Rani Zim Shopping Centres published its second-quarter report. It contains the same phenomenon we saw this week at several property companies, here in a particularly pronounced form.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
The Quarter
| NIS millions | The quarter | Share of revenue |
|---|---|---|
| Revenue | 83.8 | |
| Gross profit | 53.5 | 63.9% |
| Operating profit | 80.1 | 95.6% |
| Pre-tax profit | 25.8 | 30.7% |
| Net profit | 20.2 | 24.1% |
| Attributable to shareholders | 21.8 | |
| Non-controlling interests | -1.7 | |
| Basic earnings per share | NIS 0.12 | |
| Balance sheet total | 3,589.5 | |
| Shareholders' equity | 997.7 |
Operating Profit at 95.6% of Revenue
NIS 80.1 million of operating profit, on revenue of NIS 83.8 million and gross profit of NIS 53.5 million.
And this is a figure that cannot be read as operating profitability, nor does it claim to be.
Investment property is measured at fair value, and an increase in value is recorded above the operating line. So the operating profit of an income-producing property company comprises two things: rental income net of costs, and the change in the assets' valuation.
Here the gap between gross and operating is NIS 26.6 million - meaning the revaluation in the quarter was several times larger than the administrative expenses netted against it.
And that makes the operating margin a figure that is not comparable - not to companies in other sectors, and not between quarters at the same company.
And here is how it looks against the other income-producing property filers of these two weeks:
| Q2 2026 | Gross profit | Operating profit | The difference |
|---|---|---|---|
| Big | 524.8 | 853.8 | +329.1 |
| Rani Zim | 53.5 | 80.1 | +26.6 |
| G City | 359 | 373 | +14 |
| Mivne | 247.0 | 293.5 | +46.6 |
| Azrieli | 665 | 549 | -116 |
And relative to the size of the company the revaluation here is significant: NIS 26.6 million on gross profit of NIS 53.5 million - about half of it again. Only at Big is the ratio larger, where the revaluation was 62.7% of gross profit.
And Financing: 67.9%
From NIS 80.1 million of operating profit, NIS 25.8 million was left before tax. NIS 54.4 million was taken out.
And here the two parts have to be joined, because together they say something neither says alone.
Operating profit includes NIS 26.6 million of revaluation, which is not cash. And the financing, NIS 54.4 million, is cash.
So the ratio "67.9%" flatters the picture. Strip out the revaluation and compare financing expenses to gross profit alone - NIS 54.4 million against NIS 53.5 million - and the ratio is about 102%.
That is, financing expenses in this quarter were slightly larger than the entire gross profit.
And that is precisely the point I made yesterday at Azrieli: a coverage ratio computed on operating profit that includes revaluation is not a real coverage ratio, because a revaluation does not pay interest.
And here it stands out, because the revaluation component is large relative to the company's size.
And the Minority Absorbed a Loss
Net profit is NIS 20.2 million, and the amount attributable to shareholders is NIS 21.8 million - larger than it.
That is, non-controlling interests absorbed a loss of about NIS 1.7 million.
This is the phenomenon we saw this week also at Shikun & Binui, at Alony-Hetz and at Medipower - some of the subsidiaries that are not wholly owned ended at a loss, while the wholly owned activity contributed profit.
The Balance Sheet
| Balance sheet total | NIS 3,589.5 million |
| Shareholders' equity | NIS 997.7 million |
| Leverage ratio | 3.6 to one |
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What I take from this report is an exercise in stripping things out.
The figure "a 95.6% operating margin" looks extraordinary, and it genuinely is - only not in the sense it sounds. It does not say the business is unusually profitable; it says the quarter included a revaluation that is large relative to the size of the company.
And what interests me is what remains once you strip it out. Gross profit, NIS 53.5 million, represents operating the assets. Financing expenses, NIS 54.4 million, represent the cost of holding them. The two are almost identical.
And that is a point worth holding about any income-producing property company: when the revaluation is positive, everything looks fine. The question is what happens in a quarter when it is not. At Azrieli we saw exactly that quarter this week - its operating profit was below its gross profit.
So the number I will follow here is not operating profit but the ratio between gross profit and financing expenses. Today it is about 1.0 to one. That is a boundary, not a margin.
And what I would look for in the full accounts is the capitalisation rate underlying the revaluation, and occupancy across the centres. The first derives from market interest rates rather than the asset's performance - and so it can reverse direction without anything at the centres changing.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
