"It is better to invest directly in Delek Energy Systems Ltd. (TASE: DLEN), Avner Oil and Gas LP (TASE: AVNR.L), and Delek Drilling LP (TASE: DEDR.L) than in Delek Group Ltd. (TASE: DLEKG), despite the 23% discount at which Delek Group's share is trading," says Midgal Capital Markets. "The business environment supports raising the recommendations for the gas partnerships, which in the absence of the Egyptian supplier and higher prices, will result in upsides soon, following the contract with Israel Electric Corporation (IEC) (TASE: ELEC.B22)."
Avner and Delek Drilling directly owns stakes in Yam Tethys, Tamar, Leviathan, Noa, and other gas exploration licenses. Migdal says that the energy sector, especially natural gas exploration, continues to be Delek Group's primary business, and that their proportion will increase ahead of the development of Tamar and Leviathan.
Delek Group's fuel operations in Israel (Delek Israel Fuel Corporation Ltd. (TASE: DLKIS)), the US (DelekUS), and Europe (Delek Europe Ltd.) continue to expand, with the acquisitions of refineries in the US and gas stations in Europe. Delek Group also announced plans to delist Delek Energy and Delek Israel.
Migdal reiterates its "Buy" recommendation for Delek Group and revised its target price to NIS 954. It raised his recommendations for Avner and Delek Drilling to "Buy" from "Hold", with target prices of NIS 2.50 and NIS 15.10, respectively. The new targets reflect premiums of 18% on Avner's opening price and 18% on Delek Drilling's. It also raised its recommendation for Delek Energy to "Buy" with a target price of NIS 1,385.
Migdal also says that the offer to purchase for Delek Israel is less than the company's economic value, reflecting a value of only NIS 900 million. It reiterated its "Buy" recommendation, but cut its target price to NIS 111. Migdal also cautions that the acquisition of BMW importer by Delek Group subsidiary, Ford and Mazda Delek Automotive Systems Ltd. (TASE: DLEA) could be challenging, due to the limited number of brands in the high-end car market. It reiterated its "Hold" recommendation and target price of NIS 43.
Delek Group's share price rose 2% by mid-afternoon to NIS 748. Avner's share price rose 0.4% to NIS 2.06, and Delek Drilling's share price rose 0.4% to NIS 11.57. All three shares are on the Tel Aviv 25 Index.
Delek Israel and Delek Auto are both on the Tel Aviv 100 Index. Delek Israel's share price was unchanged at NIS 94, and Delek Auto's share price rose 0.3% to NIS 370. The share price of Delek Energy, which was relegated from the Tel Aviv 100 Index last month, rose 1.3% to NIS 1,206.
Published by Globes [online], Israel business news - www.globes-online.com - on July 20, 2011
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