Africa Megurim: The 2026 funding bridge, 20/80 terms and what is really left in cash

The main article already argued that the key number at Africa Megurim is not reported profit on its own, but the bridge between sales, execution, project finance, and cash. This continuation isolates the most fragile part of that bridge: how 2026 is supposed to work in practice, what 20/80 terms are doing to cash timing, what really sits inside the land-loan bucket, and what is actually left in cash once the headline balance-sheet figure is stripped away.

The right framework here is all-in cash flexibility, not a normalized cash-generation view. In other words, this is not about how much the existing platform can generate before land purchases and capital uses. It is about how much money is really left after equity injections into projects, debt service, interest, tax, and dividends. That is the right lens because Africa Megurim's 2026 test is not whether it can post accounting profit. It is whether the corporate layer can get through the year without leaning too heavily on refinancing and maturity rollovers.

That is also where the headline can mislead. In the consolidated statements, the company ended 2025 with ILS 212.2 million of cash and cash equivalents and another ILS 41.5 million of marketable securities. But the forecast cash-flow bridge, the one that serves debt, interest, and dividends at the company level, opens 2026 with just ILS 65.7 million. That gap is not a technicality. It is the reason the funding bridge matters more than the consolidated cash headline.

Where The Cash Gap Starts

The company itself points to two mechanisms behind the disconnect between profit and cash. The first is the business model of residential development, where land purchases are classified inside operating cash flow even when the land itself still sits as a non-current asset until execution gets closer. The second is the growing use of customer-financing arrangements such as 20/80, where the customer pays most of the consideration only later, after the company has already started bearing part of the construction cost.

The filing is precise on one important point. Management says 20/80 terms hurt cash flow mainly through timing, and that their impact on operating results is limited mostly to financing expense. It also says that historically these transactions have been completed at a rate similar to other sales. So this is not automatically a credit-loss story. It is a working-capital story. And for 2026, working capital is exactly the risk that matters.

The warning disclosure makes that clear. The company says it has a 12-month working-capital deficit of about ILS 44 million on a consolidated basis and ILS 305 million on a solo basis. Sitting behind that disclosure are about ILS 128 million of land loans tied to the Herzliya Studios project and Efron Hod Hasharon, plus another ILS 274 million of loans for projects already under execution but not yet eligible to enter full project-finance frameworks.

Management's explanation is not unreasonable. It says land loans are deliberately taken for relatively short periods of up to two years in order to lower funding cost, so they fall into current liabilities as maturity approaches even though the land itself still sits outside 12-month working capital. It also says that, based on past experience, land loans are usually renewed until project finance comes in, and that for the project-level loans in execution the company received in-principle bank approval after the report date to extend maturity.

That is the strong side of the thesis, but also the dependency. The 2026 bridge works only if the move from short-term loans into longer project finance actually happens on time. If that slips, the profit-to-cash gap stops being merely accounting noise.

That chart is the heart of the difference between profit and cash. In 2025 the company reported ILS 200.1 million of net profit, but operating cash flow was negative ILS 218.4 million. The biggest items were a ILS 156.2 million increase in land inventory, a ILS 103.3 million drag from non-cash fair-value gains on investment property, and ILS 163.2 million of working-capital and contract-item changes. Inside that working-capital bucket sits another ILS 132.7 million change in buildings held for sale, net of customer advances, which is another sign that the company pulled investment forward ahead of customer cash.

2025 Already Showed The Difference Between Normalized Cash And Real Cash

To understand 2026, it helps to hold two different pictures of 2025 at the same time. In the normalized picture, the one management itself presents as operating cash flow excluding land purchases, the business generated ILS 145.4 million. That says the platform still has internal cash-generating ability. But that is not the relevant picture for funding flexibility.

In the all-in picture, the company also spent another ILS 156.2 million on higher land balances, ILS 161.7 million on working-capital growth, ILS 259.7 million on investment property, ILS 129.8 million on bond repayment, ILS 59.9 million on interest, ILS 46.0 million on tax, and ILS 70.0 million on dividends. To fund all of that, it needed ILS 483.8 million of net loans, ILS 138.7 million from marketable-securities realization, and ILS 155.1 million from changes in restricted balances inside project-finance accounts.

That is the key continuation point. Even if one accepts the argument that the core business still generates cash before land, the company did not get through 2025 on internal cash alone. It got through the year by raising and redirecting sources. That is why 2026 has to be read first and foremost as a financing exercise.

The 2026 Bridge Relies Mostly On New Funding And Upstream Cash

The forecast cash-flow statement through the end of 2027 shows almost explicitly how management intends to get through 2026. Opening cash is ILS 65.7 million. Total 2026 sources are ILS 444.9 million, total uses ILS 310.7 million, and the year is supposed to end with ILS 199.9 million.

But the mix matters more than the closing balance. Out of those ILS 444.9 million of 2026 sources, only ILS 68.5 million comes from direct operating-type sources at the company level: ILS 42.1 million of surplus withdrawals from development projects, ILS 9.6 million of rental cash flow, and ILS 16.8 million of management fees from subsidiaries. Another ILS 85.4 million is supposed to come up from subsidiaries as dividends and loan repayments. ILS 41.5 million is supposed to come from liquidating marketable securities. And the largest single source, ILS 249.5 million, is supposed to come from new financing against an income-producing asset, bonds, or commercial paper.

