Mifaat as an operating engine and an external pricing test

The main Lahav article framed 2026 as a test between value built inside the holdings and cash that can actually move up to the parent. This continuation isolates Mifaat, because this is where the sharpest link now appears between two very different things: an operating business that has already proved itself, and a memorandum that tries to turn that proof into an external price.

The issue here is no longer whether Mifaat looks good on paper. That part is already answered. The real question is whether the 2025 operating jump, together with the Mizrahi Tefahot Invest memorandum, already changes Lahav’s own flexibility, or merely improves the way investors can look at the asset’s value.

The short answer is sharp. The operating test has been passed. The cash test has not. Mifaat finished 2025 with about ILS 494.5 million of revenue, about ILS 74.1 million of EBITDA, and about ILS 37.1 million of net profit, while the memorandum set a pre-money valuation of ILS 560 million. That is no longer a holding-company story built on “maybe.” It is an operating asset that an outside investor is prepared to price. But the proposed cash goes into Mifaat, not into Lahav. For Lahav, at least at this stage, this is first of all an external pricing event and a subsidiary-level capital strengthening step, not a parent-level liquidity event.

The operating engine is already there

Mifaat is no longer a hidden holding that lives only inside valuation language. In Lahav’s directors’ report, and on Lahav’s proportional view, the waste-collection segment contributed about ILS 321.4 million of revenue and about ILS 49.6 million of gross profit in 2025. That matters, because it means Mifaat already shows up inside Lahav as a real operating engine, not just as an asset that may one day surface value.

At Mifaat itself, 2025 looks like a step-up year rather than a one-off. Revenue rose from ILS 389.0 million to ILS 494.5 million, EBITDA rose from ILS 42.7 million to ILS 74.1 million, and net profit rose from ILS 14.6 million to ILS 37.1 million. That is a sharp improvement in both scale and quality.

The more interesting point is that those numbers rest on a real platform, not on a single contract. By the end of the period Mifaat was active in about 40 local authorities, two of them added during 2025, and in January 2025 it also completed the acquisition of waste-collection activity in 10 additional local and regional authorities. Inside 2025 the run-rate also stabilized. On Lahav’s consolidated line, waste-collection and treatment revenue came in at ILS 114.6 million in the first quarter, ILS 124.3 million in the second, ILS 127.6 million in the third, and ILS 128.0 million in the fourth. This is already scale, not a random spike.

Quality is also supported by a two-legged revenue mix. In 2025 Mifaat generated about ILS 297.7 million from waste collection and about ILS 191.0 million from operating the Sharon transfer station. In other words, Mifaat is not just a contractor that wins collection tenders. It also has infrastructure and treatment exposure.

That said, this is still not a fully insulated business. Competition in collection remains high because the work rests on tenders and contracts typically lasting around 3 to 7 years. In addition, apart from Herzliya and Kfar Saba, Mifaat did not have customers that each exceeded 10% of revenue in 2023 through 2025. That implies reasonable diversification, but still two material municipalities. Nor is there a hard quantitative backlog here. Mifaat explicitly says revenue depends on actual waste volumes, so there is no fixed, known order backlog. This is a better-quality business than a superficial read suggests, but it is still a live operating business with tenders, volumes, and pricing pressure.

Even after 2025, the platform is not full

The annual presentation gives the key clue. On the same slide that shows the financial numbers, Lahav also presents the Sharon transfer station with capacity of about 3,000 tons of waste per day after the upgrade, against current utilization of about 1,500 tons per day. In simple arithmetic, the station is still running at roughly half of post-upgrade capacity.

That is a key data point, because it explains why an outside investor can look at Mifaat and see more than the 2025 profit line alone. If the company already reached ILS 74.1 million of EBITDA in 2025 while the transfer station is still not full, then from a financial investor’s perspective there is both a proven base and visible room for more.

This is also where Mifaat differs from several other Lahav holdings. With Mifaat, investors do not need to rely mainly on future optionality. The core is already there, visible in revenue, in EBITDA, and in infrastructure that still has room to fill.

The Invest memorandum is an external pricing test, not parent-level cash

On January 26, 2026, Mifaat, Lahav Tashatiyot, and Mizrahi Tefahot Invest entered into a non-binding memorandum. The immediate report published on February 5, 2026 set out three important anchors.

The immediate report adds another important point: the company presents the move as part of a strategy to bring a strong financial partner into Mifaat, while also preparing it for a possible future IPO. That language matters. It says Lahav is trying to turn Mifaat from a good operating subsidiary inside the group into a platform that can stand up to outside financial scrutiny, and later perhaps the capital market as well.

That is why, as a pricing test, this memorandum is meaningful. It does not rest on management’s own valuation language or on a multiple the group chose for itself. It rests on an external investor prepared to go through due diligence and place a price framework on the business.

But for the same reason, it is still not an immediate solution for Lahav. First, it remains a non-binding memorandum with a 75 business-day exclusivity period, subject to due diligence, detailed agreements, and approvals. Second, the cash is meant for Mifaat itself in exchange for newly issued shares. It does not go into Lahav.

There is also an important numerical point here. In simple arithmetic, a pre-money valuation of ILS 560 million implies a value of about ILS 364 million for Lahav’s 65% stake before dilution. If the first round closes, Lahav’s holding would be diluted to about 55.25%, but at the same transaction price the economic value of that stake remains roughly similar. In other words, the move first of all gives an external value anchor to the asset. It still does not create an exit for Lahav.

This strengthens Lahav, but it does not yet release it

To see why, the analysis has to move back up to the parent level. In the annual report Lahav states explicitly that its cash flow is used for debt service, interest, and company expenses, and that a decline in dividends or management fees from subsidiaries could hurt its cash flow. That is the key sentence. It means the question at Lahav is not only whether a subsidiary is good, but whether the value can actually move up the chain.

That leads to the practical conclusion. If the Invest memorandum closes, it will first strengthen Mifaat. It can improve Mifaat’s capital structure, support its business plans, and deepen a possible IPO path. All of that is clearly positive for Lahav, because it turns Mifaat from a good operating subsidiary into an asset with both an external price anchor and a clearer financing route.

But it is still one step short of real parent-level flexibility. For this to change Lahav itself, something has to happen beyond the price: a binding close and then either upstream distribution, a partial realization, an IPO, or at least a situation in which Lahav can use the external price anchor and stronger Mifaat balance sheet to improve its own monetization options. Until then, the most precise way to frame it is this: an improvement in the quality of Lahav’s value, not an immediate release of cash to Lahav.

This is also where the counter-thesis belongs. One can argue that the memorandum gives a generous external price to a single strong year, while the collection business still depends on tenders, volumes, high competition, and two large municipalities. That is a smart objection, and it is exactly why the move from memorandum to closed transaction matters more than the headline itself.

Conclusion

Mifaat has already earned the label of an operating engine inside Lahav. 2025 showed a business with scale, sharply better profitability, and infrastructure that has not yet been fully utilized. The Mizrahi Invest memorandum adds a new layer, a real external pricing test.

But from Lahav’s perspective, that price is still not the same thing as accessible cash. It strengthens the case that the value inside Mifaat is real, and it may open an IPO or future monetization path. On its own, it does not yet solve the parent’s flexibility question.

Put differently, Mifaat is already changing how investors should price the quality of the group, but not yet how they should price parent-level liquidity. For that to happen, external pricing first has to become a closed deal, and then a value event that actually moves up the chain.