Issta 2025: Net Profit Jumped, but the Path to Shareholders Runs Through Hotels, Real Estate, and Financing

Understanding The Company

It is easy to read Issta as a travel company that bounced back after a difficult wartime year. That is only part of the picture. In 2025 consolidated revenue rose to ILS 586.8 million, up 40.6%, and net profit jumped to ILS 212.5 million, up 95.8%. But a large share of that jump did not come from the travel desk. It came from other layers: ILS 108.9 million of fair-value gains on investment property, ILS 50.7 million of profit from equity-accounted companies, and a hotel and project portfolio that does not flow through the revenue line in the way a casual reader might expect.

Issta today is less a classic travel agent and more a hybrid platform with two very different legs. The first is tourism, still an important operating engine with brands, branches, websites, wholesale activity, business travel, and content-led products. The second is a real-estate and hotel platform built through Issta Nechasim, joint ventures, hotels in Israel and abroad, logistics, residential development, and value-enhancement projects. At a market cap of roughly ILS 1.83 billion, the gap between what appears in the income statement and where value is actually created has become the core of the story.

What is working right now is fairly clear. Tourism is growing again, online sales keep increasing, hotels and real estate are driving a step-up in profitability, and Issta Nechasim strengthened its funding base through public debt and new bank loans. What is still missing for a cleaner thesis is the transition from valuation uplift, equity-accounted profits, and project-level value creation into cash that can move up the chain without loading on another round of bridge financing. That is Issta’s active bottleneck today.

What Matters Immediately

• This is no longer just a travel company. In 2025 tourism contributed about ILS 73 million of segment profit before tax, but on management’s 100% segment view, hotels abroad contributed ILS 155.3 million, hotels in Israel ILS 93.8 million, employment and other real estate ILS 79.4 million, and logistics ILS 48.9 million.
• The bottom line leaned more on real estate than on travel. Out of ILS 198.9 million of profit from regular operations, ILS 108.9 million came from fair-value gains on investment property and another ILS 27.4 million from other income, partly driven by the sale of a startup stake.
• Value is being created, but not all of it is accessible. At the parent level alone, year-end cash stood at ILS 71.4 million and loans to Issta Nechasim stood at ILS 761.5 million. At the same time, Sela Issta carried ILS 1.56 billion of bank credit and ILS 985.8 million of shareholder and related-party loans against only ILS 210.4 million of equity.
• 2026 is a transition year with a proof element. If cash release, monetizations, deliveries, and hotel ramp-up move according to plan, the read on Issta improves. If profits remain heavily dependent on revaluations, financing layers, and trapped value, the market will keep applying skepticism.

The workforce structure is another clue. Out of 674 group employees, 652 sit in tourism and only 18 in real estate. That means revenue, day-to-day activity, and headcount are still concentrated in travel, while a growing share of value and profitability comes from real estate and hotels. On a consolidated basis that works out to roughly ILS 871 thousand of revenue per employee, but even that ratio is misleading because a meaningful part of the asset base and operating economics sits in equity-accounted companies and joint vehicles rather than fully inside the consolidated top line.

Events And Triggers

Real-estate financing improved materially, but the story is not cleaned up

The most important corporate move of the year was the strengthening of the real-estate platform. In December 2025 Issta Nechasim completed its first public bond issuance, Series A, at ILS 215.5 million nominal value, and in the same month also received a ILS 50 million convertible loan and an additional ILS 150 million bank loan from the First International Bank. The proceeds are meant mainly for business development and for lowering financing costs, including repayment of shareholder loans.

That is a real improvement. It extends breathing room, gives the platform a more direct capital-markets channel, and reduces exclusive dependence on more expensive or less flexible funding. But the other side matters as much: the platform is still running with a wide project pipeline, construction finance, shareholder loans, and a large inventory of land and projects under development. Funding has improved, but the underlying complexity has not disappeared.