That chart sharpens the dependency. The largest source in the 2026 bridge is not a strong rebound in internally generated cash. It is new funding. And the second-largest source is not operating cash from the company itself, but cash expected to be upstreamed from subsidiaries. In practice, about ILS 334.9 million out of ILS 444.9 million of 2026 sources comes from those two buckets together.

There is also a small but important detail in the forecast-variance table. When the company compares the second-half 2025 forecast with actual results, it explicitly says dividends that were supposed to be pulled during 2025 were deferred into early 2026. So part of the relative comfort in the 2026 bridge comes not only from new economics, but also from timing slippage of cash that was supposed to arrive earlier.

On the uses side there are few surprises, but there is a lot of rigidity. ILS 107.1 million goes to bond repayment on series E, ILS 34.7 million to interest, ILS 35.3 million to project equity injections, ILS 48.5 million to other ongoing uses, and ILS 5.0 million to tax. On top of that sits an ILS 80.0 million dividend, just as in 2027.

This is no longer an accounting question. It is a priorities question. Management is building the 2026 bridge in a way that still leaves room for a dividend inside a funding year.

What The Bridge Assumes Will Not Happen

The most important part of the forecast table is not what goes into it, but what stays outside it.

This is not an automatic criticism. In a residential developer, a meaningful part of the model really does rely on moving from short-term land loans into longer-term project finance, with actual repayment coming out of the project structure rather than the parent cash balance. But it is the right way to read the table: 2026 is not being closed only with cash already on hand. It is also being closed with the assumption that several large walls are simply pushed forward in time.

That is also where the distinction between "there is cash" and "cash is left over" becomes critical. If the land loans and project loans are indeed rolled or converted, the bridge looks reasonable. If not, ILS 65.7 million of solo opening cash is a very thin base for a funding year.

Series V, The Rating, And The Dividend: Flexibility Exists, But It Is Not Free

The good news is that the market is still open to the company. In February 2026 Africa Megurim completed the issuance of series V bonds with ILS 250 million of face value and net proceeds of ILS 248.0 million. The company also says the ILS 249.5 million source item in the 2026 bridge is based, among other things, on the bond issuance already completed in the first quarter of 2026 and on the ability to raise financing against an income-producing asset with an aggregate value of about ILS 92.5 million that is already pledged to a bank but does not yet have credit drawn against it.

The less comfortable news is that this flexibility comes with discipline. Under series V, the company undertook not to make a cash distribution if, after the distribution, equity would fall below ILS 1.1 billion, if net debt to CAP would rise above 72%, or if the equity-to-balance-sheet ratio would fall below 24%. In addition, the deed makes clear that cash distributions cannot be made out of unrealized investment-property revaluation gains. As of December 31, 2025, the company says it was in compliance.

That is exactly the point. The bond market is providing room, but not on the theory that all reported profit is already distributable cash. And yet the 2026 forecast still includes an ILS 80 million dividend, while after the balance-sheet date the board had already approved an ILS 18 million dividend in March 2026.

The outside signal reinforces that reading. In its December 30, 2025 rating report, Midroog kept the issuer rating and series E rating at A1.il with a stable outlook, but it also said leverage had risen even if it still fit the rating. Net debt to CAP stood at 46.0% as of September 30, 2025, versus 40.2% a year earlier, and Midroog expects a 45% to 51% range in the short to medium term. EBIT to interest coverage stood at 2.3x, and Midroog's forecast range is 2.0x to 2.8x for 2025 to 2026. Beyond that, Midroog explicitly says the company's 50% profit-distribution policy weighs on its financial policy, and it even lists damage to liquidity resulting from dividends beyond Midroog's expectations as a possible downgrade driver.

That does not mean the company is heading into trouble. It does mean the dividend is not secondary to the analysis. If 2026 is a bridge year, the dividend is part of the bridge itself, not something that sits outside it.

Conclusion

The message of this continuation is simpler than the table and sharper than the cash headline. Africa Megurim is not entering 2026 with an immediate covenant problem, and not with a shut bond market. It is entering 2026 with a funding bridge that works as long as four things happen together: 20/80-style terms do not expand beyond what the balance sheet can carry, land loans and project loans do in fact roll into extensions or project finance, cash comes up from subsidiaries on time, and the company keeps distribution discipline inside a year that already relies on new financing.

The thesis in one line is this: what is really left in cash at Africa Megurim is not what appears in the balance-sheet headline, but what remains at the solo-company level after repayments, interest, project equity, and dividends, and in 2026 that layer is still heavily dependent on external funding and loan rollovers.

The strongest counter-thesis is that the market may be reading normal bridge financing too harshly. One can argue that land loans are a standard tool in residential development, that the in-principle approvals received after the report date for part of the loans tied to projects already under execution support the probability of extension, that series V has already been issued in practice, and that dividends from subsidiaries simply move cash up to the parent layer from where it was already accumulated below. That is a serious argument. But even under that reading, 2026 remains a test of funding discipline rather than just reported profitability.

That matters because in a residential developer with customer-financing terms, land loans, and a rental-housing arm, value is created long before cash reaches the parent layer. The key question is therefore not just whether projects exist and whether profit is reported, but whether the move from accounting value into distributable and financeable cash actually happens on time.