Mediterranean Towers Ltd. operates a chain of retirement communities in Israel. The company was founded in 1982 and is headquartered in Tel Aviv, Israel.

Israel

Mediterranean Towers Ltd.

Real Estate

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 somewhat mixed. 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. 

MDTR.TA reported revenue of ILS 252mn in the last 12 months, up 5% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 19% from FY23 to ILS 1.75.

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 20ppts over past six months and grown 13ppts faster 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 131.7% in the last 12 months, up from 46.7% in FY23. 

Historically, MDTR.TA has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 105.9%, a growth from 91.6% in FY23. 

Mediterranean Towers Ltd. reported a return on equity (RoE) of 19.2% in the last 12 months, up from 18.1% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 4.5% in the last 12 months, an increase from 4.1% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 8.1%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 5.2 in the past several years. This ratio implies a excellent 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.

MDTR.TA has very poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day under normal market conditions. Liquidity is very unstable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. 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 tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

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, slow historical revenue growth, excessive margin volatility, inadequate interest coverage, and an unfavourable capital structure. We note robust profitability and solid return on capital, among the positive credit factors. 

In highly turbulent market conditions, MDTR.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, MDTR.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 'cheap' on P/E, undervalued on EV/EBITDA, underpriced on P/FCF. 

Mediterranean Towers Ltd.

ILA 1294

5

Mediterranean Towers Ltd.

ILA 1294

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 1294

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