Connect with us

Hi, what are you looking for?

Jewish Business News

Financial Research

Excellence downgrades Israel Chemicals

 Analyst Gilad Alper: We will see Israel Chemicals’ share enter a long period of uncertainty.

Please help us out :
Will you offer us a hand? Every gift, regardless of size, fuels our future.
Your critical contribution enables us to maintain our independence from shareholders or wealthy owners, allowing us to keep up reporting without bias. It means we can continue to make Jewish Business News available to everyone.
You can support us for as little as $1 via PayPal at [email protected].
Thank you.

LogoNewSmall/ By Efrat Peretz /

The new committee established by Minister of Finance Yair Lapid to review the state’s royalties from natural resources, beginning with the resources mined by Israel Chemicals Ltd. (TASE: ICL), will recommend sharply raising the royalties and taxes that the company pays, says Excellence Investments analyst Gilad Alper. Today, he downgraded his recommendation for the stock to “Market perform”, and cut his target price for the share from NIS 54 to NIS 43, which compares with an opening price today of NIS 42.40.

“We’re cutting our recommendation because of concern that the government will sharply raise taxes and royalties on the company, ” says Alper in the review.

18 months ago, the government raised the royalties on Israel Chemicals’ potash operations from 5% to 10% on sales in excess of 1.5 million tons a year. But the public criticism against Israel Chemicals has continued because of the low royalties. “The government is now planning to take the next step, ” says Alper. “It is possible that the tax model imposed on the gas companies will be replicated, with the necessary changes and adjustments, on Israel Chemicals.”

How much might Israel Chemicals pay in taxes? Alper made a comparison with Canada’s Mosaic Company (NYSE: MOS), excluding the dividend tax. He assumes a 25% companies tax rate (the rate that Israel Chemicals will pay from 2018), and concluded that the government’s take from Israel Chemicals’ operating profit will be 34% compared with the Canadian government’s take of 40% of Mosaic’s operating profit. To equalize the two, Israel Chemicals would have to pay an additional $140 million a year, which would cut its company value by NIS 4 billion.

There is a worse option for Israel Chemicals: if the government does not use another global potash company as a basis for comparison, but uses Australia’s natural resources tax, which would become the basic model for the new committee. “Either way, we will see Israel Chemicals’ share enter a long period of fundamental uncertainty with regard to its profitability, ” says Alper.

 

Published by  www.globes-online.com 

 

 

 

Newsletter



Advertisement

You May Also Like

World News

In the 15th Nov 2015 edition of Israel’s good news, the highlights include:   ·         A new Israeli treatment brings hope to relapsed leukemia...

Entertainment

The Movie The Professional is what made Natalie Portman a Lolita.

Travel

After two decades without a rating system in Israel, at the end of 2012 an international tender for hotel rating was published.  Invited to place bids...

VC, Investments

You may not become a millionaire, but there is a lot to learn from George Soros.