Deutsche Bank has published updated reviews for two of Israel's key players in the chemicals industry, Israel Chemicals (TASE: CHIM) and Makhteshim Agan Industries Ltd. (TASE: MAIN), both of which it rates "Buy."
Raising its target price for Israel Chemicals by NIS 4 to NIS 42, Deutsche Bank adds, "After recent stock underperformance, Israel Chemicals can lay claim to the dubious title of cheapest fertilizer stock globally. It trades at a 20% discount to peers and a 40% discount to PotashCorp. We expect the valuations gap to close quickly as the same demand and pricing trends impact the whole peer group."
Commenting on future potash prices, Deutsche Bank adds, "Current market dynamics suggest that the cycle of potash price rises will continue in 2008." As for Israel Chemical's recent acquisition of Supresta, Deutsche Bank says, "we view last week's $352 million acquisition of flame retardant company Supresta as a good use of free cash flow that will give Israel Chemicals a leading position in that industry."
As for Makhteshim Agan, whose target price was raised to NIS 39, Deutsche Bank says, "We are increasingly confident that Brazilian demand will rebound in the second half of the year, and have increased 2007 and 2008 earnings before interest, taxation, depreciation and amortization estimate to $393 million and $450 million, from $375 million and $425 million respectively. The crop season is progressing well in the northern hemisphere, a region that typically accounts for 60% of Makhteshim's second quarter sales," the bank notes.
Published by Globes [online], Israel business news - www.globes.co.il - on July 4, 2007
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