Table of Contents
Executive summary ........................................................................... 3
Where we are right now...........................................................................................................4
What’s next?............................................................................................................................4
Where to put your money? .......................................................................................................7
Risks ......................................................................................................................................15
Sector outlook – cautious near-term, but looking for a recovery in
2011-2012 ......................................................................................... 18
Rapid deterioration of economic conditions ...........................................................................18
Construction sector activity to fall by at least 30% in 2009 ....................................................18
Residential market – first to recover .......................................................................................21
Office market – worst near-term outlook ................................................................................33
Retail market – better positioned............................................................................................37
PIK..................................................................................................... 45
Investment thesis ...................................................................................................................45
From a mass market king to despair… ...................................................................................46
…and back to life? What’s the plan and how viable is it? ......................................................48
Valuation – clear disparity between current share price and valuation on ‘going concern’ basis
...............................................................................................................................................53
AFI Development ............................................................................. 63
Portfolio update ......................................................................................................................64
Portfolio valuation ...................................................................................................................67
We value AFI Development using SOTP approach:................................................................67
Financing................................................................................................................................69
Africa Israel – a cash-starved parent .......................................................................................69
LSR Group........................................................................................ 73
Strategy and business update.................................................................................................74
Valuation ................................................................................................................................79
Debt and liquidity ....................................................................................................................81
Open Investments ........................................................................... 87
Investment thesis ...................................................................................................................87
Portfolio overview and strategy ..............................................................................................88
Portfolio valuation – largely land but not only..........................................................................92
Debt and financing ..................................................................................................................94
Recent asset sales – beginning of an end?.............................................................................96
Prohorov, Potanin and Open Investments – what’s in store for minorities? ...........................97
Sistema-Hals .................................................................................. 103
Portfolio and strategy update................................................................................................104
Financial outlook - in need of capital increase.......................................................................106
The VTB question..................................................................................................................109
Valuation ...............................................................................................................................110