Coca-Cola Icecek

Re-Initiation of Coverage
Coca-Cola Icecek (2008-2009)
16.0 13.6 TL 11.2 8.8 6.4 4.0 01.08 02.08 03.08 04.08 05.08 06.08 07.08 08.08 09.08 10.08 11.08 12.08 01.09

Coca-Cola Icecek Market Perform

Current / 2009-end Target Price: TL6.90/8.48

We re-initiate our coverage of Coca-Cola Icecek (CCI) with a Market Perform recommendation as our 2009-end target value indicates a 23% upside potential in TL terms. We valued CCIs domestic and international operations using a sum of parts methodology. Our valuation, which is based on a combination of DCF and international peer multiple comparison suggests that the shares are fairly valued, with an upside potential that is in line with the expected ISE index target. Steady cash generation... The stock offers stability in the current difficult economic environment. As an FMCG product bottler, CCI is less vulnerable to slowing economic growth. Assuming that prices increase in parallel with inflation after 2010 in the domestic market, we expect a 13% CAGR in sales between 2008 and 2018. The company has also completed its major capex programme, suggesting more limited capex growth for 2009. Well positioned... CCI is well positioned to benefit from growth markets in its operating region. Excluding Pakistan CCI receives 80% of its revenues from domestic operations. In Turkey, CCI has exhibited stable growth and we expect this trend to continue in the coming years, notwithstanding a slowdown in growth in 2009 and 2010. CCI operates in 9 international markets, all which offer strong prospects for economic growth with their low per capita beverage consumption. CCI has recently added Pakistan to its expanding geographical coverage, extending its number of potential consumers to 335mn. Depreciation of TL to hit the bottom line We expect CCI to report TL105mn of FX losses in 2008, leading to a net profit of TL97mn. Following the sharp decline in 2008, we believe that CCIs 2009F net profit of TL142mn will return to a normalized level on back of decreased fx losses.

CCOLA

ISE-100

STOCK MARKET DATA (16 January 2009) Bloomberg/Reuters Relative Performance 1 mth 10.9% 52 Week Range (TL): Market Cap (TLmn): Average Daily Vol (TLmn) 3 mth: Beta: YTD TL Return (%): Shares Outstanding (mn): Free Float: 3 mths -21.7% 12mths 5.5% 5.6 - 13.6 1,755 1.5 0.75 8.7 254 25 CCOLA.TI/CCOLA.IS

THE COMPANY IN BRIEF Coca-Cola Icecek is a Turkey-based manufacturer, bottler and distributor of sparkling beverages and still beverages. CCI operates in Turkey, the CIS region and the Middle East.

SHAREHOLDING STRUCTURE
Free Float, 24.6%

Ozgorkey Holding AS, 5.0% The CocaCola Export Corp., 20.1%

Anadolu Efes and its Affiliates, 50.3%

Source: The Company FIGURES & FORECASTS Net Sales (TLmn) 2006 2007 2008F 2009F 1,682 1,926 2,251 2,525 EBITDA (TLmn) 252 327 384 417 Net Profit (TLmn) 87 154 97 142 EBITDA Margin (%) 15.0% 17.0% 17.1% 16.5% P/E (TL,x) 20.2 11.4 18.0 12.4 EV/ Sales (TL,x) 1.4 1.3 1.1 1.0 EV/ EBITDA (TL,x) 9.6 7.4 6.3 5.8

Research: +90 (212) 318 2730 Sales: +90 (212) 318 2741

Coca-Cola Icecek

INVESTMENT THEME
Fairly valued We believe that CCI shares are fairly valued at their current level. Our 2009-end target Mcap of US$1,280mn, leads to a 23% upside potential in TL terms. Based on its 2009F EV/EBITDA multiple, CCI is trading at a 3% discount compared to its international peers. We also used DCF analysis to value CCIs domestic and international operations separately. Due to the limited information presented to assess the value of Pakistan operations we used its acquisition price as a fair value. Accordingly, the shares offer upside potential in parallel with our ISE index upside target. Steady cash flow Demand for beverages is relatively impervious to price increases, and we therefore think the beverage sector will be comparatively less affected than other sectors from the changes in the macroeconomic environment. The expected slowdown in the economy will impact the beverage market in the form of reduced sales growth in 2009. Excluding Pakistan CCI generates 80% of its sales volume from domestic operations. The Company raised its prices by 9% in 2008 in line with inflation and the pricing policy for 2009 will be similar. The Company aims to maintain its gross profit margin in the domestic market by adjusting prices in accordance to movements in inflation. On the EBITDA level, the operations in Turkey comprise a massive 91% of CCIs consolidated EBITDA. We believe CCIs international EBITDA margin will approach the domestic EBITDA margin and we believe that in the following years share of international EBITDA will rise. CCI has positioned itself well to benefit from the growth potential of the regions it operates We believe CCI will sustain its sales volume growth in all countries where it is active. Turkey boasts a young population coupled with high population growth, as well as a low average per capita consumption of beverages when compared to Western Europe. The rising number of visiting tourists will also contribute to consumption in Turkey. CCI also has exposure to international markets in the CIS and Middle East regions. The demographic characteristics of these countries resemble that of Turkey, with a young population and low per capita beverage consumption, which offer tremendous growth potential for CCI. CCI recently acquired a 48.9% stake in Coca-Cola Beverages Pakistan Ltd. for US$76.9mn in 3Q08, effectively doubling the size of CCIs market population from 170mn to 335mn. Brand name recognition stimulates penetration in new product lines CCI benefits from the Coca-Cola brand name while expanding its product scope through innovative products. CCI is the market leader in the sparkling beverages category in Turkey with a market share of 66%. Furthermore, the introduction of innovative products to the market has helped expand the market, with CCI being the leader in the Turkish sparkling beverage sector. CCI has expanded its scope of products to include tea with the start of sales and distribution of Dogadan products in September 2008.
2

