Reik Aspen in the first quarter: profit arrived, but cash still depends on new collateralized funding
Reik Aspen moved to NIS 10.4 million net profit in the first quarter, but a large part came from cancelling the Ashdod transaction. The 2026 cash plan now depends on project-surplus releases, land-backed credit and new loans against future surpluses, so the liquidity test advanced but did not disappear.
Reik Aspen ended the first quarter of 2026 with NIS 10.4 million net profit and positive operating cash flow, but this report does not close the liquidity test opened in the previous annual analysis. Profit received an unusual boost from an NIS 11.3 million gain on cancelling the Ashdod transaction, while the recurring business is still measured mainly by project progress and the ability to release surpluses. The positive change is real: Hahula already brought in NIS 24.2 million, Shir Tower moved closer to delivery, and Sderot Hayeled received an additional funding layer. Still, the cash-flow forecast for the rest of 2026 shows that the company is not relying only on existing project surpluses. It also plans to use land-backed credit, loans against future surpluses and advances from combination transactions. The current read is therefore practical progress, not a full change in risk profile. The next proof points are actual surplus releases by June and October, closing Kiryat Ono by the new deadline, and opening the next project generation without pledging too much future value to new debt.
Profit Looks Good, But The Business Is Still Measured In Cash
Reik Aspen is a residential developer with two projects under construction and a pipeline of land and planned projects. Its economics do not resemble income-producing real estate with steady NOI. This is a leveraged development model: buy land, advance planning, finance inventory, sell apartments, and wait for the moment when project surplus is released from the bank-lending account. Accounting profit matters, but it is not the measure that settles the case. In this type of company, the key question is when profit becomes accessible cash, and how much of that cash has already been pledged to existing or future funding.
The setup is better than it was at the end of 2025, but still not clean. Shir Tower in Netivot has sold 160 of 167 apartments, Hahula in Ramat Gan is fully sold, and Sderot Hayeled in Ramat Gan had 31 signed contracts at quarter-end and 32 by May 17, 2026. On the other hand, Shir Tower still needs to complete buildings A and B in the second quarter and building C in the fourth quarter of 2026. Hahula is expected to finish only in the second quarter of 2027, and Sderot Hayeled is still before full execution even after receiving another funding layer.
Revenue in the first quarter rose to NIS 38.45 million, compared with NIS 17.75 million in the comparable quarter, mainly because construction progressed at Shir Tower and Hahula. Gross profit rose to NIS 5.79 million, but the gross margin was 15%, almost the same as 15.5% in the comparable quarter and below 18.3% for full-year 2025. In other words, the quarter did not show a step-change in margin quality. It mainly showed more revenue recognition from projects already under construction.
The number that inflated profit came from a different line: other income of NIS 11.29 million, almost all from an NIS 11.32 million gain on cancelling the Ashdod transaction. Without that line, operating profit would have been around NIS 4.4 million before finance expenses, not NIS 15.66 million. That is still an improvement over the comparable quarter, but it does not by itself change the company's central question: whether the projects release cash on time.
Finance expenses also show that progress is not free. They rose to NIS 2.61 million, compared with NIS 0.88 million in the comparable quarter. The main explanation is that financing costs for Sderot Hayeled stopped being capitalized after the building permit was received in November 2025, alongside costs related to Series B bonds. Once a project moves stage, some financing costs stop sitting inside inventory and flow through the income statement. That is not necessarily negative, but it sharpens the fact that opening the next project generation also raises the current financing load.
2026 Cash Flow Uses Surpluses And New Debt
Operating cash flow was positive at NIS 12.76 million, after negative NIS 79.74 million in 2025. That is progress, especially after a period in which most customer receipts were pushed toward construction completion. But unrestricted cash fell from NIS 27.74 million at the end of 2025 to NIS 10.06 million at the end of the quarter, while restricted deposits and cash rose to NIS 62.45 million. More cash is inside the system, but much of it is still not freely available.
The all-in cash flexibility here means cash after the period's real uses: finance and headquarters costs, project equity investments, bond repayments, loan repayments, land purchases and new borrowings. Under the forecast, the company starts the April to December 2026 period with NIS 10.06 million and targets ending it with NIS 38.28 million. That sounds more comfortable, but the route there relies heavily on external funding sources and surplus monetization.
