Suny Cellular Communication Ltd imports and sells cell phones, accessories, and storage devices in Israel. The company provides sale, technical support, repair, and maintenance services for mobile end equipment, tablets, mobile phones and telephones, accessories, and spare parts, which are made by the Samsung Electronics Co. Ltd. It sells products through a network of 22 stores of Samsung brand; other retail chains, distributors, and mobile stores; and its website and other online sites. The company was formerly known as Scailex Corporation Ltd. and changed its name to Suny Cellular Communication Ltd in November 2016. Suny Cellular Communication Ltd was incorporated in 1971 and is based in Petah Tikva, Israel.

Israel

Suny Cellular Communication Ltd

Communication Services

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, but the dynamics are unclear. 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 twice a year. 

SNCM.TA reported revenue of ILS 1 057mn in the last 12 months, up 24% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 143% from FY23 to ILS 0.22.

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 9ppts and its growth decelerated by 6ppts 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 modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 7.2% in the last 12 months, up from 4.8% in FY23. 

Historically, SNCM.TA has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 4.5%, a growth from 2.6% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 10.3% in the last 12 months, an increase from 4.6% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 12.7%, above the peers. 

Suny Cellular Communication Ltd reported a return on equity (RoE) of 19.9% in the last 12 months, up from 8.6% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 3.0 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.

SNCM.TA has average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is very unstable 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 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 and low margin volatility, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, and bleak profitability.

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

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. 

Suny Cellular Communication Ltd

ILA 119.2

5

Suny Cellular Communication Ltd

ILA 119.2

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 119.2

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