Coca-Cola Icecek

VALUATION
We calculate a 2009 year end target equity value of US$1,280mn for CocaCola Icecek, implying 23% upside potential in TL terms. We derived our target value through a sum of parts methodology using a blended valuation of US$ denominated DCF analysis and international peer group multiples. We valued Coca-Colas operations in Turkey and abroad separately to arrive at a fair value for the company.
CCI-Valuation Summary (US$mn) Part / Method Turkey Operations - DCF International Operations exc. Pakistan - DCF DCF Total Peer Comparison (Turkey and Intl. exc. Pakistan) Total Blended Valuation of Turkey and Int. Pakistan - Deal Value Total Valuation Current Mcap 2009YE Price Target (TL ) Current Price Upside/Downside Potential (TL) 50% 50% Weight Value 1,000 248 1,248 1,158 1,203 77 1,280 1,100 8.48 6.90 23%

We used two separate DCF valuations to arrive at a fair value for Turkey operations and international operations excluding Pakistan. We also used peer group multiples to arrive at a total value for both Turkey and international operations excluding Pakistan.
Coca-Cola Icecek
Turkey 80% of sales volume DCF: US$1,000m n Intl: CIS and Middle East 20% of sales volume DCF: US$248m n Pakistan Completed Acq. in 3Q08 Acq. Value: US$77m n

Peer Comp.: US$1,158mn

Blended Value: US$1,203m n

Total Valuation: US$1,280mn

Currently the company does not provide any guidance for Pakistan operations. Thus, we used the recent acquisition price as fair value.

Coca-Cola Icecek DCF Analysis 1. Domestic Operations

We find a fair value of US$1,000mn for Coca-Cola Iceceks domestic business in Turkey through a US$ denominated DCF valuation methodology. Our DCF-based price target assumes a WACC of 11.3% in 2009 which increases gradually to 14.3% by 2018, the end of our forecast period, with a terminal growth of 2.0%. We used the 2010 TR sovereigns as a reference for the risk free rate, while assuming a market risk premium of 9.5% in calculating the cost of equity, which we assume at 15% in 2009 before declining to 14.6% in 2018. We assume a corporate tax rate of 20% for 2009 and beyond.
CCI- Free Cash Flow Projections (US$mn) Turkey Operations
2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E Net Sales Gross Profit Operating Profit Taxes NOPLAT Depreciation Gross Cash Flow Change in WCR Capex Free Cash Flow EBITDA EBITDA Margin 1,445 1,268 1,280 1,366 1,478 1,591 1,721 1,861 2,003 2,167 2,343 629 188 -38 150 73 223 0 -194 29 261 551 158 -32 127 66 193 -3 -101 89 225 557 160 -32 128 66 194 -9 -104 80 226 601 191 -38 153 68 221 -13 -113 95 259 650 207 -41 166 71 236 -13 -138 85 278 716 255 -51 204 49 253 -13 -150 89 303 774 275 -55 220 56 276 -11 -164 101 331 838 298 -60 238 61 299 -11 -159 129 359 902 321 -64 256 63 319 -17 -173 129 383 975 347 -69 277 70 348 -14 -189 144 417 1,054 375 -75 300 78 378 -22 -78 278 453

18.1% 17.7% 17.7% 19.0% 18.8% 19.1% 19.2% 19.3% 19.1% 19.2% 19.3%

Assumptions and Results (US$mn) - 2009E

Weight of equity Cost of Equity Beta Risk free rate Market Risk Premium Cost of Debt after tax Tax rate WACC Terminal Value Growth % 65% 15% 0.75 9% 9.5% 7% 20% 11.3% 2% PV of FCF PV of Terminal Value Implied Firm Value Net Cash Target Mcap 652 725 1,377 -377 1,000

Coca-Cola Icecek 2. International Operations (excluding Pakistan) We also used DCF analysis to arrive at a fair value for the Companys international operations, excluding those in Pakistan. We arrive at a value of US$264mn through a US$ denominated DCF valuation for the Companys operations in the CIS and Middle East regions. Our DCFbased price target assumes a constant WACC of 11.8% between 2009 and the end of our forecast period in 2018, with a terminal growth of 2.0%. We used the Kazakh sovereigns for a risk-free rate in our model, while assuming a market risk premium of 6% in calculating the cost of equity which we assume at 14.3% between 2009 and 2018. We assume an average corporate tax rate of 22% for 2009 and beyond. In our model, we valued CCIs international operations by its consolidated financials. However CCI has different stakes in the countries that it operates. We have assigned a weighted average ownership of 94% for CCIs shareholding. Accordingly we value CCIs stake for US$248mn.
CCI - Free Cash Flow Projections (US$mn) - International Operations
2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E Net Sales Gross Profit Operating Profit Taxes NOPLAT Depreciation Gross Cash Flow Change in WCR Capex Free Cash Flow EBITDA EBITDA Margin 287 89 17 -4 13 17 31 0 -83 -53 34 308 96 18 -4 14 17 31 -1 -25 5 35 352 113 25 -5 19 18 37 -2 -25 10 43 395 128 30 -7 23 20 43 -4 -25 14 49 443 146 40 -9 31 22 53 -4 -29 19 61 497 167 52 -11 41 16 56 -4 -32 20 68 558 190 61 -14 48 19 67 -4 -35 28 80 626 216 72 -16 56 22 78 -4 -34 40 94 702 246 84 -19 66 23 89 -6 -37 46 108 788 276 95 -21 74 28 101 -6 -40 56 122 884 309 106 -23 83 32 115 -9 -33 72 138

