Follow-up: G Willi-Food International Ltd (Q3 2016)

Today it was time for a thirteen months follow-up on my position in WILC. So far it has been a good position in my portfolio, up 46 %. As I will present below, WILC is still a very undervalued position and continues to checks all of my criteria for the net-net checklist. Also, there has been some recent positive developments regarding the company’s capital allocation (see other notes below). To summarize, I’m quite glad that I will continue to hold WILC another thirteen months.

NASDAQ:WILC – 5,4 USD

1kr50öreG. Willi-Food International Ltd. is a holding company. The Company is engaged directly and through subsidiaries, in the development, import, export, marketing and distribution of a range of over 600 food products around the world. The principal products in the import segment product line include Canned Vegetables and Pickles, Canned Fish, Canned Fruit, Edible Oils, Dairy and Dairy Substitute Products, Dried Fruit, Nuts and Beans, and Other Products. Its brands include Willi-Food, Gold-Frost, Gold Food, Tifeeret, Donna Rozza, Completa, Raskas and Del Monte, among others. The Company’s products are marketed and sold to approximately 1,500 customers throughout Israel and outside of Israel. The Company’s customers generally fall within one of the two groups, including retail supermarket chains in the organized market, and private supermarket chains, mini-markets, wholesalers, food manufacturers, institutional consumers, such as catering halls, hotels, hospitals and food producers. – Google Finance

1. Adequate margin of safety (criterion a) or b) must be met): 

a)

  • P/NCAV < 1x
    • 0,74x 

&

  • EV/Operating earnings(5y&10y) < 3x
    • 5y = 0,9x 
    • 10y = 1x 

b)

  • P/NCAV < 0,75x
    • 0,74x

2. The risk of permanent loss is low:

2.1 The risk of bankruptcy is low (criterion a) or b) must be met):

a)

  • Debt/Equity < 25 %
    • 0 % 

b)

  • Z-score ≥ 3
    • 8,9

2.2 The company’s business model is not totally unprofitable (criterion a) or b) must be met):

a)

  • Positive retained earnings:
    • 76 M$ 

b)

  • Positive aggregate operating income for the last ten years:
    •   51 M$ 

3. The company does not have a shareholder unfriendly capital allocation:

  • Shareholder yield TTM ≥ -2 %
    • Dividend yield TTM = 0 %
    • Net buyback yield TTM = -0,9 %
    • Net debt paydown yield TTM = 0 %
      • = -0,9 % 

Other notes:

  • P/Net cash = 1,2x
  • P/TB = 0,67x
  • NCAV-burn rate Qx – Qx-4 (YoY) and Qx – Qx-1 (QoQ)
    • Qx – Qx-4 = +2,6 %
    • Qx – Qx-1 = +4,3 %
  • In november 2016 WILC announced that the company had implemented a dividend policy of at least 25 % of its annual after-tax revenues (announcement)
    • A dividend of 0,38 USD per share was declared.
  • Other recent analysis of WILC:

MoS

Disclosure: The author is long NASDAQ:WILC when this analysis is published.

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