Thread by @pbcinc, $EFCN.TA is a tiny Israeli high ROI capital allocation story, vast TAM, [...]

$EFCN.TA is a tiny Israeli high ROI capital allocation story, vast TAM, Global #fintech monster in the making, led by a capable, shareholder-friendly, first-class Owner Operator team offering potential 26% - 30% returns pa for investors.

A thread.

#עפנכ

1 The alternate Financing business is an interesting sector at least in Israel. Structural, Policy, Business, and Historical reasons make businesses here very interesting. Briefly, these guys have first cut of the best short term credit needs of successful entrepreneurs needing>

quick response time and ingenuity to fund short-term credit needs until the Banks can step in. They fund Ultra High Return projects with service the Banks cant respond to in time and charge for it well.

$EFCN.TA short duration book of 51,374 MNIS Returned 10,070 MNIS or 19.6%. You get it. These loans are typically EXTREMELY strong or have Collaterals (or other manners of (Ethical) collections) the Banks envy. They're close to bulletproof.

Even NPL's reported, typically get collected. (1375 on the Book, slightly on the higher side, driven by COVID technical reporting asked).

With about 300B NIS credit provided TAM, the Baby Israeli alternate financing sector enjoys a gale-force Massive Regulatory backwind >

and can't keep up with explosive demand being pushed on it by regulators who want it to grow fast.

A simple thesis really of a #compounding machine.

a) Underwrite safe credit at mouth-watering returns (~20$ pa);

b) Reinvest all the profits into the book and do a' above again

c) Get cheap(er) credit (Public listed bonds) to underwrite even more great credit,

d) Keep Expenses shareholders friendly low

e) Rinse, Repeat Growing into generational opportunity.

What is very special here is the fact this small business (operated as a "division" of a large, private, successful enterprise by already wealthy individuals) has at its resources a sea of expensive pro team it uses (and pays for) as needed.

Employees cost on the P&L don't reveal the 30-ish people team ready to jump when needed. Fixed expensive costs paid on when you need them. Lawyers, Accountants, Appraisers, Economists, and other top-level resources.

This business is managed to GROW not to get rich drawing a salary (and its shows everywhere).

The Core Book is likely to grow to 250M, make pretax ~ 26M (Smart RTO generated 150M NIS tax credit), worth about 13X multiple or about 340 M NIS over 160 MC (~2X) in 2-3 years.

But Team $EFNC.TA aims high. Known for their maverick-esque deals, the team managed to build what is potentially a basket of Global #Fintech solutions that could transform the business into a very large, global undertaking. For this thread let's just call it free optionality

Albeit one I have a gut feeling will be very large very fast after digging in and doing my own DD. We should expect news sooner than later.

How much could it be worth? I'm pegging it as a Possible 200-300 MNIS, and I'm being probably very conservative.

We'll know more soon.

There are many things to talk about here, but very simply, this could be a 600 million NIS enterprise in 5 years generating whapping explosive 30% + CAGR from these levels. I especially like the hard-working, trustworthy, smart, and ethical management team here.

I've been promised English reporting just for you guys.
We're long for some time now and this is not a rec. You need to DYODD, as always.

We'll be watching the story carefully, and judging by the amount of interest in the idea, will keep writing about Erech Finance in English

Traded in TASE, Israel (IB access).

Edit Ticker: $EFNC.TA
Erech Finance Cahalacha Ltd.

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