Leviev, Live

Lev reveals shocking true value of Russian assets

Eight years after diamond and real estate baron Lev Leviev took his first hesitant steps in the Israeli business scene, fighting opposition on all fronts, he is an unquestionable master of corporate Israel. The annual Africa Israel (TASE: AFIL) press conference held in Tel Aviv yesterday was more like a triumph than a meeting to clarify financial minutiae of the company's report.

The business press flocked to the event. Sweetly, what the press really wanted to know about was the bziarre incident in which the young ultra-Orthodox billionaire promised to buy that bastion of secular Israel, the Hapoel Tel Aviv soccer team. But Leviev calmed any apprehension by assuring the room that his sporting ambitions had been shelved.

Then he unveiled the prize behind the curtain.

First of all, Africa Israel's results were impressive in and of themselves. The company netted NIS 650 million in 2005. In the last 12 months its stock had risen 45% to a market cap of NIS 9 billion. And finally, Leviev revealed a hidden factor in its business: Russia.

In Moscow with love

One might think that investments in Russia are an internal matter for Leviev, who speaks the language, and his people. But the figures are huge.

The gross value of the company's investments in Russia is in the range of $2.7 billion to $3 billion, he revealed. In net terms (after deducting investment in projects), the scope is $1.3 billion to $1.6 billion. That's the kind of figure to send Africa Israel stock climbing for a day, and the company's fortunes for the long-term.

The market may not yet have had a chance to digest the news Leviev reported over a sumptuous breakfast. Or, given how much good news the company has had, the market may be suffering from an embarrassment of riches. But few market animals had thought Africa Israel had anything like that much invested in the former Soviet hub.

Africa Israel stock since 2004

The figure Africa Israel presented for its Russian assets is based on an appraisal by a Big Investment Bank (unnamed), ahead of a giant offering in London. The bottom line is that the Russian properties add about a billion dollars in value to Africa Israel. For a company worth $2 billion, that's a huge difference.

But Leviev is looking higher. "Four banks are courting us," he said, but he doesn't accept the values they offer. "I have instructed the company CEO, Pini Cohen, to get a better valuation.

What's his take on warnings that the U.S. real estate market is in for a fall? In any case, he says, Africa Israel is structured to minimize the fallout from any such event. "The Israeli market is dependent  on the American one, so we diversify our investments to Russia, China, the Philippines and now we're going for India, too."