Tamar Petroleum Ltd engages in the exploration and production of natural gas in Israel. It has 16.75% interest rights in the Tamar and Dalit reservoirs located in west of Haifa. The company supplies natural gas to the State of Israel, private electricity producers, industrial customers, and natural gas marketing firms, as well as exports to Jordan, Egypt, Italy, Cyprus, and Greece. In addition, it sells condensate produced from the Tamar project to Paz Ashdod Oil Refineries. The company was formerly known as Karish and Tanin Management Ltd. and changed its name to Tamar Petroleum Ltd in May 2017. Tamar Petroleum Ltd was incorporated in 2015 and is headquartered in Herzliya Pituach, Israel.

Israel

Tamar Petroleum Ltd

Energy

The company pays dividends most of the time. It has paid dividends in almost every one of 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 annually. 

TMRP.TA reported revenue of USD 300mn in the last 12 months, up 8% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 14% from FY23 to USD 0.64.

Over the past six months, the stock has consistently climbed, resulting in 72% 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 85ppts 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 mildly favourable.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 51.6% in the last 12 months, up from 49.6% in FY23. 

Historically, TMRP.TA has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 19.5%, a growth from 17.8% in FY23. 

Tamar Petroleum Ltd reported a return on equity (RoE) of 14.3% in the last 12 months, up from 13.1% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 4.8% in the last 12 months, an increase from 4.0% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 5.3%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.7 in the past several years. This ratio implies a poor 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.

TMRP.TA has poor trading liquidity. It will take at least a day or two for the average private investor to sell a common position under normal market conditions. 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 high. Among the negative credit factors, we point to slow historical revenue growth, excessive margin volatility, weak debt servicing capacity, and an unfavourable capital structure. We note robust profitability, among the positive credit factors. 

In highly turbulent market conditions, TMRP.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, TMRP.TA is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to mild. 

Based on key historical and expected multiples, the stock is undervalued relative to its peers. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITDA, undervalued on P/FCF. 

Tamar Petroleum Ltd

ILA 3520

4

Tamar Petroleum Ltd

ILA 3520

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 3520

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