Written by: Zack Miller | August 12, 2007
Zoran (ZRAN) up strongly on Friday’s upgrade by JP Morgan.
Teva Pharmaceuticals (TEVA) has obtained two approvals from the US Food and Drug Administration for a generic version of Pfizer’s (PFE) Ellence Injection and tentative approval for a generic version of Pfizer’s Revatio Tablets.
Scopus Networks (SCOP) advised shareholders to reject the increased partial cash tender offer by Optibase (OBAS) citing that the premium was just too low. Read IsraelNewsletter’s review of Optibase’ investment strategy in Optibase: Hi-Tech Innovator or Aspiring Investment Advisor.
Nice Systems (NICE) upgraded by First Analysis Securities. Israel’s Nice Systems, a pioneer in security solutions for email and the telephone, is poised to meet if not exceed expectations for the next few years and has opportunities to penetrate follow-on software and VOIP upgrades.
Morgan Stanley sees a 4.75% - 5% interest rate by end of 2007. Globes has a good summary of the story. Bank of Israel Deputy Governor Zvi Eckstein said this week in an interview with “Globes” that he saw rates rising to a nominal 5% by the end of the year.
Oracle’s (ORCL) CEO, Larry Ellison was in Israel this week. Globes covers the story. One of Ellison’s salient points: Israel’s technology sector has matured to the point that it needs to begin looking to cheaper sources of research services. Also, see the video of Ellison speaking about Israel.
Pharmos (PARS) cutting Israel workforce as R&D expenses increased.
Written by: Aaron Katsman | August 10, 2007
By Aaron Katsman
IsraelNewsletter.com
Optibase (OBAS), a company that deals with advanced digital video solutions, today announced a “change” in its investment policy. They will decrease their holdings in structured notes, after taking a loss. They had invested about $10 million, about 40% of all their cash, in a structured note that they have since sold at a loss of over $300,000. In today’s announcement, they didn’t specify the principal amount but they said as of July 30, the loss would have been over $900,000. It appears to me that they invested in some kind of range accrual structured note, where, as long as the Libor rate was within a specific range, they earned high rates of interest, but once the range is breached, they get nothing. They obviously did this when rates were still low; as rates rose, they got nailed.
My question is where is the corporate oversight?
How was the company able to manage their cash position in such a speculative manner?
Where was the Board of Directors?
If you investigate the company, you will find that the Chairman of the Board also happens to be CEO. I am not naive enough to think that Optibase is the only company with this arrangement, but clearly there is a conflict of interest with this structure. If Optibase wants to turn into an investment company and take more risk with their cash, that’s their choice, but how about a little transparency for investors?
It’s a shame that this has happened because the company has been executing their core business model well. For the first half of ‘07, revenues totaled $12.2 million, compared with $8.3 million for the first half ‘06. Net loss for the period was $1.6 million compared to a net loss of $2.4 million.
Maybe the fact that they are stepping up to the plate and taking responsibility for the loss will mean the end to this practice. Let’s hope Optibase stays on the cutting edge of broadband streaming solutions and leaves the investing to professionals.
Please see our Disclaimer HERE.
Disclosure: Author’s fund has no position in OBAS as of 8/10/07.
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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.
Written by: Zack Miller | August 9, 2007
Tefron (TFR) is a neat, little textile company that manufactures boutique-quality everyday seamless intimate apparel, active wear and swimwear sold throughout the world by such name-brand marketers like Victoria’s Secret, Nike (NKE), Target (TGT), The Gap (GPS) and others.
The company makes some high-end seamless sports apparel that’s being adopted at the level of the MLB, NFL, NBA, NCAA, ATP, World Cup Soccer, as well as by local and international Rugby, Running, Rowing, Softball, and Tennis clubs.
Yet, not all is bliss at Tefron.
They reported today after issuing a profit warning about a month ago and things don’t look great.
