Investment houses are feeling better about Israeli real estate companies and are resuming coverage of them, after suspending coverage in recent months possibly because of the US sub-prime mortgage crisis, which seems to have died down. Analysts are expressing cautious optimism in three warm recommendations published today.
One of the main Israeli victims of the bull market was IDB Holding Corp. Ltd. (TASE:IDBH) subsidiary Property and Building Ltd. (TASE: PTBL), which lost a third of its value. Investors worried that the company’s extensive residential business in Las Vegas, as well its multibillion dollar joint venture with Yitzhak Tshuva’s Elad Properties, the Plaza Casino Hotel, had increased the risk of the company’s investments. IBI Investment House analyst Shai Lipman today cited this project in a new report in which he gave Property and Building a “Buy” recommendation, with a target price 20% above the current price.
Lipman wrote, “It should be noted that the Plaza Casino Hotel project is burning capital at a very high rate, which raises a number of questions, such as: How will it be financed; what will be the proportion of shareholders’ equity; from whom will the debt be raised; and how will this affect the company’s balance sheet, or even the company’s debt rating?”
He adds, “The project involves no little risk, since it is hard to anticipate trends in the residential industry, including in Las Vegas, in the next 3-4 years. Nevertheless, we believe that the opportunity in this case exceeds the risk, and that demand for high-quality hotel rooms and casinos will continue to be high over the coming years.”
Despite the many question marks, Lipman sees exclamation marks as well. “We believe that when completed, the project will create very substantial value for the company. In addition, the collaboration with Tshuva can be carried over into other countries, such as Singapore.”
Clal Finance Batucha analyst Benny Dekel has given Fishman Holdings subsidiary Jerusalem Economic Corp. (TASE:ECJM) (JEC) a “Market perform” recommendation with a target price 12% above the current market price. Dekel believes that the pending exit of the company’s French property portfolio, either through an IPO of the REIT, or by some other means, will generate hundreds of millions of shekels in value for the company.
Dekel also notes JEC’s 44.8% stake in Russian developer Mirland Development Corporation plc (AIM:MLD), which will benefit the company. He believes that Mirland is traded at a 33% discount on its real price. He also believes that JEC’s 59.1% stake in Indian developer Mondon Investments Ltd. will create value and become an important growth engine.
Dekel cited JEC’s opacity for his “Market perform” recommendation for the company, because this increases the risk of investing in it. Eliezer Fishman is the controlling shareholder in “Globes”.
Leader Capital Markets Ltd. analyst Galia Michalevich has initiated coverage of Ashtrom Properties Ltd. (TASE:ASPR) with a “Buy” recommendation and a target price that is 20% above the market price. She believes in the company’s conservative model and says that the share is priced at a significant discount, below the company’s shareholders’ equity on the basis of International Financial Reporting Standards (IFRS).
Published by Globes [online], Israel business news - www.globes.co.il - on October 11, 2007
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