Written by: Zack Miller | May 31, 2007
Today’s IsraelNewsletter News Roundup
By Zack Miller
IsraelNewsletter.com
Perrigo (PRGO), a generic drugmaker with Israeli roots, said that it received approval from the FDA to market an over-the counter coated fruit nicotine gum as an aid to quit smoking. The Forbes article on the news claims that Nicorrette Fruit Chill gum is already selling at an annual rate of more than $70MM.
Zion Oil and Gas (ZN) ends its 8th and final round of its IPO by raising $12+MM.
Novartis (NVS) says US court extends restraining order against TEVA (TEVA). See IsraelNewsletter’s recent article on this battle of two titans.
Interesting podcastwith Cimatron’s (CIMT) CEO and President, Sam Golan about the state of the tooling and manufacturing industry.
Strong macroeconomic data out of the Central Bureau of Statistics. The Israel economy appears to be going strong, despite political and security crises, and in the face of the ongoing concern about the viability of the current government. Read the Globes article about making sense of the data.
Companies Reporting Earnings
OTI (OTIV)
VocalTec (VOCL)
Formula Systems (FORTY)
BVR Systems (BVSRF)
Healthcare Technologies (HCTL)
Ituran (ITRN)
G. Wili-Food (WILC)
Shamir Optical (SHMR)
Vuance (VUNCF)
TAT Technologies (TATTF)
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Written by: Aaron Katsman | May 31, 2007
By Aaron Katsman
www.IsraelNewsletter.com
Investors Business Daily had an interesting article a few days ago about the business intelligence (BI) software market. The article spoke about the industry being in the midst of a big round of M&A. The industry had sales of $23 billion last year, but there is no one company that dominates. In order to offer customers the complete software package, Many larger companies like SAP (SAP), Oracle (ORCL) and IBM (IBM) have been on the prowl, buying up smaller companies. Even Microsoft (MSFT) earlier this month had their first ever Business Intelligence conference.
BI systems help companies achieve a more in depth undertsanding of factors within their business, such as metrics on sales, production, and internal operations, all which help companies in making more well informed decisions.
The article mentioned a recent Goldman Sachs (GS) survey saying that Business Intelligence ranks as a top-five priority for tech spending. And Merrill Lynch analyst Edward McGuire said acceptance of business intelligence is firmly entrenched in the mainstream.
The article mentioned some potential takeover targets, but surprised me in their omission of three Israeli companies that seem ripe for the picking, and have actually been mentioned in takeover talk.
Retalix (RTLX), who automate and synchronize retail, distribution, and supply chain operations for stores, headquarters, and warehouses, has been rumored to be bought out by either SAP or Oracle for some time.
Fundtech (FNDT), which provides end-to-end financial transaction processing software solutions for financial institutions, has been rumored to be an acquisition target as well.
Verint (VRNT.pk) produces analytic software-based solutions for the security and business intelligence markets. Verint has been linked to IBM more than once over the last 12 months, and at hefty premiums to current market cap.
If you are looking for a way to play the M&A game in the BI space, have a look at Retalix, Fundtech, and Verint, three companies that appear to already be in play.
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Disclosure: Author’s fund is long FNDT, RTLX and VRNT.pk as of 5/30/07. He does not hold positions in the other companies listed.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | May 30, 2007
By Aaron Katsman
IsraelNewsletter.com
On-Track Innovations (OTIV), which designs, develops and markets secure contactless microprocessor-based smart cards, dissapointed investors earlier today with a weaker quarter than analysts had expected. The company reported an adjusted loss of $2.5 million, or 14 cents a share, on revenue of $10.4 million. Analysts expected a loss of 6 cents a share on revenue of $10.1 million. To make matters worse, gross margins decreased to 39% for the 1st quarter, from 49% for the same period in 2006. Factor in that the company’s stock price is down 40% from last July, when they lost a US government tender for electronic passport production, and the picture isn’t pretty.
OTIV develops smart cards for three vertical markets: petroleum payment solutions, micropayments for small ticket items and SmartID for credentialing, identification and verification of individuals. The companies’ EZ-Park has eliminated the need to carry around small change to plug a meter when parking. You load up your EZ-park machine at any one of a number of machines located at gas stations, and then depending on the city you are in and the amount of time you plan on parking, you set the machine to those parameters, and hang it from your window. That’s it. If you set it for 2 hours and you only park for a fraction of that time, you only pay for the actual time used.
With all the bad news, it’s hard to see a turnaround in the horizon. But after listening to the conference call and going through the financials, I got the sense that the company is poised for a very strong second half 2007, and full year 2008. That being said, we still have another quarter in the first half to suffer through.
Commenting on the results, Oded Bashan, Chairman, President & CEO of OTI, said, “During the first quarter we increased our revenues by 15% to $10.4M while increasing the contribution from the ID and the petroleum markets, which was in line with our expectation that revenue growth this year will be driven mainly by the petroleum and ID markets. While quarter to quarter lumpiness is characteristic of the early-stage markets in which we participate, we expect the second half to be significantly stronger than the first half. Our first quarter results were impacted by the weakness of the dollar. Because the trend continues, we are considering steps to mitigate the influence of currency on our results.”
The company estimated that the strong Israeli Shekel against the US Dollar added ten percent to R&D expenses, because the R&D is done in Israel and the employees get paid in the local currency. I personally believe that by year end we will see the dollar strengthen vs the shekel, thus improving the expense line.
A deal with the Polish government for passport identification has garned OTIV half the market in Poland and it appears that another European governmental deal is imminent. The installation at over 100 locations of EasyFuel pay at the pump solution, should start paying dividends in the second half ‘07 as well.
OTIV has $46 million in cash, and with the stock trading in low to mid $7’s, with some patience to allow the turnaround to take place, this has the potential to provide nice returns in the next 6-12 months.
Disclosure: Author’s fund is long OTIV as of 5/30/07.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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Written by: Aaron Katsman | May 30, 2007
By Aaron Katsman
IsraelNewsletter.com
Yesterday a U.S. Federal judge extended a temporary restraining order on sales of generic versions of blood pressure drug Lotrel by Teva Pharmaceuticals (TEVA). While that was good news for Novartis (NVS) , the judge also allowd for the continued sales of TEVA’s generic version, which had already been shipped and received by suppliers and customers. A final verdict on the case by the U.S. District Court for the District of New Jersey is expected very soon.
As I mentioned in this blog last week, most analysts think TEVA successfully shipped more than enough of the drug to start taking market share from Lotrel, so yesterday’s ruling, which allowed them to sell what has already been shipped, would have to be considered a victory of sorts.
Disclosure: Author’s fund is long TEVA as of 5/30/07.
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Please see our Disclaimer HERE.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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