Tikun Olam-Cannbit Pharmaceuticals Ltd engages in the research, development, cultivation, manufacture, and distribution of medical cannabis and related products. It also provides training and patient care services. The company is based in Nof Hagalil, Israel.

Israel

Tikun Olam-Cannbit Pharmaceuticals Ltd

Healthcare

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

TKUN.TA reported revenue of ILS 35mn in the last 12 months, down 21% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 44% from FY23 to ILS -0.80.

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 26ppts and its growth accelerated by 9ppts 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 very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -50.8% in the last 12 months, up from -85.5% in FY23. 

Historically, TKUN.TA has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -117.6%, a growth from -201.0% in FY23. 

Tikun Olam-Cannbit Pharmaceuticals Ltd reported a return on equity (RoE) of -230.9% in the last 12 months, down from -110.8% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to -191.4%, below the peers. 

Another important profitability metric, return on assets (RoA), amounted to -99.5% in the last 12 months, a decrease from -76.2% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -8.9 in the past several years. This ratio implies a fragile 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.

TKUN.TA has poor trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity may be unstable 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 high. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, negligible return on capital, inadequate interest coverage, poor cash flow generation, and an unfavourable capital structure. We note low margin volatility, among the positive credit factors. 

In highly turbulent market conditions, TKUN.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, TKUN.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 critical to immense. 

Considering past and projected metrics, the stock is distinctly 'cheaper' than its peers. Specifically, the stock is underpriced on P/FCF. 

Tikun Olam-Cannbit Pharmaceuticals Ltd

ILA 38.7

3

Tikun Olam-Cannbit Pharmaceuticals Ltd

ILA 38.7

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 38.7

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