Equital 2025: Value Is Being Created Below, but the Parent Is Still Waiting for Cash

Company Overview

At first glance, Equital looks like a simple holding-company story: Airport City on the real-estate side, Nafta on the energy side, and a large asset base that should eventually work its way up to the parent. That is only part of the picture. In 2025 the group posted NIS 3.44 billion of revenue, down from NIS 3.58 billion in 2024, yet profit attributable to shareholders rose to NIS 599 million from NIS 474 million. That did not happen because both engines improved together. It happened because valuation gains, buybacks, and holding-structure effects mattered more than underlying operating momentum.

What is working now? At the parent-company level there is no immediate balance-sheet pressure. On the solo-expanded basis, equity stands at roughly NIS 6.28 billion, the ratio of equity to equity plus net financial debt is 94%, and net financial debt to asset value is only 6.5%. There is also real asset quality underneath that balance sheet. Airport City ended the year with NIS 788 million of net profit, another buyback that lifted Equital's stake to roughly 51.69%, and an income-producing and non-income-producing real-estate portfolio of about NIS 15.9 billion. At the same time, Tamar sold 10.05 BCM of gas in 2025, almost unchanged from 2024, and the first phase of the expansion project was completed in February 2026.

What is still not clean? The active bottleneck is not a covenant issue and not market access. The bottleneck is cash moving up to the parent. Out of total group equity of NIS 13.16 billion, NIS 6.87 billion belongs to non-controlling interests. Both Airport City and Isramco Negev 2 operate under clear distribution restrictions, and Tamar still has an open capital-spending agenda around expansion and export infrastructure. That is why a reader who focuses only on consolidated profit or asset value can miss the question that really matters here: how much of this value can actually become accessible cash at the top, and how quickly.

That is also why the market value, about NIS 4.94 billion in early April 2026, is not enough on its own to explain the case. It sits below attributable equity, but Equital is not the kind of holding company where one can simply mark a large value gap and wait for it to close. It sits on top of minority layers, distribution restrictions, Tamar capex, and a major difference between the quality of earnings at Airport City and the quality of earnings at Nafta. Over the next 2 to 4 quarters, the read improves if Tamar shows real capacity expansion and commercial conversion, and if Airport City proves that value gains are not staying trapped in fair value but are also feeding through to NOI and distribution room. If that does not happen, Equital is likely to remain a case where value is being created below while cash stays slow to reach the parent.

The quick economic map looks like this:

Near the reporting date the group employed 371 people, 127 at the Airport City group and 244 at the Nafta group. That is not a cosmetic detail. It is a reminder that Equital itself is not an operating platform in the usual sense. It is a structure that brings together two very different businesses: real estate, where profits are shaped by cap rates and occupancy, and gas, where profits are shaped by prices, maintenance, export paths, and project finance.

The pre-2025 setup matters as well. Merger talks with Nafta ended in January 2023, and in 2024 Equital moved in the opposite direction: not a simplification of the structure, but a stronger concentration of control through a tender offer that lifted its Nafta stake to about 88.36%. So 2025 is not a year of “same structure, same rules.” It is a year in which Equital arrives more concentrated, more dependent on Nafta and Tamar, and more clearly exposed to the strengths and weaknesses of that structure.

Events and Triggers

Tamar got a real trigger, but not a finish line

The most important post-balance-sheet event is the completion of the first phase of Tamar's preservation and expansion project on February 9, 2026. It matters because together with the compressor upgrade at the Ashdod reception facility, which the operator expects to complete in the coming weeks, Tamar's maximum daily production capacity is expected to rise to as much as 1.6 BCF per day. That is a real trigger, but not the end of the story. Anyone reading Equital as if Tamar has already moved from an investment phase into a full harvest phase is running ahead of the evidence. The Ashdod compressor work was still not complete, external export infrastructure was only 86% complete at the end of 2025 with a target in the second half of 2026, and the Nitzana project points only to the second half of 2028.

