G. Willi Food-International: Fatten Your Wallet

| About: G. Willi-Food (WILC)

With their earnings report due out at the end of the month, G. Willi Food-International Ltd. (NASDAQ:WILC) has provided a glimpse of what to expect by forecasting a 28% growth in quarterly revenues over last year’s comparable quarter. I would like to give a quick update to the report I wrote last August.

The stock has moved up 26% from the $6.20 it was trading at the time of the report. As hoped for, the company has been executing its business model efficiently, especially in penetrating the huge kosher food market (estimated at over $6 billion) in the U.S. Mr. Zwi Williger, President and COO of Willi-Food said:

We believe that we have made great strides in executing our international growth initiatives, and we expect to deliver record quarterly revenues for the period. In January, we closed the acquisition of Laish Israeli, a U.S. importer and distributor of kosher food products, which is already beginning to contribute to our results. More recently, we concluded a joint venture with the Baron Family to form a global kosher trade and export company that we expect to further extend our international capabilities by adding complementary product lines and presence in several new markets.

I had mentioned in last summer’s report that I thought that 3rd quarter ’06 earnings were going to get a boost (and indeed they did) from the war that Israel experienced last summer because, generally, Israel empties out in July and August, with tens of thousands of Israeli’s traveling abroad. Last year cancellations abounded, and thousands of consumers stayed in the US for six weeks more than usual, thus adding to WILC bottom line. Assuming no war this summer (no easy assumption, but that’s for another post), this year’s 3rd quarter figures versus last year’s will probably not show such strong growth, due to the fact that Israel will probably empty out for the end of the summer. It will be important to take that into consideration when viewing those numbers.

In any event, the company is poised to continue its strong growth and remains cheaply valued in relation to its competitors. While we have seen some PE expansion, the PE still is under 11 which is more than half the industry norm. And, with strong gross margins, the stock has plenty of room to run. Not only that, there is a float of only 2.5 million shares and insiders hold over 70% of the shares.

The company has also raised money through a private placement, using the proceeds to build a new distribution center that will help increase Willi-Food's capacity and enable the company to progress its strategy of international expansion.

As the company continues to execute its growth strategy and the stock price reacts in kind, it’s hopeful that we will see the stock trade at a valuation more in line with industry norms. This would mean continued upside for the stock.

WILC 1-yr chart