Roundup / Strong Yen Pounds Delek Auto

Melisron raises debt, an analyst worries about estate bonds, Mainrom's owners seek exit and Yossi Ackerman resigns from Elbit.

Strong yen pounds Delek Auto: The appreciation of the yen did horrible things to Delek Automotive's second-quarter report, since the company imports Mazda cars to Israel from Japan. It also imports Ford and BMW cars, but still. On Sunday the company, which is controlled by its CEO Gil Agmon and Delek Group, admitted to losing NIS 60 million in the quarter despite a 20% year over year increase in sales. The main problem, the company said, was the yen's 9% climb against the shekel during the quarter. The upshot was that the company's the company's financing costs increased ninefold against the corresponding period a year ago, to NIS 167 million. That lifted the cost of sales to NIS 779 million, 89% of turnover. Revenues had risen 19.2% to NIS 1.06 billion in the quarter but the increase in cost of sales offset the increase.

Melisron to raise more debt: Melisron, a real estate company controlled by Leora Ofer of the billionaire Ofer family, means to issue up to NIS 650 million (adding to the NIS 780 million raised from bondholders in May) in debt. The offering has received a blue-chip AA rating by S&P Maalot. Most of the proceeds will be used to roll over debt. Granted, investors are hardly roaring for corporate debt these days, but the blue-chip rating should be quite the magnet. In the May offering, Melisron managed to raise money at a low yield of 2.55% showing that the market still likes the company, which invests in malls (and which now owns British Israel).

Picky, picky: Be that as it may, Excellence-Nessuah real estate analyst Amir Arad thinks that just because real estate sector bonds haven't been hammered yet, doesn't mean they'll been spared for eternity. Now, Arad likes Melisron. His investment recommendation for the stock is Outperform. But he feels there's an imbalance between the prices of commercial-property companies, and their share prices. The stock multiples (0.5-0.9) reflect expectations that the companies' shareholder equity will take a beating, whether because of diminishing revenues, or downward revaluation of assets. But meanwhile, their bonds are trading at unprecedented spreads of just 1.5% to three% over government bonds, reflecting sunny optimism about the companies' financial condition.

Owners trying to sell shrunken Mainrom: Shipping company Mainrom, which confined its maritime attentions to the Danube River, admitted on Thursday that its controlling shareholders are negotiating to sell their shares for NIS 1.8 million. Now, Mainrom started the trading week at a market cap of NIS 8.4 million, so the putative transaction is priced at a big discount. Meanwhile, last week the owners motioned the court for permission to withdraw a NIS 9.6 million dividend, not from profit but from equity, hence the need for court permission. The court has yet to rule. The selling price, therefore, is post-dividend. From 2007, Mainrom stock has lost 99% of its value: shipping along the Danube has suffered mightily from the economic crisis in Europe.

Yossi Ackerman moving on: Yossi Ackerman announced his resignation as CEO of warfare electronics maker Elbit Systems. Ackerman, 62, has led the company since 1996. During his 16-year stint he shepherded Elbit Systems through no less than 30 mergers and acquisitions, the most prominent being the total acquisition of Tadiran Communications, El-Operating profit, and Elisra.
Eran Azran contributed reporting.