You do realize he is no longer in the company, right?
Start looking at the assets and I think you will find that over the next 5 years the company should
be able to rather easily pay back all its liabilities (probably way less with prepayments of the
As I told you before, I think Zisser was too smart for his own good too many times in his life.
I believe that a good deal is a deal good for both sides, Zisser strikes me as a person who
believed that a deal good for him is a good deal regardless of the other party.
So what happens if and when Gamida cell finish their phase I/II (which should trigger the Novartis
buying of the equity for total of $165M - 24% to Elbit Medical which would cover the shareholder
loan to Imaging, which is $35M)? that would trigger 75% (~100M NIS) prepayment of bonds
(not secured against Bank Hapohalim - only against the bonds). if that happens future payments
could get up to $435M more (24% to Medical which is 89% owned by Imaging) over the next
so many years (depending on clinical trial progress and sales later - if will get to that).
Insightec (by value of last round) was valued at $200M pre money or $262.5 after. Medical owns
~33% fully diluted (assume sales do not reach $60M for 2014-2015).
I have not valued the hotels (I assume 60M Euro equity), the 35M NIS due for the silly fashion
stores. Tiberias land value is a good question.
Plaza centers will continue to reduce debt and another question is about the India lands.
In case the company goes private, they will have to pay full payment for the bonds and to Bank
I do not have any illusions about convincing anyone, but I do wish to set the record straight
about the economic value of this company (regardless of end of the year tax selling season).
I thought Elbit remained as an independent company that got absorbed into
Elron after it spun off the Imaging (elscint) and systems. Elbit vision was a
later creation. I remember Uzia Galil's vision with Elron.
The irony is that only now things like Pill cam are really being monetized...
Anyway, it is a shame how people with vision are replaced with people with
Just a side note - the bond 9 at less than 60 is quite the thing to buy and put
to the side. only my opinion. good luck to the company and us at 2015.
God knows tax selling season is creating a very low benchmark for the
And you do remember that the debts of both Plaza and Elbit are predominantly in Shekels and their assets
are in dollars and Euros?
In Elbit's case the debt (direct debt - not mortgages) is 666M NIS in bonds plus $48M to Bank
Hapohalim. between 35M NIS for the stores and 9M Euro from Park Plaza (from the 2012 sale of their
hotels), the Bank loan should go down to less than $30M. the equity in Antwerp alone is more than that...
For Plaza the effect is more dramatic (close to 1B NIS of bonds and all the assets are in Euros and dollars).
This company was always and will always be an event driven company. liquidity event means better
prospects. people will be shorting or going long, but at the end of the day comes the actual value.
1. Hotels - selling the Bucharest of Antwerp hotels or the land in the Galilee. each of the two hotels has
mortgages, but the equity value is much higher than the obligation.
2. 2015 - Gamida cell - if the Nicord milestone results are met (look to be heading there based on results
so far - as of August), Elbit Medical will get 30.7% of $165M. Elbit Medical owes Elbit Imaging $35M in
shareholder's loan. Imaging also owns 89% of Medical. Medical also owns a slice of Insightec.
Gamida cell option to NOvartis is until 1H 2016.
3. Receipt of 9M Euro from Plaza Park - to be paid to Bank Hapohalim to reduce its loan there.
4. India land - would a project in Chennai begin in 2015? Imaging owns 40% of 83 acres which are worth
a lot. Bangalore (25% of 165 acres) is a more complex deal.
5. Plaza centers - finishing the rights issue (in which Elbit Imaging will contribute ~13M Euro) should
enable Plaza to start and look for financing partners for the shorter term projects (Casa Radio phase I,
Belgrade old city hotel & commercial project, Lodz Residential - depending on market, Lodz Plaza etc.).
Anyway, I do not know the technicalities of stocks. I do know value and usually value wins over time.
People who short here might wake up one day to find a liquidity event happened and a decent chunk of
debt will be soon gone. in such a case, I do not envy these guys.
Like I said, what do I know. been there before and will be in the future...
I do not know the exact number, but I will repeat what I think the components are worth:
Antwerp Hotel (8M Euro EBITDA in 2013, assume same in 2014) should be worth close
to 80M Euro (again, just a guess). debt against it = 22M Euro. net value ~58M Euro.
Bucharest hotel (77%) (10M Euro EBITDA in 2013, assume same for 2014) should be
worth well north of 90M Euro. debt against asset = 64M Euro. net value ~20M Euro.
Stores will bring in at least 35M NIS. I wonder if more will come from the negotiations
with the owner of the Mango name (the Spanish company).
Rights to land by the sea of Galilee - I do not know how much it is worth. 40M NIS were
invested for the rights to build 650 hotel rooms and vacation apartments on the site.
that was in 2007, when the real estate in Israel was half of its price today. I am not fully
aware if this is a desired piece of land or not... 11 acres could be worth a lot there.
