Rimoni Industries (RIMO) is an Israeli company that specializes in industrial design, engineering, mold manufacturing, precise injection molding and assemblies of products and components for various fields such as medical, agriculture, automotive, consumer, and others.
It was founded in 1954 by Yotam Rimoni and it is still primarily owned and managed by the family. Rimoni Industries has two advanced facilities in central and northern Israel and a development center in Nesher near Haifa. Some of its customers include Teva, Audi, Porsche, Bentley, BMW, Lamborghini, Nestle, SodaStream, Netafim and more.
I’ve been wanting to analyze Rimoni for some time because I bought some shares after analyzing it a long time ago (10 years? who remembers that far…), and since then I’ve kind of forgotten about it. This analysis was also more complicated than expected as I had to manually fill in a lot of the company’s data from the annual reports since the sources I use for analysis only had data for the last 5/6 years.
Rimoni Industries provides solutions for medical devices, automotive parts, consumer products, agricultural equipment and technology innovations1. It has a reputation for high quality, cost-effectiveness and responsiveness. They have pretty cool looking stuff, which you can see in their web site: https://www.rimoni-ind.com/#phive.
The company operates in two segments: Plastics, which constitutes ~88% of its revenue and Molds, which make up the rest of the company’s revenue (~12%). In the plastics segment, the company operates in multiple areas such as agriculture, consumer, automobile, medical, and others.
Rimonit is constantly working to increase and improve their production capabilities. It has bought companies, two in 2017 and one in 2019, and in 2023 it finished building a new clean room in one of its factories (adding to the existing one) and it is working to enlarge another factory by 2.5K sqm.
A strong point of Rimoni Industries is that it provides a one-stop shop for product development, from design to manufacturing and assembly. Another thing I like about Rimoni is that it can leverage the near-shoring trend that is currently happening worldwide, which favors product made in outside China, to reduce the dependence everyone has on them.
Since 2012, Rimoni was able to increase its revenue from 20.25 ILS per share to 25.38 ILS per share, a modest increase of 25.32%, or 2.28% average annual growth.
Earnings have seen better growth, increasing since 2012 from 3.1 ILS per share to 5.69 ILS per share, a total growth of 83.55%, or 6.26% annual average growth.
A new pair of “metrics” that I’ve decided to add to my analysis is operating cash flow and free cash flow. I like cash flow metrics because at the end of the day, companies live and die because of cash flow, and dividends come from the free cash flow of a company, so as a dividend investor, I’m very interested in where my money comes from.
It does look like Rimoni has been increasing its operating cash flow in pair with earnings, with an increase of 123.17% in the last 10 years, but at the same time we can see that free cash flow has been all over the place. I’m still learning how this metric behaves, but intuitively this is not a good sign for me as it means the company doesn’t have a constant and secure cash source to pay its dividends.
And talking about dividends, they have been on a long-term growth trend in the last ten years, but not in what I would call a “straight line”.
From a starting dividend of 2 ILS per share in 2012 to 4.12 ILS per share in 2022, Rimoni has grown dividends at an average annual rate of 7.49% per year, or a total of 106%. This is good, but what is really impressive is that buying a share of Rimoni at the start of 2012, at 17.8 ILS, would have returned all the initial investment as dividends after 5 years, and more than that in the next 5 years. Which shows me that for Israeli companies the dividend growth and trend are not good enough to evaluate a company. Total dividends are also important. I also need to add the dividend payout ratio to my analysis – based on it Rimoni is also problematic as many years it has distributed more than 100% of earnings as dividend.
Rimoni is currently trading at a P/E of 11.16 at 64 ILS. I think the company has potential and could be a good investment, but after this analysis I’m not sure that at the current price it has enough margin of safety. But it is hard to ignore its total return, so I may be adding a small amount to my portfolio.
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