Gazit-Globe Ltd. (GZT)’s price swings sank to the lowest level since 2003 on prospects the Israeli property company’s focus on tenants from supermarkets to barbers will help buffet a slowdown in Europe, its second-largest market.
The company’s 50-day volatility, a measure of fluctuations in the shares, fell to 17.3 today for its Tel-Aviv traded stock, the lowest level since November 2003. Shares added 1 percent in New York yesterday, their biggest gain in a week. The Bloomberg Israel-US Equity Index (ISRA25BN) of the most traded Israeli companies traded in New York jumped the most since Feb. 19, led by Cellcom (CEL) Israel Ltd. The nation’s largest mobile phone provider rose as Bank Leumi Le-Israel Ltd. rated the shares buy.
Gazit-Globe, which owns commercial real estate in more than 20 countries through its subsidiaries and rents spaces to supermarkets, pharmacies, barbers and daycare centers, outperformed European mall operators Immofinanz AG (IIA) and Deutsche Euroshop AG in February. Europe, where the central bank expects the economy to shrink 0.3 percent this year, accounted for 25 percent of the Tel Aviv-based company’s revenue in 2011, second to Canada, which represented 31 percent of sales.
“They have centers where people go to shop for everyday needs, not a health club or place that people tend to spend less money on when economic conditions get bad,” Adar Etzioni, the head of research at Migdal Capital Markets Ltd. who rates the shares the equivalent of neutral, said by phone yesterday from Tel Aviv. “Their properties can deal better with slowdowns than big malls or the office sector.”
Higher volatility means an asset or index can swing dramatically in a short period, increasing the potential for unexpected losses.
Europe’s recession caused the amount of new lending for commercial property in the region to drop by about 77 percent from 2007 through 2011, according to estimates from Michael Haddock, a London-based research director at CBRE Group Inc. Retail tenant sales at shopping malls owned by Klepierre SA (LI), Europe’s second-largest publicly traded mall operator, fell 9.8 percent in Spain last year, the company’s annual report showed.
Gazit-Globe may be able to capitalize on the weak economic conditions in Europe by increasing its portfolio through more new purchases, Etzioni said. The company’s Citycon Oyj unit joined the Canada Pension Plan Investment Board in December to buy the Kista Galleria shopping center in Stockholm for 526 million euros ($687 million).
The Israeli company is also looking to buy commercial properties in Brazil, where the central bank has kept borrowing costs at a record low to revive slow growth, Chief Executive Officer Roni Soffer said last month. Gazit completed in January the purchase of the Prado shopping center in Campinas, Brazil for about $20 million. The mall is anchored by a supermarket operated by Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer.
Shares of Gazit-Globe in the U.S. have soared 42 percent in the past six months. The company trades at 19.3 times estimated earnings, a 42 percent premium to the average multiple for companies on the Bloomberg-Israel US gauge.
“The momentum is pretty good right now, and Gazit-Globe is in a good position to make their portfolio larger,” Etzioni said. “Even though the stock price today is not low, not all of the future potential is priced in.”
The Bloomberg Israel-US gauge jumped 1.1 percent to 87.97 yesterday, the highest level in two weeks. The benchmark TA-25 (TA-25) Index rose for a third day, adding 0.2 percent to 1,228.23 today in Israel.
Cellcom climbed 4.3 percent to $7.46, the biggest jump in a month. Bank Leumi raised Cellcom to the equivalent of buy from neutral, saying a stronger cash flow will help the mobile phone provider beat peers, according to an e-mailed note yesterday. Shares traded in Tel Aviv today added 2.3 percent to 27.87 shekels, or the equivalent of $7.47.
Teva Pharmaceutical Industries Ltd. (TEVA) jumped 2.4 percent to $38.13, halting eight days of declines. Shares traded in Tel Aviv climbed for a third day, advancing 1.5 percent to 142.9 shekels, or $38.29. Pfizer Inc. said it filed patent- infringement lawsuits yesterday against generic-drug makers including Teva to prevent them from selling a low-cost version of the painkiller Celebrex until December 2015.
The drug “is not the big story for Teva, and they’re a big enough company that they can absorb the delay,” Kevin Kedra, an analyst at Gabelli & Co. who rates the shares buy, said yesterday from Rye, New York.
Prolor Biotech Inc. (PBTH), based in Nes Ziona, Israel, advanced 3.2 percent to $5.16, the highest price since Oct. 17. The shares fell for the first time in five days, slipping 0.7 percent to 19.17 shekels in Tel Aviv, or the equivalent of $5.14. The biotechnology company received a notice of allowance from the U.S. Patent and Trademark Office covering methods for cutting body fat with its human growth hormone, according to a statement yesterday.
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