12.0% 11.5% 12.1% 12.4% 13.9% 13.7% 14.4% 15.0% 15.3% 15.5% 15.6%

Assumptions and Results (US$mn) - 2009E

Weight of equity Cost of Equity Beta Risk free rate Market Risk Premium Cost of Debt after tax Tax rate WACC Terminal Value Growth % 65% 14.3% 1.00 8% 6% 7% 22% 11.8% 2% PV of FCF PV of Terminal Value Implied Firm Value Net Cash Target Mcap 159 275 434 -170 264

Valuation Summary of International Operations

Total Value of Intl Assets CCI Stake CCI Share US$264mn 94% US$248mn

Coca-Cola Icecek Peer Group Analysis - Multiple Based Valuation We also applied a comparison of peer group multiples to determine Coca-Cola Iceceks fair value. In this valuation we valued CCIs operations, excluding those in Pakistan. We compared the Company with its global peers giving an equal weighting to 2009 and 2010 EV/EBITDA multiples. We chose not to use the P/E multiples as the accounting standards and tax regimes vary among the peer group countries. We derive an Mcap of US$1,158mn for CCIs operations in Turkey and abroad (excluding Pakistan).
Coca-Cola Operations International Comparison
2009E Company Coca-Cola Hellenic Bottling Coca-Cola Femsa Coca-Cola Amatil Embotelladora Andina Britvic PLC Average CCI - Current Price Turkey 1,100 Country Greece Mexico Australia Chile UK Mcap (US$mn) 5,107 6,597 4,770 1,627 809 EV/ EBITDA 4.9 6.3 9.5 5.6 6.5 6.6 6.3 -3% 1,158 P/E 7.9 13.1 16.6 8.8 19.8 13.2 12.5 -6% 1,170 2010E EV/ EBITDA 4.6 9.0 5.6 6.2 6.4 6.1 -3% 1,158 P/E 7.1 15.4 8.6 7.9 9.8 7.2 -26% 1,492 1,158

Premium (Discount) to peers CCI - Target Value CCI Target Value (2009E, 2010E average)

Valuation of Pakistan Operations We valued the Pakistan assets based on the purchase price, of US$77mn for a 48.99% stake in Coca-Cola Beverages Pakistan Ltd. The company has only provided limited financial information regarding this operation, which is in its infancy.

Coca-Cola Icecek

FINANCIAL ANALYSIS & FORECASTS

1. Domestic Operations Increasing sales volumes in the domestic market CCI achieved 8% YoY growth in its domestic sales volumes in 2008 excluding Dogadan tea sales, contributing 80% to the consolidated sales figure. We forecast that this contribution will remain relatively unchanged at 78% in 2009. We believe 2009 will be a harder year for CCI, and adapting a conservative stance, we forecast domestic sales volume growth to be at 4% in 2009 and 2010 and continuing with a stable 7% growth rate throughout the remainder of our forecast horizon for CCIs Turkey operations. CCI is a steady growth company which accomplished a 6 year (20022008) CAGR of 14% in domestic sales volumes. Through the introduction of new innovative products and the new tea business, we believe CCI will be empowered to secure steady volume growth. Domestic prices to be raised as inflation expectations rise CCI has raised its prices by 9% in 2008. In our model, in which we used a 10 year time horizon, we assumed a price increase schedule in line with inflation forecasts in TL terms. Our model thus suggests a CAGR of 12% in sales of domestic operations.
Coca-Cola Turkey
Sales Volume (mUC) Growth % Unit price (TL) mn TL Net Sales Growth % Gross Profit Operating Expense OPEX/Net Sales Operating Profit EBITDA Gross margin Operating margin EBITDA margin 2006 344 4.05 2006 1,392 437 -290 -20.8% 146 220 31.4% 11% 15.8% 2007 382 11% 4.19 2007 1,600 15% 674 -471 -29.4% 203 284 42.1% 13% 17.7% 2008E 411* 8% 4.57 2008E 1,878 17% 817 -573 -30.5% 244 339 43.5% 13.0% 18.1% 2009E 428 4% 4.75 2009E 2,032 8% 884 -630 -31.0% 254 360 43.5% 12.5% 17.7% 2010E 445 4% 5.03 2010E 2,240 10% 974 -694 -31.0% 280 396 43.5% 12.5% 17.7%

