Monday, July 13, 2009

Israel Chemicals Shares Plunged 9 Pct After India-Silvinit Deal

. Monday, July 13, 2009

By stockOzone team

Shares of Israel Chemicals (ICL) slid nearly 9 percent on Sunday after India late last week signed a potash deal with Russian producer Silvinit (SILV.RTS) at a price sharply below market expectations.

ICL shares ended down 8.7 percent at 35.60 shekels, by far the biggest decliners on the Tel Aviv Stock Exchange (TASE).

As the second largest company traded on the TASE, ICL's decline helped push the overall TA-100 index .TA100 down 1.2 percent.

India on Friday agreed to buy 850,000 tonnes of potash from Silvinit at a delivered price of $460 a tonne, analysts said, citing reports in Fertecon and FMB, well below the $625 to $635 per tonne range that all other major producers had proposed.

Shares of ICL, a maker of fertilisers and specialty chemicals, do not trade on Friday as the TASE is closed.

"Israel Chemical shares are likely to remain volatile in the near term as the market digests recent news and waits to see how demand reacts," Citi analyst Sophie Jourdier wrote in a client note. "Nonetheless, even on our worst case scenario, we still believe ICL represents good value."

Jourdier maintained a "buy/high risk" rating and target price of 45 shekels for ICL.

"Israel Chemicals is one of the best placed potash producers globally given its very low-cost production from the Dead Sea and low capex costs. We estimate the company will generate strong cash flow for the medium term," she added.

Jourdier also reduced her 2010 potash forecast to $450 a tonne from $500, with a long-term target of $400.

Brokerage Psagot lowered its price target for ICL to 43 shekels from 50 shekels while maintaining a "market perform" rating.

"The (potash) price reduction leads to the unavoidable conclusion: In the current market situation, the customers have the upper hand," Psagot analyst Limor Gruber said in a report.

Bank Hapoalim's Gilad Sarig lowered ICL to "market perform" from "outperform" and his target price to 42 shekels from 50 shekels.

Yoav Burgan, an analyst at Leader Capital Markets in Tel Aviv, put his "buy" rating and target of 70 shekels on review, citing "terrible news from India".

Disclosure: Author does not own any of the stocks discussed here.

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