Opportunity or Madness


Would you invest in AMAPL?


By: YOSEF TASTASSA  
Published: February 23rd 2011
in Economics » World

Egypt-Israel gas pipe
Pic: NULL
Ampal logo
Pic: NULL

The peaceful Middle East - Opportunity

 

If I wrote about AMPAL - American Israel Corporation (AMPL on NASDAQ) over a month ago I would have probably written the following:

 

a) EMG is an Egyptian energy company that supplies natural gas to Israel via a pipe that runs from Egypt to the Sinai Peninsula and to Israel.

 

b) AMPL is an American Israeli Corporation that is owned by the Israeli businessman, Yossi Miman. AMPL holds 12.5 per cent of EMG.

 

c) The Israel Electric Company (IEC) buys natural gas from Egypt via the EMG pipe. The Egyptian natural gas supplies 18 per cent of Israel's energy needs.

 

d) The recent natural gas discoveries in the Mediterranean, "Tamar" and "Leviathan" will become serious competitors to AMPL and to EMG.

 

After reading the above statements, the common investor would likely think:

 

1. Israel is a fast growing economy and its energy needs will increase.

 

2. The energy prices in the world are surging amid growing demands in Asia.

 

3. "Tamar" and "Leviathan" will not supply natural gas before 2013 and 2016 respectively.

 

4. Egypt has a 30 years stable regime and a stable peace treaty with Israel.

 

Therefore, AMPL seems like an interesting investment.

 

The crazy Middle East - Madness

 

As we all know, in the past month some "minor" changes have happened in the area:

 

a) Hosni Mubarak is no longer the president of Egypt.

 

b) The riots in the Arab world have spread after Tunisia and Egypt to Yemen, Bahrain and Libya, Egypt's neighbor from the west.

 

c) Two Iranian warships have crossed the Suez Canal, an act of provocation in Israel's point of view.

 

d) On February 5th the gas pipe from Egypt to Israel was bombed by terrorists and until today the gas supply from Egypt to Israel is still on hold.

 

e) It was reported that Hussein Salem, Yossi Miman's Egyptian partner, that holds 28 per cent of EMG, escaped to Geneva, Switzerland.

 

f) The New-York post reported on February 11th, that the investments made by Sam Zell, an American Jew, of $220 million in EMG may blow after Mubarak left Egypt.

 

After reading the above data the common investor would likely think: "Hey, I have a weak heart and this story is not for me. It's too much risk and too much uncertainty.”

 

However, the risk lover, the opportunists, may think differently.

 

Blood in the streets

 

History is filled with people who have made their fortune during political instability, when regimes fell, when kings lost their throne, and unfortunately when there  were wars and the streets were filled with blood. People abandoned or sold their property for pennies, other fled and left everything behind. For some, war and instability are bad for business but for others it is very good.

 

It happened in the biblical period, in the era of the Roman Empire, the medieval wars in Europe, the civil war in Spain, the two World Wars, The collapse of the Soviet Union, Yugoslavia and during many other conflicts.

 

According to this investment philosophy, there are those who will see investments in Egypt as an opportunity. Sooner or later a stable regime will rise and the financial system will return to full functionality. Nobody will allow 85 million Egyptians to stay in vacuum forever. Now it's time to invest, maybe not for the short term, but for the mid-long term.

 

Many have purchased the Egyptian pounds, others bought Egyptian government bonds and some bought shares and partnerships in Egyptian industrial companies.

 

AMPL shares

 

The last closure in New-York was $2.12 per share with a market value of $119 million. Before the Egypt riots began AMPL was traded at a peak of nearly $2.70 per share. The highest peak in the last 52 weeks was $2.95, almost 40 per cent higher than today. Before the 2008 crisis AMPL was trading for $6-7 per share but hasn’t returned to those peaks since.

 

Summary

 

Investing in the capital market is a risky business. Investing in today's Egypt energy sector is a very, very risky business but could also be a great opportunity. This article does not recommend investing in the capital market



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