*: Announced sales volume excluding Dogadan tea sales

2. International Operations CCI has expanded the breadth of its operations, reaching 10 countries in 2008. We expect the proceeds from international operations to lose momentum in 2009 but gain pace in 2010. Kazakhstan, which accounts for the highest share among international markets, is expected to suffer a period of relatively slow economic growth. We have substantially cut our estimates for 2009 in order to take account of the expected business contraction.
7

Coca-Cola Icecek
Coca - Cola Icecek International (US$mn)
Sales Volume (mUC) Volume Growth Rate Unit Price (US$) Price Increase (%) Net Sales Growth Gross Profit Operating Expense Opex/Net Sales Operating Profit EBITDA Gross Margin Opert. Margin EBITDA Margin *: Announced sales volume 2006 80 2.53 2007 98 22% 2.58 2% 253 24.7% 84 -56 -22.0% 28 43 33.2% 11.2% 17.0% 2008E 105* 7% 2.73 6% 287 13.4% 89 -72 -25.0% 17 34 31.0% 6.0% 12.0% 2009E 117 12% 2.62 -4% 308 7.5% 96 -77 -25.0% 18 35 31.0% 6.0% 11.5% 2010E 132 12% 2.68 2% 352 14.2% 113 -88 -25.0% 25 43 32.0% 7.0% 12.1%

203 62 -41 -20.4% 20 32 30.5% 10.1% 16.0%

International sales volume to pick up CCI operates in countries deemed to offer high development potential. International sales have increased substantially with the number of countries where CCI operates increasing to 10 with the addition of Pakistan in 2008. Kazakhstan had the highest share in international sales volume (36%) in 2008 and we estimate this figure to be lower in the following years, since the growth volume in Kazakhstan is slower than rest of the international markets. The international markets to which CCI has exposure all offer similar characteristics with a young population and low per capita beverage consumption. For international operations, we have assumed a 12% sales volume growth in 2009 and 2010. Also, we have estimated a 4% price decrease in 2009 on the back of appreciating US$, continuing with an annual price increase of 2% in US$ terms. We have excluded CCIs operations in Pakistan as the available information was not sufficient to include in our model.
Sales Volume Split - By Geography and Country - 2008
Pakistan, 8% Syria, 3% Iraq, 3%

Azerbaijan, 27%

Turkey, 80%

Int'l, 20%

Jordan, 16% Kyrgyzstan, 7% Kazakhstan, 36%

Source: The Company

Coca-Cola Icecek
TL Sales Revenue Breakdown (%) - Domestic vs. Intl (exc. Pakistan)
100% 80% 60% 40% 20% 0% 2006 2007 Domestic 2008F 2009F International 2010F 17% 17% 17% 20% 22%

Source: The Company, Garanti Securities Estimates

3. Consolidated EBITDA Analysis CCI generated 84% of its EBITDA in the domestic market in 2007. We expect the share of international EBITDA to slip by 4pp in 2008 to 12%, and increase to 14% in 2009. The international markets CCI operates in, especially Kazakhstan, have been affected negatively by the financial crisis. However, we think that CCI will benefit from the growth potential of the underpenetrated markets in the CIS and Middle East regions after 2009.
EBITDA (TL) Breakdown (%) - Domestic vs. International
100% 80% 60% 40% 20% 0% 2006 2007 Domestic 2008F 2009F International 2010F 17% 16% 12% 14% 16%

Source: The Company, Garanti Securities Estimates

4. Consolidated Cost Analysis In 2007, CCI was able to keep its COGS at the same level as in 2006, even though the Company has increased its net sales by 15%. The efficiency increase was due to decreasing input costs with appreciating TL and decreasing fixed costs with economies of scale. Raw materials account for 85% of CCIs COGS, with the main cost item being refined white sugar or its substitute, corn syrup (HFCS). Turkey imposes production quotas on corn syrup thus preventing CCI from benefiting from use of the cheaper corn syrup as a sweetener.

Coca-Cola Icecek CCI has entered into long term agreements with the Coca-Cola Company for the procurement of concentrate used in soft drinks. Starting from 2007, CCI sealed the contract price for the concentrate in TL and fixed the price for a period of 3 years. The Company has renewed this agreement in 2008. Packaging materials are mainly FX denominated COGS item for CCI and constitutes 27% of total raw material costs.
Operating Expenses
1,100 880 mnYTL 660 440 220 0 2006 2007 2008E 2009E 2010E Operating Exp (%) (rhs) Sales & Marketing Exp. General Adm. Exp. 50% 40% 30% 20% 10% 0% % of Sales
10

Source: The Company, Garanti Securities Estimates

4. Margin Analysis We estimate a 31% gross profit margin for CCIs international operations in 2009 while we estimate a gross profit margin of 43.5% for CCIs domestic business. We believe CCI will end 2009 with a consolidated gross profit margin of 39%. Consolidated Operating Margins
50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 5.2% 2006 8.0% 2007 Gross
Source: The Company, Garanti Securities Estimates

39.3% 29.6% 15.8% 17.6%

40.2%

38.8%

38.1%

17.1%

16.5%

16.5%

4.3% 2008F EBITDA

5.6% 2009F

9.4% 2010F Net Profit

As the company has a short fx position of TL512mn at the end of 3Q08, we estimate a TL105mn fx loss in 2008. Thus, our bottomline projection leads to a 4.3% net profit margin. In 2009 we estimate an EBITDA growth of 9% accompanied by a significant YoY decline in fx loss. Therefore, we arrive at a net profit of TL142mn in 2009, which points to a notable 45% increase compared to 2008 forecast.

