Amram: How much of the profit comes from revaluation, and how much from operating economics

What this follow-up is actually testing

The main 2025 article already showed a company that is still growing, but also becoming heavier from a balance-sheet and funding perspective. This continuation isolates one narrower question: how much of 2025 profit really came from deliveries, gross profit and rental economics, and how much came from updating asset values.

This is not a full cash-flow rebuild. It is an earnings-quality test. The filter is simple: what portion of profit comes from operating economics that can plausibly turn into cash, and what portion comes from value marks that are being estimated today.

Four points frame the issue:

• The revaluation line did not build the year on its own, but it did build a large part of the improvement. Pretax profit rose to NIS 216.6 million from NIS 158.1 million. Within that, fair-value gains on investment property reached NIS 46.6 million versus just NIS 3.1 million in 2024. In other words, about 74.4% of the year-over-year increase in pretax profit came from the expansion of the revaluation line.
• Without revaluation, profit still rises, but far less dramatically. Excluding fair-value gains, pretax profit would have been NIS 170.0 million in 2025 versus NIS 155.0 million in 2024, a 9.7% increase instead of the reported 37.0%.
• The investment-property and storage segment is tiny in revenue but large in result. In 2025 that segment generated only NIS 15.8 million of revenue, around 1% of group revenue, but contributed NIS 95.1 million to segment results, about 25.3% of the total.
• The balance sheet is the reason this distinction matters. Financial liabilities stood at NIS 4.30 billion against financial assets of NIS 331.8 million, while net finance cost reached NIS 111.9 million. Revaluation can improve profit, but it does not pay interest.

That is the core of the read. Dismissing revaluation as pure cosmetics misses the fact that Amram still earned more even without it. Accepting the whole profit increase as operating improvement misses the opposite point: most of the jump from 2024 to 2025 came through an unrealized valuation line.

The operating engine still sits in development

The good news on earnings quality is that the base business is not leaning on rent or revaluation to generate scale. Revenue reached NIS 1.582 billion, cost of sales NIS 1.253 billion, and gross profit NIS 329.4 million.

That means the core earnings engine still comes from development activity and deliveries. Even after G&A, selling expenses, and the share of profit from associates, Amram entered 2025 with a real operating base. That matters, because it means the company is not generating profit only through accounting overlays.

But this is exactly where the distinction matters. Gross profit of NIS 329.4 million is tied to activity that was built, delivered, and recognized. The NIS 46.6 million revaluation gain is something else. It did not come from a sale, from rent already collected, or from cash that entered the business. It came from marking investment-property values higher.

In other words, in 2025 Amram produced genuine operating profit, but it also layered on an additional, accounting-driven profit source that made reported earnings look stronger than the business’s day-to-day operating economics alone.

This chart puts the order of operations in the right sequence: first there is a business that generates gross profit, then there is revaluation, and on the other side there is still a heavy finance burden. Revaluation gains covered only about 41.6% of net finance expense. So anyone trying to read Amram’s profit correctly has to hold two ideas at once: the core business works, but the revaluation line is still too important to ignore.

The investment segment is very small in revenue and very large in profit

The segment breakdown is probably the sharpest place to see the gap between operating economics and accounting profit.

Residential construction in Israel generated NIS 1.655 billion of revenue in 2025 and NIS 345.3 million of segment result. That is the large and familiar engine of the group. By contrast, the investment-property and storage segment generated only NIS 15.8 million of revenue, but NIS 95.1 million of segment result.

That gap is too large to overlook. A segment that is almost immaterial in revenue relative to the group should not be contributing one quarter of total segment results unless a meaningful share of its economics is running through remeasurement rather than through recurring operating income.

That does not make the segment unreal. On the contrary, Amram has a meaningful asset base here, actual lease income, and investment property of NIS 2.566 billion. But it does mean that the profit coming from this part of the group is economically different from the profit created by selling apartments. In the development business, earnings are tested through execution, deliveries, and gross margin. In the investment segment, a meaningful part of the result runs through valuation.

So the right reading of 2025 is not that Amram’s profit is all paper. But it is also not that all of the profit is equally operating in nature. The profit contribution of the investment segment is inflated relative to its cash-like revenue base, and that is precisely where caution is warranted.

Revaluation is not detached from reality, but it does rest on assumptions

Criticism of fair-value gains is often too blunt. In Amram’s case there is a real economic basis for investment-property values. The investment-property portfolio rose to NIS 2.566 billion from NIS 2.137 billion, an increase of NIS 429.0 million. The balance-sheet increase is far larger than the NIS 46.6 million revaluation line in profit, which means the asset base did not grow only because the same portfolio was marked upward.

The assumptions themselves are not disconnected either. Annual rental income used for the valuation of part of the portfolio stood at NIS 85.5 million, based on a weighted capitalization rate of 5.02%. In other words, there is an anchor in real rent and market yields, not only in optimistic paper valuations.

Still, it is an appraisal. In one of the key assets, the company explicitly notes that a 0.5 percentage-point increase in the capitalization rate could reduce value by about 15%. In other parts of the portfolio, the assumptions also rely on realization pace, apartment prices, and execution costs over multiple years. So the profit is not detached from reality, but it is definitely sensitive to assumptions.

That is the balance that matters. Anyone dismissing revaluation entirely misses the fact that Amram does own real income-producing assets and rights. Anyone accepting it as the same quality of earnings as a delivered apartment misses how quickly it can move if rates, yields, or project timelines shift.

Why this matters even more once financing enters the picture

The quality of this profit matters especially because of Amram’s funding structure.

At the end of 2025, financial assets stood at NIS 331.8 million while financial liabilities reached NIS 4.30 billion. Even if not every liability carries the same economic character as classic debt, the message is clear: the company operates with a very heavy liability surface relative to liquid financial assets.

That links directly back to the income statement. Finance expenses in 2025 were NIS 140.1 million, finance income NIS 28.2 million, and net finance cost NIS 111.9 million. In other words, Amram’s real-world burden still runs through interest, repayments, and refinancing, not through fair value.

That is also why the more conservative read of the revaluation line matters. When profit comes from deliveries, rent, or efficiency, it supports a stronger thesis about earning power. When a large part of the improvement comes from revaluation, the right question is whether it improves only the reported income statement, or also the company’s ability to carry its funding burden. In 2025, the answer is only partial.

Bottom line

In 2025, Amram did not produce fictional profit. Its development activity still generated meaningful gross profit, and the increase in investment property rests on a real asset base that expanded in practice. But it would be a mistake to read the entire earnings improvement as if it came from the operating economics of the business.

The decisive number here is not only the NIS 46.6 million of revaluation gains, but the fact that without them pretax profit would have been only NIS 170.0 million rather than NIS 216.6 million. That is still an improvement, but a much more modest one. At the same time, the investment-property and storage segment contributed a result far larger than its revenue weight, and the balance sheet still has to carry NIS 4.30 billion of financial liabilities.

So the right conclusion on 2025 is precise: Amram is not living only on revaluation, but revaluation did become a meaningful part of how profit looked this year. As long as that gap exists, the market will need to ask not only how much profit was booked, but what share of it is really built on activity that already knows how to turn into cash.