Issta Lines Ltd. provides travel and tourism services to private and business customers, groups, and organizations in Israel and internationally. It offers outbound and domestic tourism services, including scheduled flights, charter flights, vacation packages, organized trips, ski vacations, sports, music, and cruises, as well as complementary services, such as hotels, car rentals, visas, and student cards. The company offers its products through 60 branches in Israel, as well as through call centers and online. Issta Lines Ltd. was founded in 1956 and is based in Tel Aviv-Yafo, Israel.

Israel

Issta Lines Ltd.

Consumer Cyclical

The company pays dividends from time to time. It has paid dividends in less than half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends annually. 

ISTA.TA reported revenue of ILS 417mn in the last 12 months, up 3% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 23% from FY23 to ILS 5.78.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 6ppts over past six months and grown 3ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is 'fair'.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 54.5% in the last 12 months, up from 28.0% in FY23. 

Historically, ISTA.TA has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 23.5%, down from 31.3% in FY23. 

Issta Lines Ltd. reported a return on equity (RoE) of 6.8% in the last 12 months, down from 10.1% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 2.7% in the last 12 months, a decrease from 3.8% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 3.6%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.8 in the past several years. This ratio implies a poor shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

ISTA.TA has above average trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is relatively stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, excessive margin volatility, weak debt servicing capacity, and inadequate interest coverage. We note resilient historical revenue growth and robust profitability, among the positive credit factors. 

In highly turbulent market conditions, ISTA.TA is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low. 

In normal market circumstances, ISTA.TA is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. We would also like to highlight the mild intraday volatility of the instrument. 

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. In particular, the stock is reasonably priced on P/E, 'expensive' on EV/EBITDA, overvalued on P/FCF. 

Issta Lines Ltd.

ILA 8682

5

Issta Lines Ltd.

ILA 8682

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 8682

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