Written by: Zack Miller | June 10, 2007
BusinessWeek reports that the extradition hearing for Comverse’s (CMVT.PK) ex-CEO, Kobi Alexander, has been postponed for later this month due to “technical” issues. Alexander remains free on bail. Alexander was arrested September 26 in the Namibian capital, Windhoek, after a two-month manhunt conducted by the FBI.
Forbes has the story that Radware (RDWR) has named a new Executive Chairman of the Board, Christopher R. McCleary. Previously, McCleary served as the company’s non-executive chairman. From LinkedIn, it appears that McCleary also holds the Chairman position at SaaS Capital and JackBe Inc.
Eltek(ELTK) posted a decline in net income for what it attributed to be caused by the devaluation of the dollar against the shekel. IsraelNewsletter.com commented on this in the past and what we thought we would occur. We seem to be seeing a reversion back to the mean now — read our current analysis on the New Israeli Shekel versus the US dollar.
Forbes has the story that Elbit Medical (EMITF) forms joint venture for real estate development in Bangalore, India. Elbit Medical is expected to invest about $180 million in land acquisition transactions, with $50 million paid in advance. The advance payment will be returned to Elbit Medical if the preliminary conditions of the deal are not met. Revenue from the project is seen at more than $3 billion. Hard to value this one.
Fighting words from CheckPoint’s (CHKP) CEO and Founder, Gil Shwed aimed at Microsoft(MSFT). Shwed, speaking at an IDC security conference in Israel, apparently called Microsoft’s management and integration of its security products “unsatisfactory.” Read the story at Techworld.com.
Generic drug manufacturer, Perrigo (PRGO), said a federal court ruled that its Famotidine Complete product didn’t infringe a patent related to the formulation of Pepcid Complete. Merrill Lynch forecasts that Perrigo could generate at least $10mn in sales and $0.02-$0.03 EPS power during the first full year of marketing, and somewhat less than that in subsequent years as competition increases.
Written by: Aaron Katsman | June 8, 2007
By Aaron Katsman
www.IsraelNewsletter.com
One of the biggest beneficiaries of Israel’s strong economic recovery and massive inflow of foreign investment over the last 4 years has been the Israeli shekel versus the US dollar. On May 14th the Shekel hit its high of 3.96 to the Dollar, culminating a rise of more than 12% against the greenback over the last 10 months. Over the last 3 weeks the Dollar has staged a strong comeback trading today at over 4.20 to the Shekel, a gain of about 6%.
As I have written in previous posts over the last few weeks, this Dollar strength has been anticipated, as the Bank of Israel has been doing whatever they can in trying to talk up the Dollar. The BOI has been lowering interest rates, but many analysts feel that they can cut no more. Officially, Israel has been experiencing little to no inflation over the last 12 months, but that is deceiving. The Dollar is a major component in inflation calculations, so the weakness in it has skewed the numbers to next to nothing. Morgan Stanley analyst Serhan Cevik warned that under the radar, inflation is there and it’s strong, running at 4% once linkage to the dollar is weeded out. He counseled the Bank of Israel, not that it asked, to stop lowering interest rates.
With no fundamental changes with the economy, why the recent comeback in the Dollar? First and foremost I think we have a situation where foreign institutions have decided to take profits and they have begun to sell parts of their stock and bond positions that trade on the Tel Aviv exchange. Once they sell, they convert the Shekels back into Dollars, before brining their money back to the US. In addition, as we are approaching summer, the Israeli media is full of reports that perhaps there will be a war in the coming few months. Local Israeli market participants have started to take that threat seriously, and have started to buy Dollars as a hedge. The third reason is that with the largest par ever between Shekel/ Dollar interest rates, and bond yields surging in the US, money is coming out of Shekel fixed income instruments and heading into Dollar denominated bonds.
I would expect this Dollar strength to continue for some time. We have seen the strength of the shekel negatively impact earnings of Israeli companies that trade in the US. Due to the fact that most of their R&D is done in Israel, and they then must pay salaries in Shekels, many companies experienced lowered net income in Q1 ’07 because of this. While a sell off in Israeli equities may negatively impact Israeli stocks that trade in the US, look for many of these companies to post earnings surprises in Q2 as their expense lines will get pared back.
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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 | June 7, 2007
By Aaron Katsman
IsraelNewsletter.com
Much has been made out of the various technologies that have come out of Israel. With Israel at the forefront of the war on terror for decades, security solutions to help combat terrorism have always been highly sought after. Many technologies, which were created with defense uses in mind, have worked their way down and now have a consumer application as well. There is no doubt that Israel has produced some of the best security technologies in the market today, and, as such, there are many attractive investment opportunities in this field. I would like to highlight three:
Nice Systems (NICE) is a security company that specializes in two markets: Security and Call Centers. Their security solution empowers security personnel to detect, prevent and respond to threats in real-time, and to investigate and reconstruct criminal and security cases using video surveillance and control services, incident monitoring, and reconstruction solutions. NICE is the market leader in providing fast and efficient solutions for the capture, storage, retrieval and analysis of customer interactions for contact centers and the enterprise. In the most recent quarter, revenues increased 33% over Q1 ’06. Operating margins in the first quarter were 15.0%, compared with 10.5%, in the first quarter of 2006. The company expects strong growth going forward, and, as an added surprise, if the US Dollar continues its recent strengthening against the Israeli Shekel, the company’s expenses should fall significantly, thus improving the bottom line.
Verint Systems (VRNT.pk) is a leading provider of analytic software-based solutions for security and workforce-enterprise optimization. Their solution generates actionable intelligence through the collection, retention and analysis of various communication networks. As a subsidiary of Comverse Technology (CMVT.pk) which has been embroiled in scandal, the stock has underperformed its peer group and is trading at compelling valuation, and is on many shortlists as potential takeover candidate.
ECtel(ECTX) , as I posted a few days ago, provides fraud management solutions in the telecom industry. The company did unnerve investors with a weaker than expected quarter, but with the growing demand for their solution, they look to get back on track in the second half of the year. In addition, Hewlett-Packard has had little success breaking into this field, and with HP’s affinity for buying Israeli companies, this could be a M&A target as well.
Disclosure: Author’s fund is long NICE, VRNT.pk as of 6/7/07. 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 | June 6, 2007
By Aaron Katsman
www.IsraelNewsletter.com
Is Nestle trying to expand even more into the Kosher food business? Already owning a controlling interest in the Israeli food giant Osem (OSEM.TA), today the Times Online reports, that Goldfrost, a subsidiary of G. Willi Food-International Ltd. (WILC), may be a target of the largest food and beverage company in the world. 76% of Goldfrost is still controlled by G.Willi Food. Goldfrost, which IPO’d in March ’06 on the AIM market, posted revenue of $3.75 million in the 1st quarter. Nestle’s purported move highlights what I posted about the explosive growth of the Kosher food market. This validates G.Willi Food’s plan of aggressively entering the US market with their wide array of Kosher food products. Aside from the quick few million dollars they would pocket resulting from such a sale of the Goldfrost subsidiary, I believe this could help forge some kind of relationship with the parent company as well, which would be a big and unexpected benefit to G. Willi Food.
Already an attractive investment opportunity based on financials… PE under 11 which is more than half the industry norm, revenue increasing by over 25%, and strong gross margins… G. Willi Food continues to be an intriguing investment for years to come.
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Disclosure: Author’s fund is long WILC as of 6/06/07.
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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.
