Leader Capital Markets Ltd. analyst Yoav Burgan says that Argentina’s energy crisis, which is causing a shortage of fuel and electricity, is affecting the country’s agriculture output, and could have repercussions on Israeli agrochemicals producer Makhteshim Agan Industries Ltd. (TASE: MAIN). Burgan says that high prices for corn ($3.46 per bushel) and soy beans ($8.91 per bushel), both of which Argentina exports in quantity, are supported by demand for corn-based ethanol, because for the first time in two years corn-based ethanol is cheaper than gas in the US. This price gap is expected to last through the end of the year.
Rising crop prices is boosting demand for Makhteshim Agan’s products. Burgan has therefore upgraded his recommendation for the share to “Buy” from “Outperform”, and set a target price of NIS 40, 18% above today’s opening price. He also notes the partial offer to purchase made by the company’s parent, Koor Industries Ltd. (TASE:KOR), in mid-May, and Makhteshim Agan’s discount compared with its peers.
Burgan cautions, however, that in view of the 9.5% rise in Makhteshim Agan’s share since the beginning of the month, investors “should wait for the expected technical correction in order to increase their position” in the share.
Published by Globes [online], Israel business news - www.globes.co.il - on July 17, 2007
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