Primotec Group Ltd produces, imports, and markets a range of consumer products in Israel and Europe. It offers cleaning materials, paper products, nylon products, disposable products, perfumes, household equipment, ancillary equipment for medicine and geriatrics, and packaging products, as well as accessories and furniture for hygienic spaces. The company was founded in 1985 and is headquartered in Beersheba, Israel.

Israel

Primotec Group Ltd

Consumer Cyclical

The company pays dividends from time to time. It has paid dividends in less than half 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. 

PRMG.TA reported revenue of ILS 302mn in the last 12 months, down 3% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 5% from FY23 to ILS 1.82.

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). Within the past six months, its performance has trailed this peer group's by 6ppts and its growth accelerated by 7ppts 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 neither favourable nor unfavourable.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 20.3% in the last 12 months, up from 16.1% in FY23. 

Historically, PRMG.TA has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 8.7%, a growth from 8.1% in FY23. 

Primotec Group Ltd reported a return on equity (RoE) of 15.2% in the last 12 months, down from 16.0% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 9.2% in the last 12 months, an increase from 8.6% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 14.2%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.6 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.

PRMG.TA has very poor trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is very unstable and becomes extremely unfavourable 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 very 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 solid return on capital, strong debt servicing capacity, 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, PRMG.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, PRMG.TA is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. 

From both historical and forecast perspectives, the stock is considerably underpriced compared to similar stocks. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

Primotec Group Ltd

ILA 1402

5

Primotec Group Ltd

ILA 1402

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 1402

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