Ori Eyal presented his in-depth investment thesis on Israel Discount Bank (Israel: DSCT) at Asian Investing Summit 2015.
Israel Discount Bank — hidden value to be unlocked:
- #3 bank in Israel: incorporated in 1935; 218 branches; major business lines: retail banking, corporate banking, financial management, capital markets and private banking;
- Operationally the least efficient bank in Israel: current ROE = 7%; working to increase sustainable ROE. New CEO Lilach Topilsky started in 1Q14; previously led operational turnaround at Bank Hapoalim; announced multi-year strategic turnaround plan.
- Looking to unlock value by selling assets: Discount Bank New York (100%); Mercantile Bank (100%) – focus on Arab and Haredi sectors; Visa Cal (72%).
- Sum of parts valuation (right now): IDB-NY: 2.8 billion ILS (book value); Visa Cal: 1.5 billion ILS (72% stake, 15x net income); core IDB bank: 7.7 billion (0.8x 9.6 billion core book value); total: 12 billion ILS (64% upside).
- Possible value in two years: assumes no asset sales; book vale increases 14% (7% per year); ROE goes from 7% to 9%; P/B goes from 0.55x to 0.9x; 87% upside.
About the instructor:
Ori Eyal is Founder and Portfolio Manager of Emerging Value Capital Management, a long-short global value fund. The firm’s in-depth research explores the merits of each investment in the context of a global market. Ori worked at Deutsche Bank Asset Management, Deephaven Capital Management and Aquamarine Fund. He holds an MBA from the University of Chicago Booth School of Business and an MSc. in Computer Science from the Open University of Israel. Ori has experience investing in both developed and emerging markets. His interests include economics, strategy, logic games and puzzles, artificial intelligence, science, physics, astronomy, and futurology.
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