Tue: Fancy TAT

If FIMI is getting into the company, that arouses my buying instincts.

Not all shares are expensive, and I cite TAT Technologies (TATTF) as today's example. There is talk that First Israel Mezzanine Investors (FIMI) is buying into TAT. Neither company has yet made any official confirmation; the talks are still only preliminary, but a deal is likely.

As usual, FIMI is making a great deal, at least as far as it is concerned, naturally. It is entering one of the cheapest and most worthwhile of Israeli shares on Wall Street (or on the Tel Aviv Stock Exchange for that matter). FIMI has already gained a reputation as Israel's only real mezzanine fund with successful investments. FIMI general manager Ishay Davidi has proved that he and his team are peerless in buying into companies at fire-sale prices. More importantly, Davidi has proved that he knows how to help the managers achieve much higher values for their companies. In Israeli terms, that's a big deal in itself.

Yesterday, TAT, which develops, upgrades, operates, and repairs heating systems, mostly for planes, announced another interesting long-term contract to supply various aeronautic products. This means that the company is entering new businesses. In addition to heaters, TAT also specializes in aircraft pumps, valves, power systems, and other products.

By the way, TAT was Israel's first private aviation company, founded by chairman and CEO Shlomo Ostersetzer in the wake of France's arms embargo in 1967. Ostersetzer and TAT president Dov Zeelim currently own 60% of the company through TAT Industries (TASE:TAT5). TAT has over $30 million in sales and $5 million in profits a year, and I estimate that its earning per share will exceed $1 and that it will distribute a dividend. With a market cap of only $32 million, TAT is truly something extraordinary.

Naturally, no analyst covers the company. Why should they cover a company in such a boring industry? But if you were to ask me, TAT is an ideal opportunity, and an excellent deal for both parties, and any young, aspiring analyst wanting to make a name for himself ought to be the first to cover this company.

If the deal goes through, FIMI is buying into a company at a bargain, while TAT is getting a wonderful partner that has connections with other companies that could benefit it, including Shamrock Holdings and Tadiran Communications (TASE:TDCM). I believe that TAT will issue new shares to FIMI and some of its shareholders may sell some more, though it's hard to believe they would do so at the current price, since the company does not need a lot of cash.

On the basis of FIMI's experience and TAT's successes in the past 2-3 years, I can only think about one thing: buying TAT shares. Not only is the share cheap now, but, as I said, a long-term investment in the company has now been legitimized. I'm adding TAT to my 2004 select list. But, ladies and gentlemen, don't believe me; go check it out.

Published by Globes [online] - www.globes.co.il - on December 23, 2003

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