Summary of Results
The model portfolio’s return is +29.61% YTD compared to +21.48% for the S&P500, and +67.58% versus +42.81% for the S&P500 since inception (September 2022). The model portfolio, as of Friday’s close, is as follows:
Now, let’s review the main developments among the companies in the model portfolio for the week:
Dynacor
Dynacor Group reported its Q3 results, which held few surprises given that the company provides monthly figures. Revenue for the period reached $76.2M (compared to $63.4M a year ago), while net profit amounted to $5.9M (vs. $2.5M). Dynacor continues to build cash reserves while maintaining steady shareholder returns, repurchasing 244.7k shares (0.7% of the float) and sustaining its monthly dividend payments (2.6% annual yield at current prices).
One of the key aspects of this investment idea is the strength of its balance sheet and the downside protection it offers, ensuring funding for its expansion plans. As of the end of Q3, its net cash position was:
Assets: $41.95M + $14.99M + $18.65M (gold) = $75.59M
Liabilities: $14.48M + $2.87M + $3.79M = $21.14M
For a total net cash position of $54.45M, representing 38% of its total market capitalization.
In October, $DNG.TO announced the start of a project to replicate its business model in Senegal, with development set to begin in 2025. This year, the company plans to invest a total of $13M in CAPEX, with $4M already allocated to international expansion.
Coinbase
Coinbase has launched the Coinbase 50 Index (COIN50), a new index tracking the top 50 digital assets available on its platform, primarily targeting traders and institutional investors in crypto-friendly markets outside the United States, United Kingdom, and Canada.
The COIN50 is highly concentrated on the most relevant cryptocurrencies, with Bitcoin, Ether, and Solana making up the majority of the index’s weight. Institutional investors will have access to this index through perpetual futures contracts on Coinbase International Exchange, while eligible retail investors can access it via Coinbase Advanced. Although this isn’t Coinbase’s first attempt in this area—its 2018 Coinbase Index Fund was discontinued due to lack of demand—the COIN50 represents a renewed focus on creating more accessible and diversified financial products tailored to both retail and institutional users.
Israel Chemical
Israel Chemicals is moving in the right direction from a fundamental standpoint, with very positive Q3 results that the market has rewarded. Revenue increased for the third consecutive quarter, reaching $1.75B, while EBITDA rose 11% YoY to $383M, accompanied by a margin expansion from 19% to 22%. Cash generation was also notable, with $572M in the first nine months (a 10% yield).
In Q3 2024, the Industrial Products segment posted sales of $309 million, a 16% YoY increase, and an EBITDA of $65 million, up 55%. The EBITDA margin reached 21%, exceeding the 16% from the prior year, when the bromine market bottomed out. This performance was driven by operational optimization and higher volumes in both brominated and phosphorus-based flame retardants, gaining market share in both categories.
In the Potash division, quarterly sales reached $389 million, with an EBITDA of $120 million. However, the average potash price dropped by $45 CIF per ton YoY, while total sales volume decreased by 220,000 metric tons. Despite intermittent challenges in Dead Sea operations due to the war, the company plans to cap total potash sales in 2024 at 4.6 million metric tons, consistent with 2023 levels, with expectations for a more favorable environment in 2025.
In the Phosphate Solutions division, sales reached $577 million in Q3, with an EBITDA of $140 million, reflecting a YoY increase. The EBITDA margin expanded to 24%, compared to 20% last year, driven by growth in specialty markets that offset price declines resulting from lower input costs.
Regarding pricing, potash and phosphates show diverging trajectories: while potash prices continue to decline, phosphate prices saw a slight increase compared to Q2 and a significant YoY improvement.
Rounding out these results, ICL has raised its guidance for its specialty-driven divisions, now expecting annual EBITDA of $0.95B-$1.05B, up from the previous $0.8B-$1B. The potash market is currently at an inflection point, navigating a cyclical trough, but in the meantime, the company’s operational improvements and the strength of its other divisions are remarkable.
Another good week of value creation by portfolio companies.
Disclaimer
LWS Financial Research is NOT a financial advisory service, nor is its author qualified to provide such services.
All content on this website and publications, as well as all communications from the author, are intended for educational and entertainment purposes only and should under no circumstances, whether explicit or implicit, be considered financial, legal, or other types of advice. Each individual should conduct their own analysis and make their own investment decisions.
