Kerur Holdings Ltd., through its subsidiaries, operates in the food sector in Israel. It produces and markets soft drinks and mineral water; and frozen potato and onion fries, as well as plant products. The company was formerly known as The Israeli Company Cooling & Supply Co. Ltd. and changed its name to Kerur Holdings Ltd. in 2006. The company was incorporated in 1929 and is based in Or Yehuda, Israel. Kerur Holdings Ltd. is a subsidiary of Israeli Shipping and Supply Company Ltd.

Israel

Kerur Holdings Ltd.

Consumer Cyclical

The company has a track record of regular dividend payments. It has paid dividends in each of 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 twice a year. 

KRUR.TA reported revenue of ILS 858mn in the last 12 months, down 12% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 7% from FY23 to ILS 6.14.

Over the past six months, the stock has consistently climbed, resulting in 23% total increase. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 30ppts and its growth accelerated by 12ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is mildly favourable.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 21.6% in the last 12 months, up from 18.2% in FY23. 

Historically, KRUR.TA has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 9.0%, a growth from 8.5% in FY23. 

Kerur Holdings Ltd. reported a return on equity (RoE) of 11.1% in the last 12 months, down from 12.0% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 6.1% in the last 12 months, a decrease from 6.6% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 7.3%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.5 in the past several years. This ratio implies a strong 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.

KRUR.TA has above average trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is unstable 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 moderate. We note robust profitability, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to weak positions in its industry, slow historical revenue growth.

In highly turbulent market conditions, KRUR.TA is not overly volatile. In other words, the stock will fall 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 low. 

In normal market circumstances, KRUR.TA is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Based on key historical and expected multiples, the stock is greatly undervalued relative to its peers. Specifically, the stock is fairly valued on P/E, undervalued on EV/EBITDA, underpriced on P/FCF. 

Kerur Holdings Ltd.

ILA 8104

7

Kerur Holdings Ltd.

ILA 8104

7

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 8104

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