The chart shows the important point: NIS 49.85 million of expected surplus release from Shir Tower and Hahula is only part of the story. Alongside it sit NIS 93.55 million of land-backed credit, NIS 60.05 million of non-bank loans against future surpluses, and NIS 17.5 million of expected advances from combination transactions. Against those sources stand NIS 101.26 million of land purchases, NIS 38.98 million of bond repayments, NIS 27.34 million of finance expenses and NIS 20.39 million of project equity investments. The company is not only releasing cash from the current project generation. It is also pulling credit forward against the next generation.
Projects Advanced, But Value Still Has To Be Released
Hahula is the best signal in the quarter. The company received NIS 24.2 million plus VAT in February 2026, the fifth payment under the sale agreement with a residential REIT. The project is fully sold, construction progress reached 44.36%, and remaining expected surplus is NIS 67.67 million. Of that, NIS 21.86 million is expected to be released on June 30, 2026, with another NIS 45.81 million in 2027.
Shir Tower is further along in execution but weaker on profitability. Completion reached 81.4%, and only 7 apartments remained unsold at quarter-end. At the same time, expected gross profit is only NIS 7.76 million, while expected surplus to be withdrawn totals NIS 56.72 million. That gap matters: a large part of the surplus is not new profit, but return of equity and measurement and financing effects. The company expects to withdraw NIS 28.58 million in October 2026 and the remaining NIS 28.14 million in March 2027.
Sderot Hayeled is no longer just land with a permit, but it is also not near-term cash. The project had 31 sold apartments at quarter-end and 32 by May 17, out of 111 apartments available for sale. The marketing rate is 28%, and expected gross profit is NIS 73.35 million. The funding progress is meaningful: the additional loan signed on March 30 can reach up to NIS 66 million or 63% of expected surpluses, at prime plus 3%, and is secured also by a first-ranking pledge over project surpluses. This improves execution ability, but it also ties future surpluses to debt service already today.
Kiryat Ono remains the most binary checkpoint. The company presented preliminary approvals from banks, but those approvals include conditions: clean rights, transfer documents, a construction-services agreement with the remaining owners, and standard collateral. After the balance-sheet date, the deadline for paying the remaining consideration was extended to June 15, 2026. The 2026 forecast already assumes NIS 49.63 million of credit against the land and NIS 58.07 million for the Kiryat Ono land purchase. Any further delay would therefore be more than a legal event. It would change the year's cash picture.
| Focus | What Advanced In The Quarter | What Still Needs Proof |
|---|---|---|
| Shir Tower | 160 apartments sold, 81.4% completion, NIS 56.72 million expected surplus | Delivery by stages and withdrawing NIS 28.58 million in October 2026 |
| Hahula | Fully sold, NIS 24.2 million February receipt, NIS 67.67 million remaining surplus | Releasing NIS 21.86 million in June 2026 and further releases in 2027 |
| Sderot Hayeled | 32 apartments sold by May 17 and another facility against surpluses | Starting execution without consuming too much future surplus through bridge funding |
| Kiryat Ono | Preliminary bank approvals and an extended closing deadline | Completing the transaction by June 15, 2026 under the required conditions |
What Will Decide The Next Quarters
Series A's collateral ratio remains 1.33, compared with a required minimum of 1.25. Expected surplus from the pledged projects is about NIS 123.8 million, against net debt of about NIS 92.8 million. The number passes the test, but it does not point to a wide cushion. After the previous Series A review, this quarter mainly confirms that the cushion still exists, not that it has become comfortable.
The conclusion for the first quarter is that the company moved from "we need to see whether sources exist" to "sources exist, but they are carefully layered." Net profit alone is too flattering for a quick read because it relies on the one-off Ashdod gain. The forecast cash flow is more encouraging than the static balance sheet, but it requires several things to work at the same time: surplus releases, new credit, land closings, combination transactions and bond repayments. If Shir Tower and Hahula release cash on time and Kiryat Ono closes by the new deadline, 2026 can become a real bridge year. If one of those steps slips, the market may return to focusing not on profit, but on how much more future value must be pledged to get through the year.
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