March 24 (Bloomberg) -- Elbit Systems Ltd. advanced to the highest in more than a year on bets Israel’s biggest private developer of defense technology may renew Turkish sales after the Jewish state and Ankara agreed to normalize ties.
Shares of the Haifa, Israel-based company added 2.9 percent to 155.3 shekels, the highest since January 2012, at the 4:30 p.m. close in Tel Aviv. Elbit Systems was the biggest gainer on a percentage basis on the benchmark TA-25 Index, which advanced 0.7 percent. Markets in Israel are closed Monday and Tuesday for the Passover holiday.
Israeli Prime Minister Benjamin Netanyahu and his Turkish counterpart Recep Tayyip Erdogan agreed on March 22 to reinstate ambassadors, according to Netanyahu’s office. Israel apologized for the deaths of nine Turks on an aid flotilla to Gaza in 2010, after failing to do so led Turkey to suspend military relations with Israel in September 2011. Elbit got about 5 percent of revenue from Turkey before ties were severed, according to Gilad Alper, a senior analyst at Excellence Nessuah.
“The detente could result in revenue for Elbit,” said Ramat Gan, Israel-based Alper. “Turkey used to be an important geography, so resuming ties is a small reason to celebrate.”
In the two weeks after Turkey cut relations in September 2011, Elbit lost 9.7 percent compared with a gain in the same period for the S&P Aerospace & Defense Index. At the time, Turkey was Israel’s sixth-largest export market, with $1.2 billion in goods shipped in the first seven months of 2011.
Elbit Systems Inc. shares in New York are trading at the highest valuation in two years after reducing its reliance on U.S. and European markets by bolstering sales to Asia. They gained 4.7 percent last week in New York to $41.61, trading at 10.9 times estimated earnings, the most expensive level since May 2011.
Elbit’s U.S. shares have jumped 41 percent from an almost six-year low reached in August to trade 12 percent above its average valuation over the past three years. The company, which got $195 million in new orders from Asian countries in the past week, is winning a majority of new contracts outside the U.S. and Europe for the first time in at least seven years. It earned 51 percent of revenue from the U.S. and Europe in 2012 and has made 70 percent of its known deals this year with Asian countries.
Elbit is seeking new markets as American defense programs face a $42.7 billion reduction, according to Bloomberg Government estimates, after automatic spending cuts came into effect March 1 amid a political stalemate over how to reduce the U.S. budget deficit.
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