The commercial picture also came with mixed signals. On the positive side, Tamar signed a gas sale agreement with Kesem Energy in April 2025, with expected partner revenue of roughly $700 million to $800 million. The agreement became effective on February 22, 2026, which supports the idea that Tamar is building additional future demand. On the other side, Israel Electric filed arbitration in December 2025 seeking up to a 10% retroactive price cut from the start of 2025, and Tamar's partners rejected the claim in January 2026. That is not background legal noise. When Israel Electric accounted for 42% of Tamar's 2025 gas sales, a pricing dispute there is a material issue for the Equital thesis itself.

Airport City sharpened Equital's control, but did not simplify the case

The most visible move on the real-estate side was the continuation of buybacks at Airport City. In December 2025 the company repurchased 1,948,647 shares for about NIS 119 million, lifting Equital's stake through Yoel to roughly 51.69%. In November 2025 Airport City also approved a new buyback plan of up to NIS 200 million. That creates value for Equital's shareholders because it increases Equital's economic participation in a relatively stable real-estate platform without a large acquisition. But the distinction between value created and cash accessible is critical here. A buyback at a subsidiary increases ownership; it does not automatically send a dividend to the parent.

Airport City also kept comfortable access to financing markets, which helps frame the stake as a more stable anchor inside the portfolio. But the real analytical question is not whether Airport City can finance itself. The question is whether the improvement there is translating, over time, into more genuinely available upstream cash, or whether it remains mostly a story of fair-value gains, buybacks, and internal balance-sheet optimization at the subsidiary level.

Equital itself did not pay a dividend, and that is part of the message

The parent company has no dividend policy, and it did not distribute dividends in 2024 or 2025, even though distributable profits stood at roughly NIS 5.1 billion at the end of 2025. That does not mean it lacks legal capacity. It means the practical capital-allocation stance remains conservative, and the case still runs through portfolio management and ownership structure rather than through visible cash distributions to shareholders. For a holding company, that is an important signal about how management itself is reading the year: a year of preserving flexibility, not a year of harvesting.

Efficiency, Profitability and Competition

Airport City carries the higher-quality earnings, but not every asset inside it is equally strong

The higher-quality engine inside Equital is Airport City. Rental and management income rose to NIS 1.002 billion in 2025 from NIS 968 million, and net profit jumped to NIS 788 million from NIS 428 million. But anyone looking only at the bottom line misses an important point: NOI from income-producing properties actually edged down to NIS 803 million from NIS 808 million. The profit jump was driven mainly by a NIS 343 million fair-value gain after a NIS 41 million decline in 2024, along with lower net finance expense of NIS 142 million versus NIS 196 million.

That means Airport City delivered a value year, not a broad-based operational breakout. Those are not the same thing. The underlying portfolio includes very strong assets, but also visible quality gaps. Industrial and storage ended 2025 at 99% occupancy, retail at 91%, central stations at 90%, and parking and gas stations at 100%. Offices stood at only 78%, and the European portfolio at 60%. That is exactly where real-estate revaluation can look cleaner than the operating layer underneath it.

The competitive message matters too. Airport City's portfolio benefits from CPI-linked leases, planning-rights gains, and transport and retail assets that are not easy to replicate. But the office and Europe segments are still not fully settled. So the correct reading is not “Airport City improved across the board.” The correct reading is that some parts of the portfolio remain very strong while others still need operational work to fully support the valuation.

Nafta did not deliver a clean engine year. It delivered a bridge year

The other side of Equital, Nafta, looked far less clean in 2025. Revenue fell to NIS 2.265 billion from NIS 2.453 billion, operating profit after levy dropped to NIS 669 million from NIS 1.0 billion, and profit attributable to shareholders fell to NIS 223 million from NIS 338 million. Tamar gas sales were almost flat for the full year, 10.05 BCM versus 10.09 BCM, but fourth-quarter sales fell to 2.15 BCM from 2.47 BCM, mainly because of about 16 planned maintenance days. Lower gas pricing also weighed on the revenue line.

More important than that is how the profit was built. In the fourth quarter Nafta benefited from roughly NIS 43 million of tax income relating to prior years and about NIS 22 million of gain from the loss of significant influence. In other words, even inside Nafta, the end of the year was better accounting-wise than it was operationally. There was also around NIS 15 million of impairment on US oil and gas assets, higher finance expense, and provisions for lawsuits and bad debts. This is not a year one can read as “Tamar delivered growth.” It is a year in which Tamar preserved a strong base while profit quality was shaped by non-operating items as well.

