One Software Technologies Ltd provides software, hardware, and integration services. The company also offers IT and infrastructure services; software solutions for cloud, BI, digital, cyber and security, POS, and other products; and managed services for IT sector. One Software Technologies Ltd is based in Petah Tikva, Israel.

Israel

One Software Technologies Ltd

Technology

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, and there is an evident trend. 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 quarterly. 

ONE.TA reported revenue of ILS 4 000mn in the last 12 months, up 8% from FY23. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS grew 26% from FY23 to ILS 3.21.

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 43ppts and its growth accelerated by 0ppts 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 modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 11.2% in the last 12 months, up from 10.1% in FY23. 

Historically, ONE.TA has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 5.8%, a growth from 4.9% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 23.5%, above the peers. 

Another important profitability metric, return on assets (RoA), amounted to 10.3% in the last 12 months, an increase from 8.9% in FY23. 

One Software Technologies Ltd reported a return on equity (RoE) of 33.0% in the last 12 months, up from 28.7% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 3.9 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.

ONE.TA has poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day. Liquidity is usually quite 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 minimal. We note solid return on capital, strong debt servicing capacity, adequate interest coverage, and solid cash flow generation, among the positive credit factors. Among the negative credit factors and we point to weak positions in its industry, poor working capital management.

In highly turbulent market conditions, ONE.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, ONE.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 low to notable. 

Considering past and projected metrics, the stock is 'cheaper' than its peers. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITDA, undervalued on P/FCF. 

One Software Technologies Ltd

ILA 6949

5

One Software Technologies Ltd

ILA 6949

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 6949

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