As we’ve written previously, Tefron has been having a rough time of it. In Tefron: Sexy Lingerie, Ugly Financials, we’ve explained that a part of Tefron’s woes stem from a Victoria’s Secret product line that we learn is ultimately being outsourced to India. Although the company says that this move won’t have a material impact on 2008, what’s going on here is a general product transition in the company.
The company is maturing its technology and sales towards servicing the high-end sports market. Companies like Under Armour (UA), Columbia Sportswear (COLM). Adidas (ADDYY.PK) and Nike (NKE) are all positioning to service professional league-level equipment and the much larger market behind it: sports fans. My son wears a Michael Vick (God help us) Nike Jersey to bed every night and is infrequently seen without his David Beckham jersey, now of the Los Angeles Galaxy.
Yosef Shiran, the CEO of Tefron, has to say this about what’s going on:
“However, given our expectations for improved active-wear sales in the fourth quarter mainly due to positive indications received from Nike for increased ‘next generation’ product orders, and a seasonally stronger quarter for swimwear sales, we expect a strong improvement in sales and margins in the fourth quarter compared to the second quarter of 2007.”
Tefron is migrating its business from lower margins, declining sales to an upper-end product aimed at athletes. Nike has made a mint out of this market over the past 20 years and Under Armour has seemingly come out of nowhere to become a $3 billion player.
I still own (and wear!) my Patagonia pullover I wore to beer parties at Dartmouth in my college days. Tefron needs to execute now on its product transition towards high-end sports apparel to lock in the athletic market to be able to sell to my kids when they enter school.
With the growing international worship of professional athletes, that’s the market I’d want to blow out.
Disclosure: Author’s fund is long TFR as of 8/9/07 and doesn’t hold any of the other stocks mentioned in this article.
Please see our Disclaimer HERE.
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Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC. and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email zack@profile-financial.com
Written by: Aaron Katsman | August 9, 2007
By Aaron Katsman
IsraelNewsletter.com
After disappointing investors with a weak Q1 ‘07, Omrix Biopharmaceutical’s(OMRI), has more bad news with a very disappointing Q2 ‘07 as well. This news sent the stock tumbling more than 20% in after-hours trading. I guess after the bloodbath takes place today, the company can sell some of their biosurgical products which are are designed to stop bleeding.
Omrix is a commercial-stage company that aims to develop and market innovative biosurgical and passive immunotherapy products, utilizing its proprietary protein purification technology and manufacturing know-how. I am no expert in this field, and the extent of my knowledge in this comes from shows like St. Elsewhere, Trapper John, MD, and ER, but I do understand that when companies quarterly profits drop by 71%, there is a need to look out below.
Uncertainty regarding future shipments of Intravenous Immunoglobulin (IVIG) to an European Union country, as well as related unrecognized revenue, resulted in the company cutting its full-year product sales view. The company said it was facing administrative issues over about $3.0 million of IVIG shipments to the EU country, which it did not name. Omrix didn’t even know as to when it could record the revenue or if it could even continue to sell the product in that country in 2007. The company projects sales of $42 million to $47 million for 2007, down from its prior view of $50 million to $55 million. This is the second quarter in a row that the target has been lowered.
If the stock were to drop down and start trading in the low to mid-teens, even with all this bad news, I think an opportunity would arise (as looking forward into ‘08, there is hope). CEO Robert Taub said,” I am particularly encouraged by the continued market penetration of Evicel in the US, which will be accelerated by the expected general hemostasis approval in the first quarter of 2008. Adding to the growth in our biosurgery platform is the anticipated approval of thrombin in September of this year.”
Keep an eye on the stock. I would expect it to continue to trade lower, but if it were to hit the levels mentioned above, I think an interesting buying opportunity would be at hand.
Please see our Disclaimer HERE.
Disclosure: Author’s fund has no position in OMRI as of 8/09/07.
Like what you see? Sign up to receive daily updates from IsraelNewsletter here
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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