.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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