That also leads to the key competitive point on Tamar. The question is no longer whether the asset is good. It clearly is. The question is under what pricing conditions it sells gas, how much capex still needs to be funded in order to expand export and capacity, and what the customer layer looks like. With 34% of Tamar's 2025 gas sales going to BOE in Egypt and 42% going to Israel Electric, this is not a broad and diversified customer base. It is a strategic asset with very clear commercial concentration.

Consolidated profit looks cleaner than the economics beneath it

This is the core of the 2025 story. Equital finished a year in which revenue fell, yet attributable profit rose by 26%. That improvement rested mainly on three drivers: NIS 353 million of fair-value gains on investment property, NIS 22 million of gain from loss of significant influence, and lower tax expense, partly because subsidiaries settled prior-year tax matters. On the other side, CPI-linked debt added roughly NIS 138 million of finance expense in the period, and each additional 1% increase in CPI is expected to add about NIS 62 million of finance expense to the group.

So anyone reading 2025 as a year of broad underlying improvement across Equital is missing the actual mix. The group created more value than it created accessible cash. Airport City provided support through valuation and buybacks, Nafta preserved the base but did not move up a gear, and the parent benefited from having time and balance-sheet flexibility. That is positive, but it is not the same thing as a year in which both main businesses entered a new and visibly cleaner stage together.

Cash Flow, Debt and Capital Structure

all-in cash flexibility, not normalized cash generation

Because this is a holding company sitting on public and infrastructure assets, the more relevant cash frame is all-in cash flexibility. In other words, how much cash remains after all actual cash uses, not just after maintenance spending. On that basis Equital ended 2025 with a positive outcome, but not a clean one: cash and cash equivalents rose by NIS 400 million, after NIS 3.519 billion of sources against NIS 3.119 billion of uses. That is a good result, but a large share of the sources came from refinancing rather than purely from organic cash generation.

The sources-and-uses table makes this clear. There was NIS 1.498 billion of operating cash flow. But there was also NIS 1.353 billion of long-term liability repayment, NIS 221 million of interest paid, NIS 394 million of changes in deposits, investments and other receivables, NIS 253 million invested in trading securities, NIS 237 million invested in investment property and fixed assets, NIS 143 million invested in oil and gas assets, NIS 332 million of distributions to non-controlling interests, and NIS 119 million of buybacks at Airport City. Without NIS 1.655 billion of bond issuance proceeds, NIS 136 million of long-term loans, and NIS 88 million of bank credit, the picture would have looked very different.

That is not a criticism of the financing. On the contrary, it shows that debt markets remain open to the group and that there is no immediate stress signal. But it does mean that “the group increased cash” is not the same as “the operating assets easily covered every use of cash on their own.” This is still a holding company simultaneously rolling real estate, Tamar capex, and cash allocation across several layers.

At the parent, this is not a covenant story

At the parent-company level, this is the most reassuring part of the report. Net financial debt at the reporting date was about NIS 406 million. The ratio of equity to equity plus net financial debt stood at 94%, against a minimum requirement of 45%. Net financial debt to asset value was 6.5%, against a ceiling of 55%. The parent has only two material bond series, Series 3 with about NIS 216.7 million of nominal principal at 1.64% interest, and Series 4 with about NIS 318.2 million at 5.31%.

The board is also explicit that there is no liquidity warning sign here. It notes that on the solo basis the company has a continuing but negligible negative operating cash flow, yet no warning indicators are deemed to exist. The reason is clear: the group has about NIS 3.376 billion of cash, deposits and trading securities, and around NIS 12.5 billion of unencumbered investment property. So the risk at Equital is not immediate financial strain at the parent.