Coca-Cola Icecek 5. Capex The Company plans to revise its investment plans, taking into consideration the current economic conditions. Our capex forecasts slightly exceed the maintenance capex, and we have assumed that 80% of capex will be allocated to operations in Turkey. We think the Company will call a halt on new investments from 2009 on. As such, we think that capex will be largely limited to maintenance capex.
Capex Estimates (TLmn)
400 320 240 160 80 0 2006 2007 2008F 2009F 2010F 209 360 262 202 228

Source: Garanti Securities Estimates

Depreciation & Amortization

150 120 mn YTL 90 60 30 0 2006 2007 Dep. & Amor.
Source: The Company, Garanti Securities Estimates

6% 5% 4% 2% 1% 0% 2008 2009 2010 D&A as % of Sales % of sales

6. Net Debt As of end 9M08, CCI has a net debt of TL674mn. Only 9% of the Companys debt is to be paid in 2009 which is related to Kazakhstan operations. The main portion which is 58% of outstanding debt, is due 2010. We believe that at that time it will be easier for CCI to roll over these loans as the credit markets are expected to recover by then.

11

Coca-Cola Icecek

9M08 FINANCIAL RESULTS

Coca-Cola Icecek (CCI) wrote a net profit of TL184mn in 9M08, up by 11% YoY. Sales volumes notched up 10% YoY growth to reach 428mn unit cases in 9M08 while net sales were up by 17% at TL1,828mn, generating TL345mn in EBITDA. In the challenging economic environment, we believe CCIs third quarter results can be considered positive. Sales Volume Consolidated: Consolidated unit case volumes increased by 9% YoY to 186mn in 3Q08 on a quarterly basis; unit case volume, both in its domestic and international operations, increased by 10% YoY in 9M08, to reach 428mn cases. The share of operations in Turkey in total volume stood at 80% during this period, with international operations, excluding Pakistan, accounting for the remaining 20%. Turkey: Unit case volume in Turkey increased by 10% to 343mn in 9M08; the launch of Coca-Cola zero, expansion of product portfolios and increased penetration of HOD water contributed to the solid volume growth in Turkey. Dogadan handed over the sales & distribution of tea to Coca-Cola Satis ve Dagtm A.S. (CCSD), a fully owned subsidiary of CCI, from September 1, 2008; as a result, Q3 volume was underpinned by an additional 2mn unit cases from Doadan. International: Unit case volume increased by 10% YoY to 86mn cases in 9M08. Strong growth in the Middle East markets continued, although growth in the Central Asia Region remained rather weak in 3Q08, which can be attributable to the continued economic slowdown, mainly in Kazakhstan. Sales Consolidated: Net sales increased by 15% YoY to TL772mn in 3Q08, and by 17% YoY to TL1,828mn in 9M08. The fact that net sales revenues staged a stronger recovery than sales volumes was down to price increases and changes in the package mix. Turkey: Net sales were up by 19% YoY in 9M08 to reach TL1,537mn. Net sales revenues grew at a stronger pace than the growth in volumes, thanks to the favourable impact of price increases and effective discount management. Price hikes in the nine month period amounted to around 7.5% in Turkey, slightly higher than the 6.8% rate of inflation in the same period. International: Net sales increased by 20% YoY in 9M08 to TL294mn; average prices per unit case increased by 9.4% YoY during the same period, as a result of the better package mix and rise in average prices. EBIT Consolidated: In 3Q08, EBIT edged up by 2% YoY to TL136mn. In 9M08, EBIT increased by 8% YoY to TL265mn, with the EBIT margin narrowing by 1.2pp to 14.5% in 9M08 due to higher operating expenses. The increase in operating expenses was mainly due to higher marketing and distribution expenses in Turkey and higher personnel and distribution expenses in international markets.
12

