Everybody knows that the world has become a global village, and that listing on Nasdaq brings global exposure. But the Israeli capital markets finds itself charmed to discover that in its search for investment opportunities for their investors, the Turkish investment house FinansInvest has stumbled upon the virtues of Goldstein brothers and their company

Formula Systems


FinansInvest analyst Tolga Kotan has initiated coverage of Formula with a Buy rating, and set a target price at NIS 137 or $32.8 for its ADR, compared with its current price of $27.4.

Kotan deems that Formula has a far-sighted and capable management, as well as a strong balance sheet. "Formula's dynamic and talented management is the most valuable asset of the company," he writes.

Kotan also notes that the Goldsteins have proved their talent at nurturing growth, whether in-house or through acquisitions. For instance, they bought

Magic Software Enterprises

(Nasdaq:MGIC) and

Crystal Systems Solutions

(Nasdaq:CRYS) in 1993 and 1998 respectively for paltry sums.

He estimates that Formula will continue snapping up companies. It ended 2000 with $141 million in cash and can be expected to take advantage of the low prices created by the technology crash.

The analyst also points out that Formula has a range of competitive products as well as several strategic alliances that will bolster its in-house growth as it continues to expand its portfolio.

Kotan also believes that Formula is well-positioned to ride out the adverse market conditions in the information technology sector, then outperform the sector's recovery, he writes.

He concludes that Formula is traded at a discount of 25% compared with its asset value. He believes its stock will outperform indices in both Tel Aviv and Wall Street.

Moreover, analysis of past results teaches that Formula stock was aggressive, with a beta exceeding 1. He calculates that it will outperform the indices by some 19% over the year to come.

Kotan also predicts that Formula, which ended 2000 with profits of $40 million on revenues of $406 million, will slip a bit. He thinks it will end 2001 with revenues of $380 million and profits of $25 million. But until the year 2003, he sees the company posting annual growth of 20%.