UBS has begun coverage of Israel Corp. (TASE: ILCO) with a "Buy" recommendation. Analysts Roni Biron, Rami Myerson, and Darren Shaw set a price target of NIS 7,200, which compares with a current price on the Tel Aviv Stock Market of NIS 5,319.
"Israel Corp. is a holding company with strategic investments in fertilizers, energy, shipping and other areas. With 90% of our NAV estimate deriving from its 52% stake in Israel Chemicals (ICL), we view Israel Corp. as a play on fertilizers more than anything else. We believe the main catalysts during the next year will be ICL share price appreciation and a narrowing discount to NAV," the analysts write.
"Oil Refineries and Zim (shipping) are currently facing challenging industry conditions, while recent initiatives may unlock hidden value in a couple of years. That said, we believe that at current levels investors either get these significant assets practically for free, or get Israel Chemicals at a substantial discount.
"We believe Israel Corp. stands out through its ‘buy and hold’ philosophy. Since the Ofer Group took control in 1999, the company has not sold a single asset, but rather has continued to invest in its various holdings. We believe future exits might take the form of an IPO (most likely Zim) and would entail a substantial control premium in the event of an M&A transaction.
"Israel Corp. currently trades at a 22% discount to its NAV, based on the market values of ICL and Oil Refineries, and a 40% discount based on our valuation. We find the current gap excessive, and believe a discount of around 15% is more appropriate," the UBS report says.
Published by Globes [online], Israel business news - www.globes.co.il - on June 12, 2008
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