The Israir deal is a commercial edge, but also a capital lock-up

Back in December 2024 Issta signed with Israir for an allocation of roughly 10% of seats on each international flight marketed to the public over five years. In December 2025 a more consequential layer was added: about 15% of seats on Airbus 330 wide-body long-haul flights, together with an advance of about USD 35 million to be paid by February 10, 2026 and offset over 10 years. In parallel, the advance payment for ticket purchases under the existing agreement for 2026 was set at USD 51.5 million.

This is a two-sided move. On one side it gives Issta deeper access to inventory, more scale in wholesale, and better ability to build product and margin. On the other side it turns part of tourism growth into a far more capital-intensive story. Once a travel company commits to large prepaid seat inventory, profit quality is no longer only a demand question. It becomes a working-capital and inventory-management question as well.

Two post-balance-sheet events could change the 2026 reading

In mid-March 2026 the company reported that it became entitled to an additional ILS 23 million consideration from the sale of rights in the Pavlika Hotel, payable within 30 days, and which the company expects to record in full as pretax profit. A month earlier it reported that Sela Issta and Sela Issta Barel are expected to benefit from the adoption of the tax ruling in the subsidized-housing purchase-tax matter, a development that could result in a refund of about ILS 55 million, pretax profit recognition of about ILS 26 million on projects already recognized through profit and loss, and an additional ILS 29 million improvement in estimated profitability on projects not yet recognized. The company is also trying to include two additional projects in that arrangement, with a further combined impact of about ILS 15 million.

These are not side notes. They matter because they speak directly to the transition from theoretical value to measurable cash, profit, and delivery pace. But both still carry a forward-looking component, so they are real triggers, not substitutes for execution.

Capital allocation included both dividends and buybacks

The company paid about ILS 51.8 million in dividends during 2025 and also repurchased roughly ILS 49.8 million of its own shares. In December 2025 it approved another buyback plan of up to ILS 50 million, and after the balance sheet it bought another 241.8 thousand shares in January and February. That signals a management team that sees value in the stock, but here too the two-layer reading matters: if part of the value is still locked in project and hotel vehicles, buybacks alone do not solve the issue of cash accessibility up the chain.

Efficiency, Profitability, And Competition

The most striking 2025 number is the growth rate, but the quality of that growth is more nuanced. Revenue from tourism sales and services rose 61.1% to ILS 378.5 million, tourism commission income rose 17.6% to ILS 133.4 million, and rent and management income rose 8.6% to ILS 75.0 million. Total revenue reached ILS 586.8 million. The problem is that not all of that growth stayed in the bottom line.

Selling and marketing expenses rose 25.0% to ILS 111.4 million, and G&A rose 19.7% to ILS 91.4 million. That is not an accounting accident. Headcount increased from 640 to 674, mostly on the tourism side, and the company is still investing in technology, content engines, niche products, and distribution infrastructure. Part of the growth was effectively purchased through a broader platform build-out, not through clean operating leverage alone.

Tourism recovered, but it did not drive the full profit surge

Tourism remains an important operating engine. The company describes a large retail network, wholesale activity, four online brands, and an AI-based sales agent. Online sales in the retail activity reached 30% of retail sales in 2025, up from 16% in 2019. That is a real structural change and suggests that Issta’s tourism business is no longer branch-led in the old sense.

The revenue mix helps explain the model. Out of ILS 511.8 million tourism revenue, ILS 205.1 million came from packages and organized products, ILS 172.5 million from flights, ILS 133.4 million from commissions, and only ILS 0.9 million from other income. The business is still highly consumer-facing, with about 87% of tourism revenue coming from private casual customers and only 13% from business and government customers.

But anyone looking only at revenue growth will miss the more important point: reported tourism segment profit fell to about ILS 73 million before tax, from about ILS 79 million in 2024. The company says the June 2025 war affected tourism segment results by around ILS 8 million in the second quarter. That explains part of the slippage, but not all of it. The rest comes from direct competitive pressure from OTA platforms, airlines, and hotel chains that are shortening the intermediation chain. In that setting, tourism growth requires more work, more selling effort, and more exclusive content.

