Aluma published its second-quarter report, and at the top of the income statement sits a number that looks like a typing error: revenue of minus NIS 731 thousand.
It is not an error. It is what happens when you read a fund's report through the template of an operating company.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
What Aluma Actually Is
In the words of the filing itself: "the fund was established in June 2020, in accordance with the recommendations of the committee for promoting the establishment of listed funds for investment in infrastructure, with the aim of being a fund for investment in infrastructure".
And on 15 November 2021, on completion of the initial public offering of its shares, the fund became a public company.
And that is a detail worth pausing on, because it explains why this company exists at all.
A listed infrastructure fund is designed to solve a specific problem: infrastructure projects - roads, water, energy, communications - require large capital for very long periods, and a private investor cannot enter them directly.
The listed structure gets around that: the fund holds the assets, and the investor holds a liquid share. The committee that recommended this structure did so out of a policy objective - to channel private capital into infrastructure.
So this is not a company that manufactures or sells anything. It holds.
The Quarter
| NIS millions | The quarter |
|---|---|
| Revenue | -0.7 |
| Operating loss | -5.0 |
| Pre-tax loss | -13.6 |
| Net loss | -7.0 |
| Basic loss per share | -0.02 NIS |
| Balance sheet total | 655.1 |
| Shareholders' equity | 455.5 |
How a Revenue Line Comes Out Negative
At an operating company, "revenue" is what customers paid. It cannot be negative.
At a holding fund, the top line is something else entirely: it is the net result of holding the assets - current income from them, plus or minus the change in their fair value.
And when a negative revaluation exceeds the current income, the whole line drops below zero.
This does not mean nobody paid the fund anything. It means the fall in the value of the assets during the quarter was larger than what they brought in during it.
And so in a structure like this, a single quarter tells you very little. A revaluation is an estimate at a point in time; it can reverse next quarter without anything in the asset itself having changed.
And this is the exact opposite of Generation Capital, which I read this season - there the operating margin was 98%, for precisely the same reason: a fund has no cost of sales. Same structure, two opposite quarters.
And the Tax That Halved the Loss
Pre-tax loss: NIS 13.6 million. Net loss: NIS 7.0 million.
That is, the tax line reduced the loss by about NIS 6.6 million.
This happens when a company recognises a deferred tax asset - an accounting recognition that the current loss will be offset against future profit. And that recognition requires an assumption: that there will be future profit to offset it against.
The structured filing gives no detail, so I state the fact and not the explanation.
And the Balance Sheet, Which Is the Reassuring Part
| Total assets | NIS 655.1 million |
| Shareholders' equity | NIS 455.5 million |
| Leverage ratio | 1.44 to one |
| That is, liabilities | about NIS 200 million |
That is low leverage, and in this reporting season it stands out. For comparison: Prime Energy is at 9.4, Holmes Place at 8.8, and Arit - the lowest I have seen - at 1.07.
And at a fund holding long-dated assets, low leverage is not merely conservatism - it is absorption capacity. An infrastructure asset whose value falls in a quarter does not force a sale when equity is 70% of the balance sheet.
What I Will Check Next Quarter
| The top line | Whether it returns to positive - that is, whether the revaluation reversed |
| The asset detail | Which projects are inside, and at what stage |
| Revaluation versus cash flow | Current income from the assets is the real number |
| The deferred tax asset | Whether the assumption behind it materialises |
| Leverage | 1.44 today - and any new acquisition will change it |
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
This report is a good reminder that one income-statement template serves businesses that have nothing in common.
The same line called "revenue" measures at RGA how much waste was collected, and at Aluma the change in the value of assets. Which is why it can be negative here and not there.
And anyone running a computerised screen for "companies with negative revenue" will get a list mixing distressed companies with funds that simply recorded a quarter of negative revaluation - and those are two completely different things.
And what I try to hold onto when reading a fund is that the three numbers I usually look for - gross margin, operating margin, survival rate - are simply not relevant. There is no cost of sales, no product mix, and no operations in the usual sense.
What is relevant is two things: what the assets bring in as cash, and what capital structure holds them. On the second, the report answers well - 1.44 to one, and that is a real margin of safety. On the first it does not answer in the structured file, and that is what I would look for in the full accounts.
And what I would not do is infer from one quarter of negative revaluation anything about the assets themselves. Infrastructure is measured in decades, and this report measures three months.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
