In the past two years, shares of Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) have been on a rollercoaster. The volatility in the shares of the real estate company controlled by chairman Lev Leviev has greatly exceeded that of the Tel Aviv Stock Exchange (TASE) as a whole.
From its NIS 28 billion peak in May 2007, Africa-Israel's market cap has fallen 90%, due to exposure the US and Russian real estate markets, and the company's high leverage. The share made a U-turn in early 2009 as the market euphoria pushed the share up 150%.
However, Africa-Israel's announcement on Sunday that it may not be able to meet its debt payments, has sent the share down over 30%, and its 13 tradable bonds down by similar amounts. As a result, the bonds are traded at yields of 25-470%, and the company's market cap is down to NIS 2.39 billion.
One cannot but wonder whether the share has fallen too far, and whether the prices for its shares and bonds do not already take the company's troubles into account. It may be possible that amidst the hysteria and panic there is an opportunity (only for the brave, of course).
It is very hard to find analysts who will recommend Africa-Israel's share nowadays, especially since shareholders are likely to see their stakes diluted as part of the company's debt settlements. The amount of the dilution is still not known. Nonetheless, a few analysts believe that some Africa-Israel bondholders, especially holders of long duration bonds, may want to invest in the company.
Clal Finance analyst Yuval Ben-Zeev says, "There are opportunities in the long-term bonds, especially in the bonds traded at less than NIS 0.50. However, it should be remembered that the risk is great. As for the shares and bonds traded at over NIS 0.70, the risk is very high and exceeds any opportunity."
Ramco Investment House VP Yaniv Rahmi specifically recommends Africa-Israel's Series 21 bond, which is currently traded at a yield of 34%. "Even in a scenario of missed debt payments, the price of the Series 21 bond is worthwhile. However, investors need stamina and the mental strength to survive the high volatility in the bond's price. Even if a settlement results in painful concessions, the long-term bonds are still an asset that will yield handsome double-digit yields," he says.
IBI Investment House analyst Shay Lipman, however, says that it is premature to determine whether Africa-Israel's securities are worth investing in. "So long as we don’t know what will happen with the settlement, everything is a gamble. The worthwhileness of an investment in a company depends on several questions, including whether the settlement will cover all the bond series, whether shareholders will see a dilution of their holdings, and so forth," he says.
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2009
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