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Gazit Discount Narrows on Demand as Teva Sinks: Israel Overnight

Gazit-Globe Ltd. (GZT), the Israeli property firm that gets 21 percent of revenue from the U.S., rose to trade at the smallest discount to peers in four months after raising twice what it planned in a bond sale.

The real estate developer gained 2.9 percent to $12.35 in New York yesterday. The advance sent valuations to 8 times reported earnings, reducing Gazit-Globe’s discount versus the Bloomberg EMEA Real Estate Index (BEUREAL) to 51 percent, the smallest gap since Aug. 12. The Bloomberg Israel-US Equity Index (ISRA25BN) of the largest U.S.-traded Israeli stocks rose 0.4 percent to 87.99, while Teva Pharmaceutical Industries Ltd. (TEVA) plunged the most in 16 months on concern sales may slow more than expected.

Gazit-Globe said on Dec. 11 it received 1 billion shekels ($265 million) of commitments from institutions for its offering of bonds due 2024, exceeding an initial plan to sell 500 million shekels of debt. Home values in the U.S., the fourth-biggest source of revenue for Gazit, have been boosted by record-low mortgage rates, with prices jumping 6.3 percent in October from a year earlier, the biggest increase since June 2006, data provider CoreLogic Inc. said Dec. 4.

“Gazit-Globe rebounded with signs of a recovery of real estate in the U.S.,” Amir Arad, an analyst at Excellence Nessuah Investment House Ltd. who has a buy rating on the shares, said yesterday by phone from Ramat Gan, Israel. “The market wasn’t expecting such demand for the bonds, and this has created more interest in the company.”

Gazit-Globe’s shares traded in Tel Aviv added 0.5 percent to 47.08 shekels, or the equivalent of $12.49, as Israel’s TA-25 Index (TA-25) lost 0.3 percent at 9:49 a.m.

‘Continued Improvements’

The bonds were assigned an ilA+ rating at Standard & Poor’s Maalot, the fifth-highest grade. The yield on the company’s 5.35 percent notes maturing September 2024 rose less than one basis point, or 0.01 percentage point, to 4.3465 percent, the highest since Nov. 29, in Tel Aviv.

Gazit-Globe’s New York shares have gained 31 percent this year, beating the 13 percent advance by the Bloomberg EMEA Real Estate Index, which includes Doha-based Ezdan Real Estate Co. (ERES) and Vienna-based Immofinanz AG. (IIA)

Brazil, the Nordic region and Canada are expected to lead growth for Gazit-Globe in the 2013, Chaim Katzman, the company’s founder, said in September. The company, which owns properties in New York, San Francisco and Sao Paulo, operates in 20 countries.

“There have been continued improvements within the company’s principal holdings,” Arad said.

Lower Rates

U.S. homebuilders will probably outperform the Standard & Poor’s 500 (SPX) Index in 2013, Robert Wetenhall, an analyst at RBC Capital Markets wrote in a Dec. 11 investor note. “Stable” pricing and low interest rates will create the foundation for a “sharp” increase in orders in the spring, Wetenhall wrote.

The Federal Reserve said yesterday that it will expand its asset purchase program by buying $45 billion a month of Treasury securities starting in January to spur the economy. Rates will stay low “at least as long” as unemployment remains above 6.5 percent and if inflation is projected to be no more than 2.5 percent, the Federal Open Market Committee said in a statement.

Israel, which has a population of similar size to Switzerland’s, has 54 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

Teva Disappointment

Teva, the world’s largest maker of generic drugs, sank the most since August 2011 on investor disappointment with Chief Executive Officer Jeremy Levin’s plan to replace revenue from branded drugs losing patent protection in the next three years.

American depositary receipts of the Petach Tikva, Israel- based company tumbled 5.3 percent to $39.47, with trading volumes six times the stock’s three-month daily average, according to data compiled by Bloomberg. The Tel Aviv stock this morning dropped 5 percent to 148.8 shekels, or $39.48.

Levin, who took over as CEO in May, spoke to a roomful of analysts and investors in New York on Dec. 11, and vowed to refocus the company’s branded efforts on areas such as neurology while delivering cost cuts of as much as $2 billion.

“The company laid out a promising vision for the long term but it might have been less clear for some how they’re going to boost growth in the next few years,” Judson Clark, an analyst at Edward Jones & Co. in Des Peres, Missouri, who has a buy rating on the stock, said by phone yesterday.

Partner Communications Co. (PTNR), Israel’s second-largest mobile phone operator, rose for the first time in four days, gaining 2.7 percent to $6.38. Shares traded in Tel Aviv today gained 0.3 percent to 24.29 shekels, or $6.45.

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

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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