Land in India:
25% of 165 acres in Bangalore - by Varthur lake at the end of Whitefield. if you assume
$1.5M/acre in value, this means $60M for Elbit's portion (same for Plaza).
40% of 83 Acres in Chennai - by SIPCOT. if you assume $1M/acre (which is conservative),
you get $32M (same value for Plaza).
I will disregard Kochi 13 acres with ocean front (will take years for development to reach
Total so far (based on 3.75NIS = $1) = 371M NIS + 35M NIS + 60M NIS (Sea of Galilee)
+ 345M NIS (India land - Conservative) = 810M NIS. total debt is 850M NIS (and is
not dollar based, so will shrink in dollar terms as the dollar appreciates...).
Elbit Medical has a $35M shareholder's loan to be paid (hopefully with Gamida cell's
sale down payment by Novartis in 2015 - not a closed deal).
85% of Elbit Medical will remain Elbit's (through which it has 33% of Insightec - the big
promise). value = $100M.
55% of Plaza Centers (after all said and done - right issue and such) should be worth
more than 100M Euro over time.
Complicated answer, sorry.
When I mentioned in Plaza the debts, I meant two types:
Bank loans (specific mortgages) 200M Euro. secured by
the operating malls.
Bonds - ~210M Euro - the ones I explained about in my other
response to you.
חג סוכות שמח to you too.
Zisser bought a pile of cash because he sold Elscint at the time. that gave over
$300M and he bought the control from Elron using Bank Hapohalim's and
Bank Leumi's loans to his private company (the one to Bank Hapohalim caused
the bank a write off of over 1B NIS - I am usually not happy to see anyone lose
money, but the loan was so silly, that the bank deserved to lose).
I believe so. there is a theme here of debt against operating
units. non operating units here do not have debt.
The operating units were the hotels and the stores. the
stores are transacted to someone who makes more sense
for them. the hotels will be liquidated in an opportune time.
remember, Europe is going through a stagnation period
and the numbers of the hotels and the malls (at Plaza)
represent that fact. the India land value will go up as India
accelerates its growth. simple math indicates to me that
the value is much higher than you might think.
Anyway, these are my two cents. nothing more and nothing
less. I tried to understand the company and its assets and
I think I do now.
I am not disagreeing with you about how senseless the all thing have been,
I am just saying that the value in the assets far exceeds the value of the debt
and the market equity value.
Many times people write off a company without acknowledging the asset's value.
This is one of those cases.
If you do the math of the hotel's value:
assume EBITDA number for Antwerp hotels of 8.3M Euro and multiple of 10.
debt is 21M Euro. net value = 60M Euro (conservative).
assume EBITDA number for Bucharest hotels of 10M Euro and multiple of 10.
debt is 64M Euro. net value = 35M Euro and Elbit owns 77% = 27M Euro.
Add 28M NIS for stores + unknown on inventory.
Land in Tiberia - unknown value. rights on 44 Dunams.
Olive Software - Unknown value. unknown status.
Lands in India - I do not know the value - my estimate is that it is close to
respective part of 25% of 165 acres by Whitefield in Bangalore or 50% of
today's value of $126M investment made in 2008 (other 50% Plaza). partner
is Mantri developers.
respective part of 40% of 83 acres by SIPCOT in Chennai ($41M investment
together with Plaza).
respective part of 50% of 13 acres in Cochin.
If you give a value of $30M to the shareholder's loan from Elbit Medical (what
they will pay in 2015 from their proceeds from Gamida deal - if goes well).
At this point, the asset values should cover the debt with the equity of Plaza
and Elbit Medical being the market value of the equity.
Plaza is very undervalued due to the malls covering all the bank loans in value
and more than 50M Euro left over (the Serbia mall alone was 11M Euro, the
India mall was 18M Euro). par value is about 210M Euro, so it should be down
to 185M Euro after paying it. if you look at what is left against that debt, you
can assume the 50% of the Riga mall should provide 15-20M Euro (beyond
its bank loan) and the Torun mall should be able to produce another 40M Euro.
That is in short term.
If you look at their consolidated number, that used to be true:
They had 28 stores of Mango, employees at their hotels in Antwerp and Bucharest (before 2012
they had 50% ownership in more hotels). they consolidated Plaza (with the workers of their
malls I assume). on top of that, Zisser was trying to build an empire...
I was talking only about the overhead at their office. I was not talking about workers at the hotels
or the ones at Plaza.
Unfortunately we do not know yet the operating expenses of Elbit at this point, but it should be very low
(especially compared to the past...).
