Gav Yam (Bayside): A Stock to Sleep Well at Night

Last updated on 2016-03-08

Disclaimer: I am not a certified investor of any kind. These are my personal views and are solely for informational purposes. The numbers I have provided here were digged up by me from many sources and may be wrong in many places. User discretion is advised. I may or may not own the stocks named in this post. This message will not self destruct in 5 seconds.

Gav Yam (or in her english name Bayside) is a company that develops and rents industrial real-estate and develops residential projects in Israel. It is a very old company (for Israeli standards), founded in 1928 to help develop the industrial infrastructure of the yet to be born country. The company is a public primarily owned by Nechasim UBinian (Property and Building Corporation in English… a very imaginative name), which in turn is owned by larger Israeli concerns in a not-so-long chain of companies. The following information was extracted from the 2011 yearly statements.

The company owns many industrial parks – a total of 743K sq. meters, in inflation-adjusted long-term contracts, with an occupation rate of 96%, which produced for the company an income of 330 Million Shekels in 2011.

In the residential sector, the company finished selling all units in two projects it had, and started selling a new project. From these sales the company received 5.1 Million Shekels in 2011.

The company has very interesting assets:

1. Haifa Matam Park: Home of Intel, Microsoft, Google, Elbit, Phillips and many other high-tech companies. It contains 194K sq. m. rental space of which 145K sq. m. are office space. The occupation rate of this asset is 97%. This assets gives a return of 8.4% on its value, which was calculated as 1,088,497K Shekels, almost one fourth of the company’s long term assets.
2. Herzlya North: Home of more hi-tech companies, one of them Microsoft. It contains 114K sq. m. rental space of which 44K sq. m. are office space. The occupation rate of this asset is 98%. This assets gives a return of 7.8% on its value, which was calculated as 721,160K shekels.

Overall, the company’s assets give a return of 8.6%, on assets valued at 3,231,870K Shekels, with an occupation rate of 96.5%. Pretty nice.

The company is also developing a number of projects, extending the Herlyza and Matam parks and building a full hi-tech park in Beer-Sheva similar to the Matam park. From a presentation to investors, the company is building 266K sq. m. more of office space that will be available for rent in the future (2-3) years.

The company’s stock price has grown 21% since 2000. It had a high valuation in 2006 of 1000 Shekels, from which it went to 410 Shekels in the hysteria of the sub-prime crisis. Now it hovers around 800, going up and down as the winds of the stock exchange carry it, with no real direction.

The stock’s behavior can be expected from how the company has operated in the last years. The stock’s EPS since 2005 has been a roller-coaster:

Here are some numbers from the latest (2011) yearly statements (all numbers are in terms of thousands shekels):

Balance Sheet
		2011	2010	2009
Assets
	Current	592420	601327	648128
	Long-Term	4719895	4249547	4045987
	Total Assets	5312315	4850874	4694115
Liabilities
	Short-Term	531098	409376	370722
	Long-Term	2842287	2397595	2355095
	Shareholder’s Equity	1938930	2043903	1968298
	Total Liabilities	5312315	4850874	4694115

Income Statement
	2011	2010	2009
Revenues	475731	474686	532200
Operating Income	416103	410421	384702
Net Income	85613	231479	286356
EPS	34.51	95.08	110.61

Cash Flow
	2011	2010	2009
Operations Cash-flow	267342	290537	341621
Investments Cash-flow	-64368	-107914	-293419
Financing Cash-flow	-83597	-270410	-221327
Total Cash-flow	119377	-87787	-173125
Cash at end of period	345960	226583	314370

What I read from these statements is:

1. Consistent cash flow.
2. Lots of assets.
3. In 2011 the company had small income because it paid lots of taxes (I read that in the company’s statements).
4. Many liabilities, but most of them are long term, which will be paid in the next 5 to 10 years. Since the company generated very good cash flow from its rents, I don’t think it will have a problem paying.

Gav Yam has distributed dividends regularly since 2002, even doing so in the height of the real-estate crisis, which didn’t even touch the company:

It is hard to say that there is a trend to increase the dividends, and the company does not have a dividend policy, but since it is owned by holding companies that need the money to pay for their acquisitions, I thinks dividends will continue to flow.

Reading the numbers, Gav Yam does not look like a promising company. But from my point of view, it is. It has great assets, and even greater projects. It has debt, I don’t think they will have a problem serving it, both in the short and long terms.

If you have ideas how to better analyze this company, please comment. I’ll do my best to improve with time.