Most of the profit was built in hotels and real estate

The best way to understand Issta is through management’s segment view, but that view needs to be handled carefully. The segment figures include 100% of the activity of equity-accounted companies, so they say a lot about where value is being created, but they do not map one-to-one into listed-company economics.

That chart is the heart of the story. Tourism is still profitable, but the real acceleration came from hotels abroad, hotels in Israel, employment-related property, logistics, and revaluation gains. The reader therefore has to separate two very different types of profit: operating profit from the recurring business, and profit coming from asset maturation, financing, revaluation, or monetization. Both matter, but they are very different in repeatability and in shareholder accessibility.

In practice, profit from regular operations rose to ILS 198.9 million, but ILS 108.9 million of that came from fair-value gains on investment property. Another ILS 27.4 million came from other income, which management explains was driven largely by the sale of a startup holding for about ILS 23 million. Strip out those components and 2025 still looks strong, but not nearly as dramatic.

Long-term tourism improvement is real, just not immune

One of the more telling disclosures in the business description is that average tourism segment profit in 2022 to 2025 was about ILS 68 million, versus about ILS 33 million in 2017 to 2019. That is evidence of a real model shift through digital distribution, niche content, wholesale scale, and better value capture. This is not just a post-Covid rebound.

But that improvement should not be over-annualized. If tourism is moving from a pure commission model toward one that combines inventory, content, and seat allocations, it may indeed earn more, but it also takes on more balance-sheet risk. The Israir agreement is the cleanest example: commercial advantage on one side, tied-up capital and deeper inventory commitments on the other.

Cash Flow, Debt, And Capital Structure

To read 2025 correctly, the cash framework matters. Here the relevant frame is all-in cash flexibility, meaning how much cash remained after actual cash uses, not how much accounting profit was produced. On that basis, the year looks less clean than the bottom line suggests.

The company ended 2025 with ILS 180.6 million of cash and cash equivalents versus ILS 37.1 million at the start of the year. Superficially that looks like a major step-up in flexibility. But along the way operating activity consumed ILS 33.5 million, investing consumed another ILS 93.7 million, and only financing added ILS 268.7 million. In plain terms, cash increased because financing more than offset operating and investing outflows, not because the business produced a strong cash surplus on its own.

The cash burn is structural, not accidental

The operating burn did not come from weak accounting profit. It came from the gap between profit and cash. The company itself points to ILS 245.9 million of adjustments and working-capital movements between profit and operating cash flow, mainly revaluations, equity-accounted profits, and working-capital swings. That is exactly why Issta cannot be read through reported profit alone.

On the investing side, one of the main items was loans extended to equity-accounted companies of about ILS 191 million, alongside about ILS 141 million invested in investment property. In other words, even when value is being built, it is being built through loans, partnerships, and assets that mature over time.

The working-capital deficit is real, but so is the explanation

At year-end the company had a working-capital deficit of ILS 533.2 million, essentially unchanged from 2024. Normally that would immediately raise a red flag. Here it needs to be read together with management’s explanation and with the balance sheet. The company says most of the deficit stems from short-term funding of real estate under construction, mainly logistics and development land, and notes that short-term credit financing real estate under construction totaled about ILS 525 million, which is almost the entire deficit.

Does that eliminate the risk? No. But it does change the interpretation. This is less a story of near-term payment stress and more a story of ongoing dependence on facility renewals, delivery pace, banking support, and project monetization. Management says cash and undrawn bank facilities together amount to about ILS 550 million. That gives room, but not a luxurious cushion.

At the listed-company level covenant headroom is wide, but asset-level leverage remains heavy

At the Issta bond level the picture is relatively comfortable. Equity-to-assets stood at about 41% at the end of 2025 versus a covenant floor of 22%, and equity stood at about ILS 1.795 billion versus a minimum of ILS 760 million. This is not a company sitting on the edge of a covenant breach.

