Following four days of negative sentiment on the TASE towards Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) share price, during which the communication group's market cap fell 11%, the share price was up 2.99% today. The trend was similar in the shares of companies with indirect holdings in Bezeq: parent company B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM) and grandparent company Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD), which were down 11-12%, and corrected upwards today by 0.5-1%.
The recent downtrend followed reports of the investigation being carried out by the Israel Securities Authority into suspicions of offenses under the Securities Law and the penal law involving deals related to Bezeq controlling shareholder Shaul Elovitch. Bezeq's market cap dropped NIS 1.9 billion to NIS 16 billion in four days, 30% below its NIS 25 billion peak in March 2016. B Communications' market cap fell NIS 370 million to NIS 1.9 billion, and Internet Gold's market cap fell NIS 130 million to NIS 640 million. The market trend in the bonds of all three companies was also negative, with moderate selling today.
Bezeq's four bond series, totaling NIS 6.2 billion, which are rated AA by S&P Maalot and Aa1 by Midroog, dipped by almost 1%, and are now traded at a yield of almost 3%. B Communications' two bond series, totaling NIS 2.5 billion, were down 1-2%, and are traded at 1.5-3.5% yields, while one of Internet Gold's two bond series, amounting to NIS 530 million, suffered more serious damage, dropping nearly 6%, with most of the damage coming yesterday with a 4% plunge and a 3.3% yield. The company's other bond series, amounting to NIS 245 million, was down 1%, with a 2.3% yield.
"No one in a hurry to get rid of Yes"
Commenting today on the effects of the investigation on Bezeq's regular business and what is happening to its securities and those of its controlling shareholders, Rosario Research and Consulting head Eran Jacoby said, "Bezeq is an operator that provides services. The investigation taking place therefore is not as such affecting its consumers - no one is in a hurry to disconnect from DBS Satellite Services (1998) Ltd. (YES), replace their call center at home, or replace their mobile carriers."
Jacoby added, "Bezeq has a deep management backbone, and therefore, in the long term, assuming that it continues operating on its current format, the recent falls are likely to create a buying opportunity."
Jacoby also said, "Bezeq will probably continue to be the strongest communications group in Israel in the coming years, and every investor must therefore make his own calculations at what price he wants to hold the share, in view of what its business is producing for it." Jacoby also commented on the companies' bonds, saying, "If the company's foundations have not been shaken and it continues servicing the same customers and creating profits, then I do not think there is any need for concern about its debt. There is money to service the debts, and since the company 's business is expected to continue to be strong, the bondholders have nothing to fear. In general, it will be good for everyone for this affair to be behind us, including at the level of the domestic communications market."
Investment institutions have lost of a total of NIS 500 million on paper over the past four days of trading (not including today) from the NIS 2.4 billion drop in the value of Elovitch's companies, because the institutions held large stakes in these companies, especially Bezeq, which is listed on the Tel Aviv 35 Index, the TASE's main index.
Published by Globes [online], Israel Business News - www.globes-online.com - on June 26, 2017
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