Brimag Digital Age: Undervalued Tech Retailer

Brimag Digital Age (BRMG:TLV) is a consumer electronic distributor and retailer based in Israel. The company primarily imports and sells to electronic retailers, and it has 12 stores of its own. It also sells its products through its own website.

The company has controlling interest in two subsidiaries. One is a retailer in Israel called Insfar and the other is a retailer in Georgia called Elit. The company respectively owns 50% and 38%, and has management control of the two subsidiaries.

I have indicated before that I think Israel is a great country for investment. It is dynamic, has good rule of law, and has great demographics. This all bodes well for consumerism. Also, Israel is attractive to me because its development has only grown very quickly in the last few decades, and it has room for more growth.

Data going back 5 years shows the revenue growth at the holding company has been tepid — at around 2 to 3%. However, earnings growth is much better. The following chart shows the earnings of the holding company and the subsidiaries as well as the gross margins of the holding company. It appears the company has enjoyed increased pricing power since the pandemic. Its gross margin is at 31%. For comparison, Best Buy currently is at 22%.

	Brimag
Price (Feb 6)	₪ 38.25
Shares (M)	10.1
Marketcap (M)	₪ 386.32 ($ 121.11)
ROE (%)	26.5
PE	6.4
EV/EBIT	5.3
Div Yield (%)	10.33
Central bank 10 yr rate (%)	1.75

I picked Brimag for the attractive earnings and dividend. Like a lot of small cap Israeli companies Brimag tends to pay a large percentage of earnings in dividends. In the last twelve months the company earned ₪6 and paid out ₪4 per share!

Stocks in a country pays high dividends typically because the national inflation and interest rates are high. But this isn't so for Israel. The country's inflation and interest rates are lower than that of the US. Yet I've noticed many Israeli companies require that they distribute a large portion of their retained earnings.

So why is this stock out there without any mention in the media? Brimag is a small company and therefore only trades on the Tel Aviv Stock Exchange. Tel Aviv is a neglected stock exchange. All companies there file their financials in Hebrew. So, the language and market cap will not appeal to investors outside Israel. And to make things worse, I've noticed that trading stocks on the Tel Aviv is a hit and miss at brokerages outside Israel; some brokers will trade certain stocks but most won't.