"We're going through a difficult time, and it's obvious that the nature of events like those in recent days is to create momentary negative sentiment, but momentary negative sentiment does comes to an end at some point," Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) and B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM) CEO Doron Turgeman said today. Internet Gold and B Communications are of two Shaul Elovitch's pyramid of companies through which he controls Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ).
Since the investigation of Bezeq became public knowledge, Internet Gold and B Communications securities' have been falling. The shares have lost 20% of their value, Internet Gold's bonds have gone down 0.9% (Series C) and 5.9% (Series D), and B Communications' bonds have fallen 0.3-1.9%. These falls may have made some investors fear a repetition of the 2012-2013 scenario, when the market was anxious about the companies' ability to repay their debt. Turgeman nevertheless stresses that the situation now is different, saying, "Internet Gold and B Communications have taken many measures to improve their financial situation in recent years, and to improve their debt structure. We're in a different place from the one we were in then, and our leverage is very low. At times like this, when Bezeq's share price has reached a year-long low, Internet Gold's leverage is only 40% LTV, and that says a lot."
On account of the investigation, the bond issue planned by Internet Gold as part of the elimination of one level of the pyramid, a measure required by the Promotion of Competition and Reduction of Concentration Law, has been postponed. Turgeman is obviously not going to comment directly on the investigation at Bezeq, but he does say, "Bezeq is a wonderful underlying asset, a market leader in Israeli communications, and one of the shares on the Tel Aviv 35 most highly regarded by both Israelis and foreign investors in recent years. In view of the negative sentiment prevailing towards it in the past few days, Bezeq has reached a situation in which its market cap today means that its dividend return is 9% - a rare commodity in the era of negligible interest rates in which we are living. I'm a person who believes that in the end and in the long term, economics always wins out over momentary sentiment resulting from one event or another, especially in a situation like ours, in which the underlying asset is being traded at a 9% dividend return and B Communication's debt cost is only 3.6%."
Meanwhile, Entropy is still recommending "Market outperform" for Internet Gold's bond series and B Communications Series C bonds, and "Market perform" for B Communications Series B bonds. Entropy Analyst Noa Zvi wrote yesterday, "We believe that Bezeq is fundamentally a strong and sound company, with highly valuable strategic assets of infrastructure and goodwill. Damage to the assets themselves as a result of the investigation affair is unlikely."
Published by Globes [online], Israel Business News - www.globes-online.com - on June 29, 2017
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