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UBS Warburg starts Osem as Buy, sets target at NIS 36

Osem set to outperform index in 2002 too, predicts analyst Stephen Levey

With Reuters

UBS Warburg said on Thursday it initiated coverage of Israeli food manufacturer Osem with a Buy recommendation and a 12-month target price of NIS 36 ($8.3), about 14% above the share's price on the market.

Analyst Stephen Levey cited the company's strong growth in the first half of the year.

Osem had outperformed the Tel Aviv Stock Exchange not simply through being in a core defensive sector but due to its management's moves in putting growth policies in place in recent years, Levey wrote.

While the TASE's Maof-25 index lost 30% in the last year, Levey wrote, Osem starred thanks to its positive results.

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Revenues grew by 5% in the first six months of this year compared with the same period of 2000. Operating profit rose by 33%, Levey noted.

"While trading at a premium to the Israeli market, when looking at Osem versus an international cross-border peer group, the shares still look attractive at current levels," Levey wrote.

Investors not lucky enough to have Osem in their portfolios last year could still reap benefits from positive performance in 2002, as things look now. He expects Osem to outperform the market next year too, as its profits continue to grow.

Among its advantages are its relations with Nestle, which controls the company. Through Nestle, Osem has achieved a 40% share in Israel's coffee market. The company foresees further growth in demand for granulated instant coffee. Levey expects Osem to expand into mineral water and milk substitutes too.

He sees Osem growing through acquisitions, possibly including in the ice-cream industry, additional new and veteran Nestle products, and expanding activity outside Israel.

Shares in Osem were trading up 1.5% at NIS 32 on the Tel Aviv Stock Exchange at mid-day compared with a 1.3 percent rise overall on TA-100 index.