Bloomberg News

Tel Aviv Shares Beat New York on Gas Outlook: Israel Overnight

December 22, 2012

Israeli stocks are outperforming their New York-traded peers for a third year as prospects that domestic gas output will start in 2013 bolster energy producers listed in Tel Aviv.

The benchmark TA-25 is poised for a 12 percent annual rally as Isramco Negev 2 LP (ISRAL) and Delek Group Ltd. (DLEKG) surged more than 24 percent on forecasts enough natural gas has been found to supply Israel’s needs for 150 years. The Bloomberg Israel-US Equity Index (ISRA25BN) of the largest Israeli companies traded in New York, which doesn’t include the gas stocks and is dominated by technology companies, is set for a 6.4 percent advance. Cellcom Israel Ltd. (CEL) and Partner Communications Co. (PTNR) were among the three worst performers in both gauges.

The Finance Ministry on Dec. 16 raised its forecast for Israel’s economic growth in 2013 to 3.5 percent from 3 percent to include the effect of natural gas discoveries, with the offshore Tamar field set to start production by the second quarter next year. Cellcom and Partner, Israel’s biggest mobile phone companies, led declines as new wireless entrants forced incumbent providers to lower prices as they lost customers.

“The gas companies performed quite well this year as there was more clarity on production,” Ori Licht, the head of research at I.B.I-Israel Brokerage and Investments Ltd., said by phone from Tel Aviv on Dec. 20. “While the best performers in Tel Aviv aren’t on the New York index, the worst performers, the telecoms, are on both.”

Bank Stocks

Israeli natural gas companies working with Houston-based Noble Energy Inc. (NBL:US) are examining plans to develop the Leviathan gas field, the world’s largest find of its kind in a decade before 2010. Israel is considering exporting a portion of the gas to finance the projects.

The TA-25 got a lift in 2012 from banking stocks, which also aren’t part of the U.S. gauge. Bank Hapoalim Ltd. (POLI), the country’s second-largest lender and the most heavily-weighted stock on the benchmark index, has gained 35 percent in 2012 after dropping 33 percent in 2011. Bank Leumi Le-Israel Ltd. (LUMI), the nation’s largest lender, has advanced 21 percent.

The Tel Aviv Banking Index (TABANK) traded at 0.58 times net assets at the end of July, less than every financial-stock gauge outside Europe on concern about bad loans. The shares rebounded after falling to “ridiculously low valuations,” Zach Herzog, the head of international sales at Psagot Investment House Ltd., said in a phone interview from Tel Aviv on Dec. 20.

Competition Intensifies

Cellcom, the largest mobile phone provider, has dropped 46 percent in New York while Partner, the second-largest, sank 31 percent. The emergence of low-cost mobile providers in Israel may reduce Netanya, Israel-based Cellcom’s sales this year by 15 percent to $1.5 billion, according to the mean of eight analysts’ estimates compiled by Bloomberg. Rosh Ha’Ayin, Israel- based Partner’s 2012 sales will fall 25 percent to $1.47 billion, according to the average of four predictions.

Check Point Software Technologies Ltd. (CHKP:US), the Tel Aviv-based security networks maker, has lost 10 percent this year. The company with the largest weighted stock on the Bloomberg Israel- US index, which doesn’t trade in Tel Aviv, retreated after revenue growth ebbed and a new competitor entered the market.

Mellanox Technologies Ltd. (MLNX:US), the Yokneam Elit, Israel-based maker of technology used to transfer and store data, led gains on both indexes, advancing 87 percent in Tel Aviv and 89 percent in New York. While the maker of technology used to transfer and store data benefited from mounting demand for its InfiniBand products, shares pared their annual gain on concern Intel Corp., the world’s largest maker of chips, will take away market share.

The Bloomberg Israel-US Index posted a third week of declines last week, losing 0.1 percent to 85.46. EZchip Semiconductor Ltd. (EZCH) led the retreat, falling 7.1 percent to $34.64. The shares of the Yokneam, Israel-based company lost 2.6 percent to 133.40 shekels, or $35.52 in Tel Aviv.

To contact the reporter on this story: Leon Lazaroff in New York llazaroff@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at Eobrien6@bloomberg.net


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Companies Mentioned

  • NBL
    (Noble Energy Inc)
    • $48.5 USD
    • -0.48
    • -0.99%
  • CHKP
    (Check Point Software Technologies Ltd)
    • $80.44 USD
    • 0.51
    • 0.63%
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