Menora Mivtachim Holdings Ltd operates in insurance and finance sectors in Israel. The company offers life and health, and general insurance products, as well as automobile insurance products, such as compulsory automobile or property car insurance products; and pension and provident funds. It also engages in the mutual funds and portfolio management, securities underwriting, and real estate investment activities. The company was formerly known as General Liability Office Ltd. and changed its name to Menora Mivtachim Holdings Ltd in 2006. Menora Mivtachim Holdings Ltd was founded in 1935 and is based in Tel Aviv, Israel.

Israel

Menora Mivtachim Holdings Ltd

Financial Services

The company pays dividends most of the time. It has paid dividends in almost every one 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. 

MMHD.TA reported revenue of ILS 14 777mn in the last 12 months, up 18% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 110% from FY23 to ILS 17.43.

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 74ppts over past six months and grown 1ppts slower in the past month. At the same time, the stock's performance relative to its the peers from the same country and sector is different. The stock outperformed these peers by 49ppts over the past six months and grew 1ppts faster in the past month. With respect to the stock's valuation against its peers, its overall price performance is 'fair'.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 13.7% in the last 12 months, up from 8.2% in FY23. 

Historically, MMHD.TA has reported average net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 7.3%, a growth from 4.1% in FY23. 

Menora Mivtachim Holdings Ltd reported a return on equity (RoE) of 15.8% in the last 12 months, up from 8.3% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 1.5% in the last 12 months, an increase from 0.7% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 1.5%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.8 in the past several years. This ratio implies a good 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.

MMHD.TA has poor trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually stable 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 moderate. We note resilient historical revenue growth and an favourable capital structure, among the positive credit factors. 

In highly turbulent market conditions, MMHD.TA is as volatile as an index. In other words, the stock will move with 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 limited. 

In normal market circumstances, MMHD.TA is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to minimal. 

From both historical and forecast perspectives, the stock is considerably underpriced compared to similar stocks. Specifically, the stock is fairly valued on P/E, undervalued on EV/EBITDA, underpriced on P/FCF. 

Menora Mivtachim Holdings Ltd

ILA 19160

5

Menora Mivtachim Holdings Ltd

ILA 19160

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 19160

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