Coca-Cola Icecek Turkey: EBIT increased by 19% YoY in 9M08 to TL238mn; in 9M08, the EBIT margin remained flat at 15.5%. The increase in operational expenses was mainly a result of increases in distribution and marketing expenses. Distribution expenses increased due to rising volumes and gasoline prices. Marketing expenses increased as a result of the launch of Coca-Cola zero, the Euro 2008 tournament and Ramadan promotions. International: EBIT in international operations dropped to TL32mn in 9M08, hit by a 31.8% YoY increase in overall operating expenses, mainly due to higher personnel and distribution expenses. Furthermore, Syria was not part of a pro-rata consolidation until the end of April 2007, and both Syrian and Iraqi operations were at the start-up phase in 2007. EBITDA Consolidated: EBITDA increased by 2% YoY to TL345mn in 9M08, with the EBITDA margin declining to 18.9% Turkey: In 9M08 EBITDA increased by 18% to TL306mn, exceeding the 2007 full year EBITDA of TL284mn. CCIs EBITDA margin narrowed by 2.7pp to 19.9% in 9M08, 20bps shy of its 2007 level. International: EBITDA increased by 5% YoY to TL48mn in 9M08, with the EBITDA margin narrowing by 2.3pp to 16.4% in 9M08. Net Debt CCIs consolidated net debt remained almost flat at TL674mn during the third quarter. Some 58% of the Companys debt matures in 2010; the amounts due in 2009 are all related to international operations.
Summary Financials (mn TL) Net Sales Gross Profit Operating Profit EBITDA Financial Exp./Inc. (net) Net Income Cash and Near Cash Total Financial Debt Net Cash Working Capital Shareholders Equity Ratios Gross Margin Operating Margin EBITDA Margin Net Profit Margin 42.1% 19.8% 23.3% 15.2% 37.4% -0.9% 6.0% -3.6% 41.1% 7.4% 14.0% -4.7% 43.0% 15.1% 19.3% 14.3% 41.1% 17.5% 21.0% 13.9% 41.5% 15.7% 20.1% 10.9% 41.8% 14.5% 18.9% 10.2% -0.9 pp -2.2 pp -2.4 pp -1.3 pp 0.3 pp -1.2 pp -1.2 pp -0.7 pp 3Q07 673 283 133 157 0 102 184 557 -373 346 934 4Q07 361 135 -3 22 -2 -13 148 508 -360 221 911 1Q08 391 161 29 55 -45 -18 205 753 -549 339 943 2Q08 664 285 101 128 9 95 113 783 -671 491 980 3Q08 772 318 136 162 -3 107 184 858 -674 459 1,091 9M07 1,564 649 245 314 -16 166 184 557 -373 346 934 1,828 764 265 345 -39 184 184 858 -674 459 1,091 % Change 9M08 3Q08/3Q07 15% 12% 2% 3% -1000% 5% 9M08/9M07 17% 18% 8% 10% 142% 11%

13

Coca-Cola Icecek

4Q08 SALES VOLUMES

The Company released 4Q08 sales volume figures on January 16, 2009. The details are:
Sales Volume (mUC) Domestic International 2007YE 382 98 3M08 74 17 6M08 195 48 9M08 343 86 2008YE 421 113

- Consolidated sales volume grew by 15% from 91mn unit cases in 4Q07 to 105mn unit cases in 4Q08 including Dogadan tea sales. - Consolidated sales volume grew by 11% from 480mn unit cases in 2007 to 533mn unit cases in 2008. Turkey Operations volume increased by 10% to 421mn unit cases including Dogadan tea sales in 2008. International Operations volume rose by 15% to 113mn unit cases including Pakistan in 2008. In 4Q08 CCI took over the sales & distribution of Dogadan tea, accordingly, Dogadan contributed 8mn unit cases to the 4Q08 volume.

14

Coca-Cola Icecek

THE COMPANY
Coca-Cola Icecek (CCI) is a manufacturer, bottler and distributor of sparkling beverages and still beverages based in Turkey. CCI operates in Turkey, the CIS region and the Middle East. CCI produces, sells and distributes sparkling beverages and still beverages (which includes fruit juice, waters, sports drinks, energy drinks and iced tea). Anadolu Efes, operating in the brewery business, is the Companys main shareholder with a 50.3% stake. The Coca-Cola Company (TCCC) holds a 20.1% stake in CCI while Ozgorkey Holding holds a 5.0% stake. The remaining 24.6% of the shares have been trading on the ISE since its IPO in 2006. The stock has also been listed on the ISE-50 since October 23, 2008.
CCI's Operating Countries
Country Turkey Kazakhstan Azerbaijan Turkmenistan Kyrgystan Jordan Iraq Syria Pakistan CCI Stake 100.00% 99,65% 89.90% 33.35% 90.00% 90.00% 30.00% 50.00% 48.99% Population (mn) 71 16 9 5 5 6 29 21 165 2008E GDP/capita (1,000 US$) 10.7 9.0 5.0 5,4 0.8 3.1 2.6 2.6 0.7 Last 5 Years Volume Development (CAGR) 15% 26% 35% n/a 23% 5% n/a n/a 19%

Source: The Company, Garanti Securities Estimates

CCI owns and operates a total of 19 operating plants in 10 different countries. Six of these facilities are located in Turkey. CCI also has production centres in Kazakhstan, Pakistan, Azerbaijan, Kyrgyzstan and Jordan. CCI further has operations in Iraq and Syria through its partnerships.

15

Coca-Cola Icecek
CCI Corporate Structure
Coca-Cola Icecek
100.00% CCI International Holland B.V.

99.96% Coca-Cola Satis ve Dagitim 99.99% Mahmudiye Kaynak Su yu

50.88%

Coca-Cola Almat y Bottlers LLP

48.77%

73.60%

Azerb aijan Coca-Cola Bottlers

16.31%

60.49% 99.00% Efes Sinai Dis Ticar et

Coca-Cola Bish kek Bottlers CJSC

29.51%

The Coca-Cola Bottling Company of Jordan 33.25% Turkmenist an Coca-Cola Bottlers Ltd. 48.99% Coca-Cola Bever ages Pakistan Ltd.

