Minrav in the first quarter: the IPO strengthened the balance sheet, but cash still lags the backlog

Minrav entered the first quarter of 2026 with a better problem than it had at the end of 2025: the balance sheet is much stronger, but the company still needs to prove that the improvement is coming from the business and not only from the capital market. The March IPO brought hundreds of millions of shekels into the company, moved it farther away from covenant pressure, and made the Clal urban-renewal framework look financeable rather than only presentable. Still, this is not yet a profitability breakout. Revenue rose, gross profit improved, but operating profit was almost cut in half because of tender and business-development expenses, and operating cash flow remained negative. Contracting looks steadier, and the U.S. inventory is starting to release cash, but receivables, income to be received and new projects still absorb cash. That makes 2026 a proof year for the company: less about immediate balance-sheet survival, and more about whether the backlog, new funding and urban-renewal pipeline can start working for ordinary shareholders.

Minrav is an infrastructure, construction, systems, concessions, income-producing real estate and urban-renewal group. Its central engine is not only backlog. It is the ability to turn project execution into cash-collected profit, and then use the balance sheet to open the development layer. The question left open in the previous annual analysis was whether the repaired 2025 contracting business could fund the development layer without bringing the discussion back to covenants and disposals. After the IPO and the Clal agreement, the immediate funding bottleneck is less acute. The test now moves to execution quality, collection, and how much project-level profit remains accessible to shareholders.

The IPO Bought Room, Not Cash Conversion

On March 24, 2026, 18,136,100 shares were allocated to institutional investors at NIS 19.85 per share. Gross proceeds were about NIS 360 million, and cash flow showed NIS 348.8 million of proceeds from share issuance after costs. The economic price was real dilution: the new shares represented 23.45% of issued and paid-up share capital, and 22.16% on a fully diluted basis.

The money changed the balance sheet immediately. Equity attributable to shareholders rose to NIS 888.9 million from NIS 540.3 million at the end of 2025, the equity-to-assets ratio reached 33.2%, and the Series E loan-to-collateral ratio stood at 40.5% against a 75% ceiling. This is no longer a company close to the covenant floor: the minimum requirements are NIS 450 million of equity and a 20% equity-to-assets ratio. The IPO therefore moved Minrav away from a place where a working-capital swing could quickly become a financing event.

But this is still not cash-flow proof. The all-in cash picture for the quarter is clear: operating activity consumed NIS 56.7 million, investing activity consumed another NIS 1.6 million, and financing activity injected NIS 292.2 million net. The final line is an increase of NIS 233.9 million in cash, but without the IPO this would have been another period in which operations and investments consumed cash.

The weakness is not caused by an accounting loss. Profit for the period was NIS 2.2 million, and accounting, financing and tax adjustments added NIS 23.0 million before working-capital movements. Cash was mainly absorbed by a negative NIS 86.7 million movement in customers and other receivables and by a NIS 21.2 million decline in suppliers and other payables, partly offset by a NIS 30.4 million positive movement in inventory of buildings for sale. This is Minrav's working-capital truth test: the backlog may look strong, but if revenue recognition and collection do not improve, the IPO is breathing room rather than proof of quality.

The guarantee note sharpens the point. In January 2026, a customer demanded that a bank guarantee of about NIS 22 million be called due to an alleged delivery delay. The project was delivered in 2024, the guarantee was returned in March 2026, and the parties are working to settle the final-account dispute. The company included income to be received that it believes is highly likely to be collected. That may end well, but it shows that profit in this industry passes through final accounts, disputes and collection.

Contracting Is Stable, but Tender Costs Hit Operating Profit

Revenue rose 9.6% to NIS 521.3 million, and gross profit rose 14.3% to NIS 50.8 million. The problem is that operating profit fell to NIS 10.4 million from NIS 19.6 million in the comparable quarter. The gross-profit improvement did not reach the operating line because selling, marketing, general and administrative expenses rose together to NIS 43.6 million from NIS 32.4 million, mainly due to concession tender participation. This is the cost of moving from an execution contractor to a broader real estate and infrastructure group. If the tenders mature into wins, this quarter will look like entry cost. If not, growth spending will eat into contracting profit.

