The Sahar Securities brokerage firm two weeks ago issued a “hold” recommendation on the shares of Elco Holdings. Boaz Levitan, an analyst at Sahar, states, in a paper on the group, that the target price range of Elco shares stands at NIS 144-160 per share. The per share price on the Tel-Aviv Stock Exchange (TASE) stands at NIS 102. Even so, the recommendation is a “hold”, since Sahar assess that it is preferable to purchase shares of part of the group rather than the shares of Elco Holdings itself.
Elco operates through four companies, all of them traded on the TASE. Levitan gives a “buy” recommendation for the shares of Electra Israel and Electra Consumer Products, a “hold” for the shares of Elco Industries, and a “sell” for the shares of Shekem.
Levitan examines the respective merits of holding shares of the subsidiary companies, as compared with shares of the parent company. All group companies make it their practise to pay a regular dividend, but the parent company paid a lower divided than did its subsidiary companies. In 1995, Elco Holdings distributed an NIS 5.3 million dividend, while it received dividends amounting to NIS 20.1 million from its subsidiaries. Clearly, then, whoever held shares of the subsidiary companies, received a dividend yield four times that received by a shareholder of the parent company.
Levitan moreover states that the greater part of Elco’s managerial resources are presently directed towards the rehabilitation of the Shekem chain-stores, and he assumed that this state of affairs will persist for quite a long time. Accordingly, developments in the group will take place in the subsidiaries and not in the parent company, and that is another reason for preferring a share-holding in the subsidiaries to a share-holding in the parent company.
Along with pessimism concerning the Shekem, two group companies are being given a “buy” recommendation. They are: Electra Consumer Products, which is traded on the TASE at a price of NIS 32.3 per shares, and for which Sahar has set a target price of NIS 52-58, i.e. an increase of 70%; and Electra Israel, which is traded at a price of NIS 89 per share, and for which Sahar has set a target price of NIS 115-130 per share - up 37%. The risk ascribed by Sahar to these shares is “market risk”, which is to say, the risk level of the share is similar to the risk level of the share market as a whole.