Michman Basad Ltd provides credit to small and medium-sized businesses. It offers credit against the receipt of deferred relays written by third parties, as well as credit against payment of deferred installments/tools and engineering equipment. The company was incorporated in 2015 and is based in Bnei Brak, Israel.

Israel

Michman Basad Ltd

Financial Services

The company pays dividends on rare occasions. There have only been a few years with dividend payments in 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. 

MCMN.TA reported revenue of ILS 105mn in the last 12 months, down 16% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 21% from FY23 to ILS 22.53.

Over the last six months, the stock performance has varied, with an increase following a drop. 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 36ppts and its growth accelerated by 4ppts 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 strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 47.3% in the last 12 months, a decline from 48.2% in FY23. 

Historically, MCMN.TA has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 33.7%, down from 35.1% in FY23. 

Michman Basad Ltd reported a return on equity (RoE) of 21.7% in the last 12 months, down from 35.5% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 4.7% in the last 12 months, a decrease from 5.9% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 5.5%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.8 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.

MCMN.TA has average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is unstable and remains 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. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, solid return on capital, and adequate interest coverage, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, excessive margin volatility, weak debt servicing capacity, and an unfavourable capital structure.

In highly turbulent market conditions, MCMN.TA is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, MCMN.TA is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to notable. 

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/EBITD. 

Michman Basad Ltd

ILA 25730

3

Michman Basad Ltd

ILA 25730

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 25730

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