Bank Hapoalim (LSE: BKHD; TASE: POLI) today upgraded its recommendation for Israel Corp. (TASE: ILCO) from “Market perform” to “Outperform”. Bank Hapoalim said that the Israel Corp. share was trading at an unjustified discount. The bank said that the share’s current economic value was NIS 153, over 20% higher than its market price.
Among the reasons cited by Bank Hapoalim were developments at Israel Chemicals (TASE: CHIM), which recently reported that bromine prices had risen for the second time this year. Bank Hapoalim noted that Israel Chemicals was expected to benefit from higher bromine prices, since its share of the world bromine market was 35%. The bank added that Israel Chemicals’ results would also affect the Israel Corp.
Regarding Zim Integrated Shipping Services Ltd., Bank Hapoalim said that, despite recent reports, marine cargo transportation prices were expected to fall only in 2006, when more ships are put into use. Until that happens, Zim is expected to report good results. Bank Hapoalim predicted that Zim would earn a $200 million operating profit in 2005.
Bank Hapoalim also said that investors’ anxiety about Zim was unjustified. Marine transportation prices have fallen for silo cargoes, not for the containers transported by Zim. Zim’s results are therefore not expected to decline in the short term.
Bank Hapoalim’s model values Israel Chemicals at $4.18 billion, 5% above its market cap; Zim at $650 million, and Oil Refineries at $540 million (according the average valuation obtained in the agreement with the state). Adding other non-substantial holdings and subtracting debt, Bank Hapoalim says that its calculation yields a $2.6 billion value for Israel Corp., which means that the company is traded at a large discount, which the bank regards as unjustified.
Israel Corp. is currently conducting in the process of raising $200 million through an issue of bonds with an average duration of 5-6 years. Maalot The Israeli Rating Company has rated the bonds AA.
Published by Globes [online] - www.globes.co.il - on July 4, 2005