But the route upward is filtered by minorities and distribution limits

Precisely because the parent is comfortable, it becomes more important to understand where the real friction sits. Out of total group equity of NIS 13.155 billion, only NIS 6.284 billion is attributable to Equital's shareholders. The rest, NIS 6.871 billion, belongs to non-controlling interests. That is a huge number, and it changes the reading of consolidated profit and asset value entirely.

| Layer | 2025 net profit | Profit allocated to minorities | Minority book value | Why this filters cash on the way up | |-----|------|-------|------| | Airport City | NIS 788 million | NIS 402 million | NIS 5.20 billion | Distributions are tied to equity thresholds, equity-to-net-balance-sheet tests, covenant compliance, and limits around certain revaluation profits | | Nafta | NIS 535 million | NIS 338 million | NIS 1.74 billion | Isramco Negev 2 is constrained by a reserve of up to $75 million, minimum economic equity, net debt to EBITDA, and LTV tests for distributions |

That is the number many first-pass readers miss. One can see strong consolidated profit, NOI, Tamar, buybacks, and even a very clean parent balance sheet, and still end up with cash moving up much more slowly than value is created below. That is especially true when the subsidiaries are both solid and leveraged, and when they also need to keep cash buffers and capital for projects. This is why Equital is not a simple “there is value, therefore it will rise” case. It is a “there is value, and the question is how much of it is truly accessible” case.

Outlook and What Comes Next

Five points worth holding in mind

First: the 2025 improvement is not broad-based. Airport City delivered profit through revaluation and lower finance expense, Nafta had a weaker operating year, and the parent benefited from structural balance-sheet strength. This was a year in which the structure worked better than the operating base.

Second: Tamar has progressed, but 2026 is still not a full harvest year. Phase one is complete, the Ashdod compressor upgrade is not, external export infrastructure only targets the second half of 2026, and Nitzana points to the second half of 2028.

Third: Airport City is creating real value, but the picture is uneven. Industrial, retail, and transport-related assets look strong. Offices and Europe look much less settled. So the question is not whether there was a revaluation. The question is how much of it rests on a broad operating foundation.

Fourth: the parent balance sheet buys time, but not a shortcut. Wide covenant headroom does not solve the accessible-cash problem. It only gives management room to manage through it.

Fifth: the market is likely to focus less on accounting profit and more on three practical links: whether Tamar really moves into a higher-capacity and broader commercial phase, whether Airport City can distribute without tightening itself, and whether Equital can keep building value without reopening structural questions around the group.

What has to happen at Tamar

Tamar enters 2026 as a better project, but also as a more demanding one. The updated total cost of phase one of the expansion project is about $640 million on a 100% basis, with Isramco Negev 2's share at roughly $184 million. The Ashdod compressor upgrade adds another roughly $24 million at the project level, about $7 million for Isramco's share. Export infrastructure outside Israel is moving toward completion in the second half of 2026 with a total budget of $176.5 million, while the Nitzana project already carries a $609 million budget including an estimated $64 million cost overrun.

That makes 2026 look like a proof year. If the higher production capacity actually turns into available throughput and broader commercial conversion, the Equital read improves. If it turns out that the added capacity comes with more delays, more capex, or more pricing disputes, then 2025 will look more like a transition year than a turning point.

What has to happen at Airport City

At Airport City the test is different. There is no need to prove that the assets exist. The need is to prove that the improvement in value is not remaining trapped in the revaluation line. NOI was basically flat in 2025, so the next reporting periods and the coming year need to show whether offices and Europe are settling into a more stable picture, and whether accounting profit is getting broader support from cash generation, occupancy, and distributions. The continuation of buybacks is a positive signal. The existence of bond-linked distribution constraints is the reminder that not every subsidiary-level improvement translates immediately into a cleaner parent-level thesis.

Why 2026 looks like a proof year rather than a harvest year

Because all the pieces of the thesis are working, but not from the same stage of maturity. The parent is clean. Airport City is strong, but not free of weak spots. Tamar is strategic, but still inside a live investment and infrastructure cycle. Nafta owns a good asset base, but did not show rising earnings quality in 2025. So the coming year will be judged less on whether Equital owns good assets, and more on whether those assets can send more cash upward with less accounting noise and less dependence on refinancing and internal capital recycling.

