Overseas: The companies that prefer to trade simultaneously in Tel Aviv and New York

Meet the Israeli companies that are still squinting at the big money of the investors on Wall Street, also cultivate the local arena and trade in Tel Aviv at the same time.

What are the gains, what are the dangers and most importantly: who will replace Teva as the "people's share"?

Roast Greenberg

26/05/2022

Thursday, 26 May 2022, 08:22 Updated: 08:39

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Enjoying all the worlds: The dual companies (traded on the Israeli stock exchange alongside another major stock exchange around the world) continue to lead the stock exchange in Tel Aviv, and often seem to have preferred Israel as the 51st star in the American flag - at least when it comes to investments.

Of the four major dual stocks traded on the Tel Aviv Stock Exchange, three have struggled for the throne as the 'stock of the people', and at the moment it seems that one of them is emerging as the designated successor - ICL GROUP, known to all of us as a (former) Israel Chemicals Company.

The company's share has jumped 300% since the low price it was in the corona period and 151.28% since the end of 2019, and shows the highest increase of the four in the share price for these periods (see attached table).

It should be noted that since the share price in the period of the Corona low, the company has shown a higher return of about 324% compared to the average increase shown by the three main indices examined (see table), and of about 104% since the beginning of 2020.

The Israeli pharmaceutical company Teva, whose share price has fallen by 16.84% since the beginning of 2020, and which has faced a variety of business and legal challenges in recent years, is no longer credited by Israeli investors as the 'people's share', and has not yet managed to return to its glory days. .

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The largest companies traded in Tel Aviv and overseas (Photo: Walla !, no)

But even though it has risen by hundreds of percent and it has fallen by tens of percent, all four companies have managed to sail towards the wide ocean of investments in the world - Wall Street, and it is often questionable why they continue trading their shares on the local stock exchange.

These companies often claim Zionism, but the facts prove otherwise.

Elad Krauss, Director of Israel Stock Research at Meitav Brokerage, explained to Walla!

Money, because "trading on the local stock exchange alongside stock exchanges such as NASDAQ and New York in the US serves companies in several aspects.

One of them concerns the volume of trading, with the local stock exchange sometimes contributing the bulk of it, which of course varies from company to company. Of the dual company to remain close and accessible to Israeli investors, especially institutional investors, and close to the Israeli market, assuming that it is an essential part of its activities.

One of the things that needs to be understood in a dual company, is where the bulk of its trading is.

If we look at the ICL share, for example, then in the past year it has

received an average demand of NIS 60 million on the local stock exchange, compared to an average of NIS 30 million in the last six months abroad.

"A million shekels in the local market. The company enjoys the current situation with the increase in goods and is in the Super Cycle (a continuous period of abnormal increase in demand that supply has difficulty meeting), when the results of the first quarter showed an all-time record."

ICL's revenue for the first quarter of the year was about $ 2.5 billion, an increase of about 67% compared to its revenue in the corresponding quarter last year, and about a third of its total revenue for 2021 as a whole.

The adjusted EBITDA for that period was about $ 1 billion, which accounted for about 40% of revenues and is an increase of about 232% compared to the adjusted EBITDA in the corresponding period and about 60% of the adjusted EBITDA for the whole of 2021.

"It is clear that the field of special products that ICL is developing in each of its areas of activity is becoming much more significant," Krauss continues, and is expected to generate $ 1.3-1.4 billion in 2022. The fact that there is such significant activity in the field of uniqueness makes ICL more interesting "In the past, since this will moderate the volatility from which the company's share suffered, as a commodity company that is subject to increases and decreases in commodity prices."

Elad Krauss, Director of Israel Stock Research at Meitav Brokerage (Photo: PR)

Diffuse risk, but also the potential for profit

Krauss continues: "On the other hand, the software company NICE is in higher demand abroad than in Israel, with the company's trading volume abroad averaging about NIS 200 million, while in Israel it is lower and stands at about NIS 60 million. Although it still accounts for about a quarter of all trading in its

stock.

In addition, although Kadima's revenue growth rate is good, and it is expected to grow by about 25% in the cloud area in the coming year, investors are still raising the question mark regarding the rate of profitability growth, if it manages to be higher than revenue.

Another dual company, which seals the top ten companies on the Tel Aviv Stock Exchange in terms of value (as of the end of the trading day on May 24, 2022), which bears a question mark is Tower Semiconductor, which was acquired by Intel and should be delisted from the Tel Aviv Stock Exchange.

The latter is traded at a gap of about 15% of its purchase price by Intel, which reflects investors' fears that the purchase deal will not materialize.

But there are also those who benefit almost equally from both worlds: Elbit Systems, whose trading volume is almost the same between Israel and the US, with a small tendency in favor of the local market.

But the American market is also an important market so it is also traded in the US so you can be close to both them and the American investors.

While its trade focuses on two centers around the globe, the company's own operations are spread around the world, from Latin America, to Asia Pacific.

This geographical dispersal prevents a sharp impairment of its activity when there is a decrease in activity in one of the areas.

For example, if the company's activity in Asia suffers at a certain time, this in Europe and the US, for example, compensates. But this wide spread also leads to lower margins compared to its competitors, This is the main challenge to face.

Most companies considering dual trading are high-tech companies, which usually want to reach the American investment ocean overseas first, but after a while understand the advantage of proximity to the liquidity of investment bodies in Israel.

It turns out that even a company that starts on the Israeli stock exchange, and reaches a significant volume that allows it to trade abroad, understands the need to be close to institutional bodies and investors in Israel, and to enter indices that provide added value, so some choose to stay on the local stock exchange.

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• Wall Street

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