But anyone trying to understand where leverage truly lives has to look deeper, into Sela Issta. That platform ended 2025 with ILS 1.56 billion of bank credit, ILS 985.8 million of related-party and shareholder loans, and only ILS 210.4 million of equity. At the same time, buildings under construction inventory jumped from ILS 41.0 million to ILS 229.2 million. That single data point explains better than any narrative why Issta still depends on continued execution, deliveries, and financing rollover.

The more subtle point is that the shareholder-loan structure gives Issta Nechasim an economic priority above its formal ownership percentage. Under the shareholder agreements, Issta Nechasim funds 90% of the equity required in parts of Sela Issta’s project set while Sela Binyui funds only 10%, so Issta Nechasim’s share in surplus cash and financing income can exceed its formal 50% stake. That is positive for shareholders if projects are delivered on time and at the expected returns. It becomes less attractive if projects are delayed, because the same excess-funding layer stays trapped deeper in the structure.

Rate sensitivity has not disappeared

At Sela Issta alone, variable-rate financial liabilities stood at ILS 2.544 billion at year-end 2025, and management estimates that a 1% rise in rates would reduce annual profit by about ILS 18.7 million before the capitalization effect. That is not existential, but it does mean falling rates can help materially, and delayed rate relief will hit the project platform more than the tourism business.

Outlook

2026 looks like a transition year with several clear proof points, not like a clean straight-line breakout.

• The first test is tourism without revaluation help. The segment needs to show that it can hold profitability around 2025 levels even without unusual deferred demand and without another period of war-driven disruption.
• The second test is turning real-estate value into accessible cash. Revaluation gains, NOI, and AFFO are a start, not the end. The market will want to see monetizations, deliveries, upstream dividends, and less dependence on bridge financing.
• The third test is execution pace in residential and logistics. Ashdod, Ramat Gan, Havatzelet Hasharon, and the broader pipeline need to move from plan to cash generation.
• The fourth test is capital discipline in tourism. The Israir seat agreement can be a strong growth engine, but only if the prepayments and inventory commitment do not erode the real economics.

The quarterly pattern tells the story well. In Q3 net profit reached ILS 129.2 million, then dropped to ILS 48.4 million in Q4. That is not a collapse, but it is a healthy reminder that Issta should not be annualized off one exceptional quarter. A meaningful part of 2025 was built in quarters where real estate, fair-value gains, and equity-accounted profits were unusually supportive. The next few quarters will test whether profitability remains strong even without that same level of support every period.

What could strengthen the positive reading

If the additional Pavlika consideration is fully received, and if the purchase-tax ruling is translated into actual refunds and recognized profit at the pace the company describes, then 2026 starts with two events that move cash or profit into the practical column rather than the conceptual one. In parallel, continued sales of Open’s neighborhood centers, after 3 out of 8 had already been sold by the report date, could provide another visible sign of capital release.

There are also meaningful hotel catalysts. Ayelet Hashahar moved into a lease with Isrotel, with minimum rent of ILS 10 million in the first two years and ILS 11 million from year three, linked to CPI. The Thessaloniki hotel opened in September 2025 with annual minimum rent of about EUR 1.085 million, and the Nicosia hotel is under development with minimum rent of about EUR 2.4 million in the first two operating years and EUR 2.8 million thereafter. Those are the kinds of facts that can make the hotel layer more legible and less theoretical.

What could weigh on the story

There is no shortage of friction points. In New York the company had to terminate the hotel lease with Sonder immediately in November 2025 after a breach and the tenant’s liquidation process in the US, and only in January 2026 did it sign with a replacement tenant. That is a reminder that hotel assets in strategic destinations do not live in a frictionless environment.

Tourism is also still a hard market. The competitive field is global, direct booking pressure is intensifying, and foreign airlines have already shown over the last two years that they can alter effective supply overnight. Issta does have scale, content, and distribution advantages, but that does not make the segment immune.

