Swiss investment bank UBS has raised Elbit’s rating from a lukewarm hold to a buy recommendation. UBS is of the opinon that Elbit’s value, after being split into three companies, is $535 million, as compared with the $309 value million at which the company traded today.
UBS points out that in the past three quarters, Elbit has reported disappointing results. The bank has reduced its profits forecast for 1996 to $24 million from $$27.3 million, and estimates that profitability will improve during the second half of the year.
UBS explains the rise in Elbit’s rating by way of a discount
UBS has also reiterated its buy recommendation for Elron, Elbit’s parent company. The bank feels Elron is trading at a 50% discount in relation to the value of its holdings, which reach $385 million. In determining the value of Elron’s holdings, UBS has given great weight to Elron’s holdings in Chip Express, which is set to issue shares on Wall Street. In UBS’ opinion, the IPO will take place at a minimum company value of $150 million, a relatively high value for an Internet company’s issuance. NetVision’s share issued was also regarded as important. Elron owns 50% of Internet service provider Netvision, which in UBS’ opinion, has company value of $40 million.
Elron has been the focus of many US investment banks attention over the past two year. Another recommendation was recently published by Lehman Brothers, which has given Elron an "outperform" ranking, one step under "buy."
Lehman Brothers point out that the value of Elron’s assets may rise in the coming years to $19.9 per share from $11.9 as its holidngs mature. In a conversation with Lehman Brothers Elron’s management said they would not allow Elbit to continue posting losses on the activity of its television division. In their estimation, in 1995 Elba’s TV business brought in $30 million in revenues, but the company has retreated from the European market due to sharp competition. They said Elbit TV will concentrate on the Israeli market, and thus reduce losses.