Contracting is the stronger side of the quarter. Consolidated backlog was about NIS 6.0 billion at the end of March, with contracting backlog at NIS 4.172 billion compared with NIS 3.994 billion a year earlier. Beit Dagan was added as a project with expected consideration of about NIS 392 million, a work commencement order from March 5, 2026 and a 56-month execution period. Still, contracting gross profit was about 8.0% of revenue, compared with about 7.7% in the comparable quarter. That is improvement, not a regime change.

The U.S. can help liquidity, not core profitability. Revenue there rose because 4 units were delivered compared with one unit in the comparable quarter, but segment profit was almost zero. In 368 Third, marketing reached 92%, with about $12.0 million of unrecognized gross profit left. In East 90th, marketing remained at 76%, and the project still carries an expected total gross loss of about $10.6 million, already recognized in prior periods. U.S. realizations can therefore reduce debt and release collateral, but they do not currently change the group's earnings quality.

Clal Solves Part of the Funding, Not Value Access

The Clal framework is no longer only a negotiation. On May 13, 2026, Minrav signed an investment agreement with Clal for up to NIS 250 million in urban-renewal residential projects. In the first stage, up to NIS 130 million is expected to go into five specific projects that include about 800 sale units. The economic structure is more important than the amount: the partnership will be held 70% by Minrav and 30% by Clal, but project equity funding will be 40% from Minrav and 60% from Clal. About 70% of Clal's capital will be provided as preferred equity carrying a 7% nominal preferred return, with the rest provided as ordinary equity.

That solves part of the bottleneck, but not for free. In the urban-renewal portfolio where the required owner majority has been achieved, the presentation shows 2,418 sale units, expected revenue of NIS 5.695 billion, expected investment cost of NIS 4.863 billion and expected profit of NIS 832 million on a project-level presentation. Those numbers draw attention, but they sit above layers of time, permits, project finance, partners and preferred capital. The ordinary shareholder does not sit directly under the project-profit headline.

The most mature project is the Tuchman compound in Rehovot: 199 sale units, 100% signatures, committee decision and expected construction start in 2026. The next projects mostly start in 2027 and 2028, while a large part of the pipeline is much farther out, in 2030 and 2031. The Clal agreement therefore changes the probability of opening the pipeline, but it does not turn the entire development backlog into near-term profit.

The May 18 filing adds context, but it does not change the thesis by itself. Minrav is negotiating with Anshei Ha'ir from the Rotshtein group to buy 49% of Anshei Ha'ir's rights in the La Guardia 35-45 Tel Aviv urban-renewal project, which is planned to include 119 units for existing right holders and about 300 sale units for the developer. In parallel, the parties are negotiating the transfer of 49% of Minrav's rights in an urban-renewal project in central Israel for no consideration. The company stresses that the consideration is not material and that there is no certainty the negotiations will mature. This is not a large financial trigger, but it shows how the company is trying to build the pipeline through partnerships and exposure swaps, not only by carrying full project equity each time.

The Next Proof Points

The first test is operating cash flow. If customers, receivables and income to be received continue to rise faster than the activity, the market will read the backlog cautiously even if revenue keeps growing. A quarter in which operating profit remains positive and operating cash flow approaches breakeven or turns positive would give the IPO a different meaning: not only a balance-sheet strengthening, but room to grow without returning too quickly to the capital market.

The second test is the quality of the new wins. Beit Dagan and the other large projects need to move from backlog to revenue without another decline in gross margin. For now, contracting proves stability, but it does not show a margin step-up. High tender costs without additional wins or clearer future contribution would keep operating profit under pressure even with a large backlog.

The third test is opening the urban-renewal pipeline without further dilution of value. The Clal agreement provides a partial solution for project equity, but each project must meet its own preconditions, including project finance. Minrav needs to show which projects enter the first framework, which have permits or a near-term start path, and how much project-level return remains after the preferred equity layer.

The first quarter improved the odds behind Minrav's story, but it did not close the case. The IPO increased equity, improved liquidity, moved the company farther from covenants and made the Clal agreement part of a more plausible execution structure. The strongest counter-thesis is that the cautious read misses the improvement: a backlog of about NIS 6 billion, a stronger balance sheet, Clal as an institutional partner and a contracting segment that continues to earn profit could be enough to make 2026 an acceleration year. That is possible, but the evidence is not there yet. Until there is a quarter with recurring operating profit, better collection and a first urban-renewal project moving into execution with financing in place, the IPO bought the company time and flexibility, but the economic quality of that time still needs to appear in cash flow.