The Ticker: Cellcom Gets the Right Numbers

Cellcom reports 18% rise in quarterly profit, Boris Mintz looks to sell $145 million in bonds on TASE, Tel Aviv shares edge higher.

Tali Mayer

Cellcom reports 18% rise in quarterly profit

Cellcom Israel, the country’s largest mobile phone operator, reported an 18% rise in second-quarter net profit as it cut costs to meet fierce competition. Net profit rose to 79 million shekels ($22.8 million), just ahead of the 76 million shekel forecast in a Reuters poll of analysts. Cellcom recorded a one-time expense of 39 million shekels from a voluntary retirement plan that led to the retirement of 380 workers. The savings in payroll are expected to be seen as early as the third quarter, it said. Revenue fell 6.3% to 1.158 billion shekels, compared with 1.12 billion in the poll, as Cellcom’s subscriber base fell by 20,000 in the quarter to 3.03 million. The board voted not to distribute a quarterly dividend for the third straight quarter, given the tough competition and its impact on revenue. Last week, rival Pelephone – a unit of Bezeq – posted a 34% drop in quarterly profit. Partner Communications, the third major player, is slated to report results later this week. Cellcom shares finished 1.4% higher at 42.41 shekels in Tel Aviv.

Russian property developer eyes Tel Aviv bond issue

The Russian-Jewish businessman Boris Mintz is looking to sell about 500 million shekels ($145.9 million) in bonds for trading on the Tel Aviv Stock Exchange. The bond issue for the O1 Properties company follows similar offerings by U.S. real estate companies in recent months, which have tapped Tel Aviv to raise debt. Mintz has been meeting with underwriters Poalim IBI, which managed sales for the U.S. realty companies Zarasai Group and Brookland, and expects to start meeting institutional investors to assess their interest this week. Part of Mintz’s O1 Group, O1 Properties holds some $4.2 billion in assets, most in the form of Moscow office buildings, and recently took on Goldman Sachs as a partner. O1, which hasn’t yet filed a prospectus, more than doubled rental revenues last year to $292 million.

Africa Israel selling assets to unit to raise cash

Lev Leviev’s drive to improve the finances of his Africa Israel Investments group took another step forward on Sunday as the company reported that it wanted to sell as much as 155 million shekels ($44.6 million) in land and residential property projects under development to its Africa Residences unit. Shareholders of the two companies must approve the sale. Meanwhile, Africa Israel Investments is issuing 700 million shekels of bonds, which it will use to repay higher-cost debt. Africa is struggling under the weight of some 3 billion shekels of debt to banks and bondholders. Africa Israel Investments edged down 0.03% to 6.05 shekels in Tel Aviv. Africa Residences, which on Sunday reported a 15.6 million-shekel profit for the second quarter – turning around a 4.2 million loss from a year earlier – finished unchanged at 52.38 shekels.

Regulators ban analyst coverage paid for by companies

Companies that pay equity analysts for coverage are in violation of securities law, the Israel Securities Authority said yesterday in a directive. The ISA said paying for coverage and/or hiring an unlicensed financial adviser to perform the work would put both the company and the analyst in violation of the Investment Advisers Law. The practice of paying for analytical coverage has emerged in the last few months as smaller capitalization companies seek ways to increase interest in their shares at a time when trading volumes across the Tel Aviv Stock Exchange have been thin.

Tel Aviv shares follow Europe and U.S. higher

Tel Aviv shares turned higher yesterday, taking their cue from Europe and Wall Street rallies, where recent uncertainty pertaining to Ukraine and the Middle East appeared to ease. The benchmark TA-25 index finished 0.3% higher at 1,387.96 points, while the TA-100 rose 0.4% to close at 1,237.86, on turnover of 882.8 million shekels ($254.3 million). Technology shares led the market, paced by strong earnings reports from Magic and Ituran. Magic led the TA-100 higher on a 6.7% gain to 24.43 shekels after its reported that net income, discounting one-time items, rose 24% from a year ago to $4.7 million. Ituran was close behind with a gain of 6.4% to 78.79 shekels. It turned in a 10.4% increase in quarterly profit to $7.4 million and said it would pay a dividend of 66 agorot a share. Other big gainers were Clal Biotechnology, which climbed 5.1% to close at 8.38 shekels, and TowerJazz, which added 4.6% to 36.71.