Ratio Energies - Limited Partnership explores, develops, and produces oil and natural gas in Israel. It has operations in Leviathan project. The company was formerly known as Ratio Oil Explorations (1992)  Limited Partnership and changed its name into Ratio Energies - Limited Partnership. The company was founded in 1992 and is headquartered in Tel Aviv-Yafo, Israel.

Israel

Ratio Energies - Limited Partnership

Energy

The company tries to pay dividends regularly but only sometimes does so. It has paid dividends in roughly half the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear 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 annually. 

RATI.TA reported revenue of USD 361mn in the last 12 months, down 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 35% from FY23 to USD 0.12. Market expects EPS to reach USD 0.11 in FY25.

The stock has been growing steadily in the past six months, adding 27% in total. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 37ppts in total. 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 73.0% in the last 12 months, up from 70.4% in FY23. 

Historically, RATI.TA has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 38.6%, a growth from 35.0% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 11.9% in the last 12 months, an increase from 11.1% in FY23. The market analysts predict that RoA will be 11.2% in FY24, again stronger than its peers. 

Ratio Energies - Limited Partnership reported a return on equity (RoE) of 30.1% in the last 12 months, down from 32.8% in FY23. The market consensus projects an RoE of 30.7% in FY24, again ahead of its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 12.6%, above the peers. The consensus estimate for FY24 for RoCE is 21.7%, again ahead of the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.6 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.

RATI.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 stable and is somewhat unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 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 robust profitability and solid return on capital, among the positive credit factors. Among the negative credit factors, we point to slow historical revenue growth, excessive margin volatility, and an unfavourable capital structure.

In highly turbulent market conditions, RATI.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, RATI.TA is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from low to substantial. 

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

Ratio Energies - Limited Partnership

ILA 408.5

4

Ratio Energies - Limited Partnership

ILA 408.5

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 408.5

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