"The share price of Israel Chemicals Ltd. (TASE: ICL) clearly incorporates all the negative effects of the Sheshinski Committee recommendations, and for this point of view the company's risk-return profile is positive," says Gilad Alper, senior analyst at Excellence Nessuah Brokerage, following the release yesterday of the Sheshinski 2 Committee's final report.
"Five years from now, Israel Chemicals will probably be a very different company from the Israel Chemicals we know today," says Alper, "On the face of it, it looks as though Israel Chemicals will indeed be compelled to review its capital investments in Israel, and will probably have to cancel a substantial portion of them, and replace them with investments overseas.
"The relaxations that Israel Chemicals received in the Sheshinski Committee's final recommendations are fairly disappointment. The surtax has become progressive, but the state of the potash market has to be catastrophic for these tax brackets to mean anything. In practice, the surtax rate is 42%. The remaining concessions that the company received do not appear sufficiently substantial, and, all in all, Israel Chemicals' situation has become much worse than it would have been without Sheshinski," Alper says.
Michal Alshech of Leader Capital Markets has raised her target price for Israel Chemicals from NIS 30 to NIS 31, which compares with a current price of NIS 26.19. "We believe that the prospect of high demand for potash, moderately higher prices, and savings from implementation of the strategic plan, should lead to improved results in 2015-2016. From 2017, we estimate, the company's results will be impaired by the application of Sheshinski 2. Because of the raising of our target price, the lessening of the regulatory uncertainty, and the recent decline in the share price, we are raising our recommendation from "Market Perform" to "Buy"," she says.
Roni Biron, director of equity research at UBS, points out in response to the Sheshinski recommendations that further changes to them could be introduced in the course of the legislative process. Biron's target price is NIS 31.5, with a "Buy" recommendation.
Published by Globes [online], Israel business news - www.globes-online.com - on October 21, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014