90.00%

Syrian Soft Drink Sales and Distribution LLC

50.00%

The Coca-Cola Bottling of Iraq FZCO 60.00% CC Beverage Lim ited Ir aq

50.00%

Source: The Company

CCI recently completed the acquisition of a bottling company in Pakistan in 3Q08. CCI acquired 48.9% of Coca-Cola Beverages Pakistan Ltd. (CCBPL) for US$76.9mn. Following the acquisition, CCI and The Coca Cola Company (TCCC) now each hold equal shares in CCBPL. The Pakistan acquisition nearly doubled the population size of CCIs market to 335mn people. In the 3Q08 financial results, CCIs Pakistans operations are only included in the balance sheet but are not consolidated in the income statement. The company stated that the Pakistan operations would have marginal effect on the bottom line in the 2008 year end results.
CCIs Sparkling Beverages Market Shares, Rankings (2007 YE)
Turkey Share Position 66.1% 1 Kazakhstan 46.4% 1 Azerbaijan 51.6% 1 Kyrgyzstan 70.0% 1 Jordan 11.4% 2

Source: The Company

CCI is the market leader in the sparkling beverage segment in most of the regions where it has a presence. CCI offers the main brand products of Coca-Cola, Coca-Cola Light, Fanta and Sprite in all of its international markets. According to a market survey conducted by AC Nielsen in 2007, CCI is the leader in the sparkling beverages segment with a market share of 66.1%, with Coca-Cola being the most consumed product in this segment. Its main rivals are Pepsi Cola and Cola Turka. Despite being the most expensive, Coca-Cola is the most consumed of these products. CCI also commands the highest market share in the sparkling beverages category in Kazakhstan, Azerbaijan and in Kyrgyzstan.

16

Coca-Cola Icecek
Carbonated Drink Retail Prices
as of 19.01.09 1lt Bottle Price (TL) Source: Migros Coca-Cola 1.54 Pepsi Cola 1.43 Cola Turka 1.41

CCI is also the leading player in the fruit juices market in Turkey. As well as fruit juices and nectars, CCI boasts a range of bottled water products, including large bottles for Home Office Delivery (HOD), sports drinks and iced tea.
CCIs Still Beverages Market Shares, Rankings (2007 YE)
Turkey M.S. Fruit Juices & Nectars Bottled Water Sports Drinks Iced Tea Source: The Company 26.5% 7.3% 93.3% 21.2% Ranking #1 #3 #1 #2 Kazakhstan M.S. 9.1% 4.2% Ranking #4 #8 44% #1 Azerbaijan M.S. Ranking

CCI has finalized the agreement for the sales and distribution of Dogadan products, a local premium segment tea brand, throughout Turkey starting from September 2008. The discussions to acquire a 50% stake in Dogadan, are still continuing. CCI aims to capture market share in the massive tea business through this possible acquisition. The Company has plans to introduce innovative premium products to the less exploited premium segment in 2009.
Alcohol Free Beverage (AFB) Market (2007 YE)
Milk, Coffee & Other, 6%

HOD, 22%

Tea, 48%

Ready to Drink AFB, 23%

Source: The Company

17

Coca-Cola Icecek

THE SECTOR
Turkeys fast moving consumer goods sector has been experiencing booming growth in recent years on the back of rising disposable incomes. Turkey's per capita GDP has grown with a CAGR of 6.9% in the last 5 years. The World Bank has defined the increasing level as being in the high-income territory. Foreign investment has been lured by this expanding consumer market as the structural reforms toward EU membership has created a pro-business environment. Beverage Consumption Growth
120,000 96,000 CAGR: 23% mn YTL 72,000 48,000 24,000 2000 2001 2002 2003 2004 2005 2006

Source: State Institute of Statistics

Consumer spending has spurred on the back of increasing disposable incomes. The expansion of retail stores in the country has had a great role in the increase in retail sales. Major retail chains like Carrefour, Tesco and Migros have increased their store numbers creating wider networks serving the country. Retail sales have surged in the past 5 years as organised retail increased share in the market while the traditional mom and pop stores (bakkal) lost competition to large retailers. Beverages are predominantly sold in traditional stores in Turkey. Sales attributed to organised retail are rising, and we believe the 25% share recorded at the end of 2007 will increase in the following 3 years as the presence of traditional stores is likely to weaken in the economic downturn. Among the different point of sales, beverage companies gain the highest margins from traditional outlets, and we think that the fall in the number of traditional bakkal stores will take a slight toll on bottlers sales margins.

18

Coca-Cola Icecek Retail Volume by Market Channel (2007 YE)

Discount stores Gas stations 4% 2% Other 12% Restaurants 6%

Organised retail 25%

Traditional retail 51%

Source: Planet Retail

Consumption of beverages in Turkey has increased over the past 5 years. New products and brands have entered the market as the beverage market has expanded. Turkeys young population and the low consumption in Turkey stand as advantages for the beverage sector. Tea is the most consumed beverage in Turkey, itself the worlds largest market for tea, accounting for 6% of global tea consumption in 2007. The tea sector constitutes 48% of Turkeys alcohol free beverage market. CCI aims to increase its sales through this business line, focusing on the premium segment.
Global Tea Consumption, Per capita consumption (lt), 2007
250 200 150 100 50 0 Pakistan Turkey Germany UK Morocco Canada Taiwan Yemen South Africa France
19

Iraq

Iran

Russia

Japan

India

Poland

Egypt

China

Source: The Company

The increasing number of tourists visiting Turkey is another factor, which has been driving growth of beverage consumption in Turkey. Tourists are estimated to comprise 4.5% of overall consumption of beverages in Turkey; this ratio is expected to grow in parallel with rising tourist arrivals.

