Potash and Real Estate

      Potash Corp. of Saskatchewan (NYSE; TSX: POT), which holds 10% of Israel Chemicals Ltd. (ISCHF.PK)  published record Q2 earnings which boosted fertilizer stock. POT reported a profit of C$905.1 mn, a 220% jump year over year and 62% sequentially. Earnings per share totaled $2.82, and gross profit soared 187% to $1.4 bn. Israeli potash is produced along the Dead Sea near Sodom and Gemorrah.

     An Arab version of ISCHF exists, Jordan Chemicals, producing potash across the mineral-laden water. The trouble is that there are fewer available Jordanian stocks so it is much more expensive in P/E terms than the Israeli version.

  *Ascendas India Trust, the Singapore REIT, reported Q1 (ended June) income rose 25% to S$28.6 mn. Net income rose 20% to S$18mn; and distributable income rose 12% to S$12.4 mn or 1.65 Singapore cents per share. This is an excellent result from a REIT investing in Indian property regulated in Singapore. Based on the current stock price the yieldis 9.3% paid out twice a year, not quarterly as in the U.S. It trades here as ACNDF on the pink sheets.

     *A DC area reader suggests Sistema HALS JSC if we want to play Russian real estate. I am not as enthusiatic. It has 144A GDRs traded in London as HALS and a occasional ADRs as SEMAL with cusip 82977M101. HALS is part of the vast Sistema conglomerate with interests in everything from spas (Kamellia)  to media, from technology to finance, from telecoms to finance, from petrochemical products to healthcare. The RE side of the busines is run by Feliks Vladimirovich Evtushenko, son of the head of parent Sistema. (Evtushenko is the preferred Russian spelling of a Ukrainian name.) The conglomerate SISTEMA which trades in London as SIS and in Russia as SSA owns 71% of HALS so only 29% is public

   There are lots of potential synergies and inside deals between the Sistema group and its housing sub HALS which first listed late in 2006. However, as a stock, the HALS share has problems. My favorite project is apparently independent of SIS. This is to modernize the Detskoy Mir (Children's World) toystore for which HALS got a $20 mn financing package from Deutsche Bank two months ago. It is my favorite is beause, improbably enough, this children's emporium sits directly opposite the Lubiayanka HQ and prison of the Russian security forces (KGB; MKVD). Of course that is the best place to buy presents for my underage grandchildren.

   However, the DB financing package is not enough for analysts. Fitch down rated the bonds of HALS because of liquidity concerns. It had a truly rotten 2007 with negative 71 percent operating and profit margins, and a minus 19.5% return on assets. This is really bad.

   Apart from Lubyianka, it has projects all over Moscow like reviving the Moscow City Telephone Network HQ property held by a related company; rebuilding the Peking Hotel; and reconstructing the huge twin towers Leninskaya project in St Petersburg which incudes the Siemens HQ. Siemens has deals with parent Sistema. As with other Russian GDRs, HALS trades in dollars and at all of $5.80 is well below half its 12-month high. The share also trades in Germany and on two Russian markets, MSE and MICEX. Cushman and Wakefield figure the portfolio closed 2007 at $3.764 bn but it is hard to sort out what is HALS and what is SSA.

   While my reader owns stock in both HALS and SSA I found that the latter is not available for retail investors; and I am dubious about the outlook for the former. But if you absolutately must own real estate in Russia consider a more accessible share, Elbit Imaging, an Israeli firm invested in property around Eastern Europe. EMITF.Q.