Rami Levi Chain Stores Hashikma Marketing 2006 Ltd operates a chain of retail stores with a format of discount network in Israel. Its stores offer breads and pastries, fruits and vegetables, milk, eggs, salads fish meats, pulses and cereals, snacks and sweets, drinks, and disposables, as well as organic and health, frozen, canning, cooking and baking, home and animal maintenance, skin and babies care, clothing, and electrical and electronic products. The company was founded in 1976 and is based in Jerusalem, Israel.

Israel

Rami Levi Chain Stores Hashikma Marketing 2006 Ltd

Consumer Defensive

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, which may appeal to investors valuing a regular income stream. 

RMLI.TA reported revenue of ILS 7 383mn in the last 12 months, up 3% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 1% from FY23 to ILS 17.50. Market expects EPS to reach ILS 19.02 in FY25.

Over the past six months, the stock has consistently climbed, resulting in 30% total increase. When compared to its international counterparts in the same sector and industry (as shown above), the stock has exceeded their performances, leading by 30ppts in total. 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 modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 9.6% in the last 12 months, up from 8.5% in FY23. 

Historically, RMLI.TA has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 3.3%, down from 3.4% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 9.7%, above the peers. The consensus estimate for FY24 for RoCE is -0.4%, however, this time below its peers. 

Rami Levi Chain Stores Hashikma Marketing 2006 Ltd reported a return on equity (RoE) of 44.1% in the last 12 months, down from 44.2% in FY23. The market consensus projects an RoE of -1.4% in FY24, however, this time below its peers. 

Another important profitability metric, return on assets (RoA), amounted to 5.7% in the last 12 months, a decrease from 5.9% in FY23. The market analysts predict that RoA will be -0.2% in FY24, though below its peers in this period. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.9 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.

RMLI.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 remains extremely favourable 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 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 solid return on capital, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, poor working capital management, and an unfavourable capital structure.

In highly turbulent market conditions, RMLI.TA is moderately volatile. In other words, the stock will fall more 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 moderate. 

In normal market circumstances, RMLI.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 very low to negligible. 

Based on key historical and expected multiples, the stock is greatly undervalued relative to its peers. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

Rami Levi Chain Stores Hashikma Marketing 2006 Ltd

ILA 28170

5

Rami Levi Chain Stores Hashikma Marketing 2006 Ltd

ILA 28170

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 28170

About

About

About

About