Interest expense should be only on the Bank Hapohalim 200M NIS and on a bit over 400M NIS.
assume 6% and that gives you 36M NIS plus management expenses. the rest of the interest of the bonds
The situation at Plaza: by selling the PPH shares and getting 9M Euro, Elbit added 15M Euro.
The rights offering will be for 20M Euro and Elbit is backstopping it with DK Partners promised to
participate at 3M Euro or more. if other shareholders will not participate (for the most part - my guess)
and DK utilizing the 3M Euro and Elbit putting in 13M Euro. at the end, 13% of the company will belong
to the debt holders and 55% of the company will still belong to Elbit.
And I forgot to say that the value of the debt (NIS dominated) at 3.71NIS = $1 is becoming
$230M. at Plaza, it gets better. except for the mortgages, all the debt (except for less than
10M Euro in Poland) is in NIS.
If it is a game, it is one of the sickest games I have ever seen. if it is not, I feel sorry for
him. the ironic thing is that he might actually make money here in the long tern if he just
walks away and let it do its thing...
They should start by using the equity method for Plaza. they should show their hotels
as one segment (the competition can figure out how the hotels are doing, but the
shareholders can not...) that is composed of the equity method for the one hotel and
100% of the other, medical as a separate one, lands as a separate one and Plaza
on the equity method as well. that is how simple it is if they want to simplify.
This way you could see anything quickly. the debt belongs to the hq and they can show
overhead as well.
It might take some time before the everything becomes more transparent, but when it does it will get
reflected. in the meantime all we can do is to shake our heads and once in a while average down
(or buy some bonds for inflation + 6% at less than par).
Summary of assets:
Store chain (which will be taken over or closed): should be above 60M NIS.
Land in Tiberias: cost has been 40M NIS so far (right for over 40 more years for 11 acres). this reflects
2007 numbers. unknown value today. was to become 650 rooms and vacation apartments on
the shores of the sea of Galilee.
Hotels: 77% of Radisson Blu Boucharest. has 64M Euro mortgage (after paying back 9M to Elbit Imaging).
718 rooms, mostly 5 stars level.
100% of Radisson Blu Antwerp plus an hotel next door. over 300 rooms, mostly 4 stars.level.
has 26M Euro Mortgage. the larger hotel needs updating of some of the interior.
India: 25% of 165 acres in Bangalore on Varthur road close to Whitefield and Varthur lake.
Plaza centers own another 25% and Mantri developers the other 50%. Elbit and Plaza have
invested $126M in the land (some in direct purchase and some in loan to Mantri).
40% of 83 acres in Chennai (behind TCS in sipcot). the investment between Plaza and Elbit
(each owning 40%) was $41M.
Elbit Medical: owns 24% of Gamida Cell and 33% of Insightec. the investment of Elbit in them was
$105M through the years. Imaging owns 89% of Medical and Medical owes $30M to Imaging.
assuming Novartis exercise its option to buy Gamida Cell, this would give Medical in 2015
the ability to pay back. Insightec is the wild card. last valuation was $25M after the money,
which is $60M value to Medical.
Plaza: A complex company that should be (when all said and done) be worth more than 150M Euro
debts = 400M Euro.
The bank debt was 213M Euro on 4/15/14. since then the sale of the Pune Mall should have relieved 20M
Euro and this sale should take out another 28M Euro. assuming 216M Euro (inc interest) - 48M Euro =
168M Euro (when the Pune mall is officially paid for).
The Bond debt was 240M Euro on 4/15/14, assume 245M Euro (inc interest) - 7M Euro (current sale) -
3.5M Euro (sale of Romania land) - 13.5M Euro (when Pune Mall is finally paid for) = 221M Euro.
If you assume run rate of overhead 8M Euro per year (some of it part of existing malls opex, but I count it
separately to be conservative), the cash was 22M Euro + 4M Euro (current sale) + 4.5M Euro (Pune, when
paid for) - 3M Euro (run rate) = 27.5M Euro + money still trapped at malls (2 malls are currently under water,
so I would ignore that money). I am ignoring ongoing net money for 5 month, but consider interest for 5
month in the effort to be conservative.
62.5% of Plaza currently is owned to Elbit. Elbit will be the main investor in Plaza's right offering of 20M
Euro and DK partners will be with them backstopping it. the right offering is at 10.5P per share while the
market price is 7P. if we assume other shareholders do not exercise their right, we get that Elbit will own
(assuming Elbit will contribute 12.5M Euro to the process) at the end 55% of Plaza (after 13% of the shares
is given to the bondholders in exchange for the extension of the bonds by 3 years).
I might have had an error before. going through the Plaza prospectus, it seems that the rents were
3.7M Euro and operating expenses were 1.05M Euro, so net margin was 2.65M Euro.
At the end of 2013 they valued it at 41M Euro, but it was revised down to 38.6M Euro on q2 2014.