So what kind of year is next

The coming year looks more like a transition year with a proof component than a clean breakout year. Issta already has the scale, brand, asset base, and strategic engines. What it now needs is less headline-making and more delivery: handovers, monetizations, rent collection, cleaner operating profit, and less dependence on bridge financing.

Risks

Risk One, tourism still operates in a competitive and fragile market

Issta’s tourism business is stronger than it used to be, but it is not less exposed. The company itself highlights direct competition from international OTAs such as Booking, Expedia, and Airbnb, and from the direct-booking push by airlines and hotel chains. In addition, 2025 was a reminder that even after Covid, geopolitical events can erase part of a quarter in days.

Risk Two, a large part of the thesis sits above the common-shareholder layer

Hotels, logistics, residential projects, and joint ventures are creating value. But not all of that value is immediately available to the parent company. The separate parent statements show ILS 71.4 million of cash against ILS 761.5 million of loans to Issta Nechasim. That is not necessarily a problem, but it does show that the listed-company investor depends on the middle layers being able to move value upward, not merely on those layers generating accounting profit.

Risk Three, legal and consumer exposure

The auditor’s emphasis paragraph did not appear by accident. Several subsidiary and sub-subsidiary companies face class-action proceedings, including a ILS 103 million Poland school-trip case, a ILS 41 million case over service fees charged after airline cancellations, a ILS 7.5 million case against Starnext, and several additional consumer cases. In some matters the legal advisers still cannot assess the odds. This is not a thesis-breaker by itself, but it is material enough to deserve attention.

Risk Four, rates and funding structure

Rate relief would help, but the company is not really dependent on the base rate alone. It is also dependent on capital-market openness, permit timing, bank support, and the speed with which projects move from trapped capital to distributable surplus. That is especially true at Sela Issta, where the structure remains heavily levered despite the operational progress.

What The Market Is Watching Now

Short interest does not point to an aggressive collapse bet, but neither does it suggest indifference. Short float stood at 1.27% at the end of March 2026, above a sector average of 0.89%, though below the 1.86% peak seen in early January. At the same time SIR stood at 8.86 versus a sector average of 3.48. The practical translation is that the market is not pricing an imminent breakdown, but liquidity is not deep enough to make the bearish position irrelevant.

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Conclusions

Issta ends 2025 as a stronger company, a more diversified one, and a more complex one. Tourism is growing again and still profitable, but most of the step-up in the bottom line came from the hotel and real-estate layers. That makes the story more interesting, and less clean. Anyone who wants to benefit from the upside has to believe not only in tourism, but also in the group’s ability to convert revaluations, project value, and shareholder-loan economics into accessible cash.

Current thesis: Issta is no longer just a tourism recovery story. It is an asset-and-content platform whose upside depends on turning project and hotel value into real cash.

What changed: A few years ago investors had to believe that Issta could build value engines outside the travel agency. Today those engines already exist. The new question is not whether they were created, but how much of them can actually be pulled up to the listed-company layer.

Counter-thesis: Too much of 2025 profit still leaned on real-estate revaluations, equity-accounted earnings, and leveraged financing structures, so the year may prove too strong to represent ordinary earning power.

What could change the market reading in the short to medium term: receipt of the Pavlika payment, implementation of the purchase-tax ruling, continued sales of Open’s neighborhood centers, and execution pace in the main Sela Issta projects.

Why this matters: because Issta is building a relatively unusual mix in the local market, a consumer travel brand with a deep hotel and real-estate asset layer, and a small gap between value created and value accessible can materially change how the market prices the company.

Over the next 2 to 4 quarters, Issta needs to prove four things: keep tourism profitability stable even without unusual tailwinds, turn post-balance-sheet items such as Pavlika and the purchase-tax ruling into real cash and profit, move the residential and logistics pipeline at a pace that justifies the financing stack, and show that the hotel layer becomes a recurring earnings and cash contributor rather than just a source of accounting value. If that happens, the read on Issta improves meaningfully. If not, the market is likely to keep discounting the complexity.