Syria

USA

Coca-Cola Icecek Sparkling Beverage Consumption per capita vs Median Age (2007)
45
Italy Bulgaria Poland Greece Russia Hungary UK Germany Spain USA

39 Median age

33
Kazakhstan Turkey Azerbaijan Kyrgyzstan Egypt Turkmenistan Syria Jordan South Africa

Quatar U.A.E. Kuwait Saudi Arabia Oman Argentina

27
Tajikistan Pakistan

Mexico

21

Iraq Afghanistan

15 0 45 90 Per capita consumption (lt) 135 180

Source: The Company , Garanti Securities estimates

Growth through acquisitions has been the main strategy for beverage firms in Turkey with a number of mergers and acquisitions having been realised in the sector.
Recent Acquisitions in the Beverage Market
Ann. Date Sep 2008 Jan 2008 Aug 2007 Aug 2007 Aug 2006 Dec 2005 Nov 2005 Target Company Coca-Cola Beverages Pakistan Ltd (48.99% stake) Doga Bitkisel Urunler; Oba Cay Caglar Su Mesrubat ve Gida San. ve Tic A.S. (80% stake) Gidasa SA Erikli Su ve Mesrubat Sanayi ve Ticaret AS Lanitis Bros Public Limited Coca-Cola Bottling Company of Jordan (90% stake) Bidder Company Coca-Cola Icecek AS Yildiz Holding AS Danone Hayat Icecek ve Gida Sanayi ve Tic AS MGS Marmara Gida Sanayi ve Ticaret AS Nestle Waters Gida ve Mesrubat Sanayi Ticaret AS 3E (Cyprus) Limited Efes Invest Holland BV Coca-Cola Icecek AS Deal Value (mn US$) 77 n/a n/a 174 n/a 90 6 305 Enterprise Value (mn US$) 156.96 n/a n/a 173.5373 n/a 90.299 7 305.0525 Revenue (mn US$) n/a n/a n/a 350 55 122.053 n/a 90.29

Oct 2005 Efes Sinai Yatirim Holding AS Source: Mergermarket

20

Coca-Cola Icecek
Coca-Cola Icecek Summary Financials & Estimates
Balance Sheet (mn TL) Current Assets Cash and Cash Equivalents Marketable Securities Short-Term Trade Receivables Inventories Other Current Assets Long Term Assets Tangible Fixed Assets Intangible Fixed Assets Other Long-Term Assets Total Assets Short Term Liabilities Short-Term Financial Loans Short-Term Trade Payables Other Short-Term Payables Long Term Liabilities Long-Term Financial Loans Other Long-Term Payables Other Long-Term Liabilities Shareholders' Equity Total Liabilities and S.holders' Equity 2007 533 141 6 153 162 70 1,144 839 226 79 1,677 420 219 94 106 333 289 44 0 924 1,677 1,047 2,247 1,116 2,470 1,215 2,614 2008E 791 263 5 185 181 158 1,456 1,034 328 94 2,247 396 133 144 119 804 745 58 2009E 992 399 5 208 204 177 1,478 1,029 349 99 2,470 388 130 184 74 966 907 59 2010E 1,108 438 5 235 231 200 1,506 1,046 357 104 2,614 894 593 217 84 505 445 60

Income Statement (mn TL) Net Sales Cost Of Sales GROSS PROFITS/LOSSES Operating Expenses NET OPERATING PROFITS Income & Expenses From Other Operations Profit (Loss) from Subsidiaries Financial Expenses PROFIT BEFORE TAX FROM CONTINUING OPERATIONS Taxation on Continuing Operations PROFIT FROM CONTINUING OPERATIONS PROFIT AFTER TAXES MINORITY INTERESTS NET PROFIT AFTER TAXES

2007 1,926 -1,142 784 -542 242 -37 0 1 207 -51 156 156 -2 154

2008E 2,251 -1,318 933 -666 267 0 0 -143 124 -25 99 99 -1 97

2009E 2,525 -1,489 1,037 -753 284 0 0 -104 180 -36 144 144 -2 142

2010E 2,856 -1,684 1,171 -848 323 0 0 17 340 -68 272 272 -4 268

21

Coca-Cola Icecek

Definition of Stock Ratings

Stock Ratings OUTPERFORM (OP) The stock's total return is expected to exceed the return of the ISE-100 by more than 10% by the end of 2009.

MARKET PERFORM (MP) The stock's total return is expected to be within 10% of the ISE-100 by the end of 2009. UNDERPERFORM (UP) The stock's total return is expected to fall below the return of the ISE-100 by more than 10% by the end of 2009.

Garanti Securities Garanti Building Nispetiye Mah. Aytar Cad. No.2/8 34340 Levent Istanbul Turkey ICM Contact Information: ICM: Facsimile: E-mail: +90 212 318 27 32 +90 212 217 84 70 research@garanti.com.tr

The information in this report has been obtained by Garanti Securities Research Department from sources believed to be reliable. However, Garanti Securities cannot guarantee the accuracy, adequacy, or completeness of such information, and cannot be responsible for the results of investment decisions made on account of this report. This document is not a solicitation to buy or sell any of the securities mentioned. All opinions and estimates included in this report constitute 22 our judgment as of this date and are subject to change without notice. This report is to be distributed to professional emerging markets investors only.