In a shorter market frame, the three events most likely to shift the read are practical progress on Tamar's higher-capacity setup, any meaningful development in the Israel Electric dispute, and Airport City's ability to continue both buybacks and distribution flexibility without hurting its balance-sheet quality.

Risks

Tamar customer concentration is higher than is comfortable for a holding-company story

In 2025, 42% of Tamar's gas sales went to Israel Electric and 34% to BOE in Egypt. That is very high concentration. The Kesem agreement is good news, but it does not change the fact that two large customers still shape a major part of the asset's risk profile. The dispute with Israel Electric shows how quickly a commercial disagreement can become a central issue for the Equital thesis itself.

Real-estate value is sensitive to both cap rates and occupancy

The NIS 353 million fair-value increase came mainly from planning-rights and levy changes, lower cap rates in Israel, and higher rents through CPI linkage and new leases. That is real, but it is not immune to reversal. Cap rates in Europe actually moved higher, while offices ended the year at only 78% occupancy. If cap rates move the wrong way or occupancy fails to improve, part of the value created in 2025 may look less durable in hindsight. On top of that, every further 1% rise in CPI is expected to add another NIS 62 million of finance expense to the group.

Value can remain trapped below even without balance-sheet stress

This is the central holding-company risk. Equital can keep reporting equity, value, buybacks, and positive cash movement, and still remain stuck with a gap between value created across the group and value accessible to the parent's shareholders. No dividend policy at the parent, a negligible but still negative solo operating cash flow, a large minority layer, and distribution restrictions at Airport City and Isramco Negev 2 all point in the same direction. They do not break the thesis, but they can slow down its realization materially.

Short Sellers' Position

It is notable that while the Equital thesis remains complicated, the short community is not leaning aggressively against the stock itself. As of March 27, 2026, short interest stood at only 0.42% of float, with an SIR of 1.57 days. Even the latest local peak in January 2026 was only 0.52% of float. That is below the sector average of 1.12%, and the SIR is also below the sector average of 3.138.

The message is straightforward: the market may not be giving Equital full credit, but it is also not pressing a heavy bearish short case against it. The skepticism looks more like a discount and a wait-for-proof stance than an outright aggressive bet against the fundamentals.

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Conclusions

Equital exits 2025 with a stronger structure, but not with a simpler story. The parent balance sheet is very clean, Airport City created value through revaluation and buybacks, and Tamar is moving into a wider-capacity stage. The main bottleneck remains the same: value is being created below, but its path upward is still filtered through too many layers.

Current thesis: Equital is a holding company with good assets and real balance-sheet flexibility, but its 2026 story will be decided less by the size of the value base and more by the speed at which that value becomes accessible cash at the parent.

What changed versus the simpler read that was available before? In 2025 it became clearer that the structure itself is driving a large part of the outcome. The profit improvement did not come from a full engine year at both Nafta and Airport City together. It came from a combination of real-estate revaluation, buybacks, tax settlements, and accounting items. That is not negative in itself, but it does mean the thesis now depends much more on the quality of value conversion than on value creation alone.

Counter-thesis: the market may be right to keep Equital under a conservative value framework, because cash could continue to move to the parent more slowly than value is being created across the group, given the large minority layer, distribution restrictions, open Tamar capex, and Airport City's sensitivity to cap rates and occupancy.

What could change the market's reading over the short to medium term? Three things: proof that Tamar's higher capacity is actually translating into commercial conversion and cash, a constructive development in the Israel Electric dispute, and Airport City's ability to keep creating value without relying mainly on fair value and buybacks for its contribution.

Why does this matter? Because in a holding company, the central question is not just how good the underlying assets are. It is how quickly and under what conditions the value created below can actually be pulled up to common shareholders.

Over the next 2 to 4 quarters, the thesis strengthens if Tamar completes the practical move into higher capacity, if the large investment programs begin to produce commercial conversion rather than only capex, and if Airport City shows that the improvement in value is supported by occupancy, NOI, and distribution flexibility. It weakens if Israel Electric succeeds in pushing down price, if Tamar demands more capital than the market expects, or if Airport City keeps delivering strong accounting profit without a broad enough improvement in the operating layer beneath it.