Deutsche Bank is bullish about AFI Development plc (LSE:AFID), the Russian development arm of Africa-Israel Investments Ltd. (TASE:AFIL). Analyst Julia Gordeyeva gives the company a "Buy" recommendation with a target price of $1.70, a 40% premium on today's opening price on the London Stock Exchange. Africa-Israel owns 64% of AFI Development.
On Friday, AFI Development announced that it had reached two non-binding understandings with the Moscow City administration for company projects. In one agreement, the company will acquire the municipality's 25% stake in the AFI Mall City and adjacent 2,700-space parking garage for $310 million. In the second agreement, the company will transfer its development rights in the Tverskaya Zastava shopping center to the City of Moscow in exchange for full compensation for the project's development costs to date.
Gordeyeva's preliminary estimate values the parking lot at $150 million, which implies that $160 million was spent on the 25% stake in AFI Mall. "This implies an equity value of the mall of $640 million, a very attractive 20%+ discount to our NAV estimate for the mall."
Gordeyeva adds, "We note, however, that all of the above agreements, including the surrender of development rights for Tverskaya Zastava Mall, are non-binding and, therefore, still carry execution and valuation risk. The Mayor has, however, mentioned the above transactions in his publicly televised interview, which somewhat mitigates these risks, in our view.
"Putting together the two transactions, we estimate the transaction has added $100 million in value, or $0.10 per share."
AFI Development's share price rose 0.5% by midday in London to $1.20, giving a market cap of ₤712 million. Africa-Israel's share price rose 0.6% by early afternoon to NIS 29.10 giving a market cap of NIS 3.05 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on March 28, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011