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Wall Street offering on the agenda – but not yet

13/03/07

From: Haaretz, 13 March 2007

Sarit Menachem

 

Three weeks ago, Scope Metal Trading and Technical Services Ltd. (TASE: SCOP) notified the Tel Aviv Stock Exchange (TASE) that it was considering raising capital outside Israel. The company’s official statement was in response to media reports claiming that the company had also picked underwriters and that an offering on Nasdaq was just around the corner. The reports and rumors set the company’s share on fire, and it rose sharply at the time.

 

Yesterday, after publishing the financial report for 2006, Scope Metal convened 70 analysts at the Tel Aviv Hilton. Reports about the pending conference again sent the share upwards 6% the day before, completing an 18% rise since the company’s announcement in mid-February. The analysts thought that Scope Metal was going to announce something about an offering on Wall Street.

 

But matters at Scope Metal are handled rather more slowly than the dreams of capital market analysts and investment managers. When the participants asked Scope Metal controlling shareholder, Chairman and General Manager Shmuel Shiloh what was happening with the offering on Nasdaq, he was stingy with information, although he did not leave the participants completely disappointed.

 

“People are always coming to us with offers. We’re surrounded by investment bankers who want to handle an offering for us. We’re studying the subject, but it won’t happen at the moment,” said Shiloh. He added that one of the company’s targets was for international sales to account for half of total sales, even as domestic business is expanded, and when this target is reached, there will something to about regarding an offering overseas.

 

When Shiloh was asked about Scope Metal’s other targets, he said, “I see replacing the shekel with the dollar in the sales line as a target.” In other words, he hinted at a $1 billion sales target.

 

First Israel Mezzanine Investors Ltd. (FIMI) General Manager Ishay Davidi also participated in the presentation. FIMI bought 27% of Scope Metal a year ago for NIS 157 million, and has made a paper profit of 85% on the investment. Davidi was somewhat more generous in supplying information about the offering. His comments implied that an offering on Wall Street was on Scope Metal’s agenda. The question was when it would happen, not if, and the intention for the offering to take place within the foreseeable future.

 

The conference’s participants were disappointed from the ambiguous comments, since Scope Metal’s share, which had risen 4% at the start of the trading session, ended it with a drop of 1.8%.

 

Nevertheless, Shiloh will definitely remember 2006 as a good year, and no wonder. His metal trading company, which went public in 1992, has positioned itself on the investment map of leading institutions on the TASE. Scope Metal’s excellent financial report for 2006 demonstrated that those who spotted the company’s potential were right, and Davidi was not the only one to see a 90% return on investment in the past 12 months.

 

Scope Metal trades in metals in Israel and internationally. In 2006, the company launched intensive international activity. Early that year, it acquired a metals trading company in Florida, and set up branches in Romania and China. Meanwhile, most revenue (65%) is generated from business in Israel.

 

Scope Metal posted NIS 299 million in revenue for the fourth quarter of 2006, compared with NIS 157 million for the corresponding quarter of 2005, an increase of 90%. Most growth came from the expansion of business in Israel, together with international activity. Fourth quarter net profit totaled NIS 33 million, compared with NIS 8 million for the corresponding quarter, an increase of 309%. 2006 net profit totaled NIS 95 million, a record profit reflecting 128% growth over 2005.