Ratio Energies (TASE:RATI) Cancels Dalia Deal As Investors Question Whether The Units Look Pricey

Event Overview: Cancellation Of The Dalia Energy Gas Supply Deal

Ratio Energies - Limited Partnership (TASE:RATI) is back in focus after it and partner NewMed Energy cancelled a planned $6.7b long-term natural gas supply contract with Dalia Energy for two new Israeli power plants.

The partnership cited unmet conditions, including financing and Competition Authority approval. Dalia disputed the move and pointed to ongoing regulatory discussions, leaving investors to weigh deal uncertainty against Ratio Energies - Limited Partnership’s broader Leviathan exposure.

At around ₪4.66 per unit, Ratio Energies - Limited Partnership has seen an 8.3% 90-day share price return. The 1-year total shareholder return of 11.3% and roughly 3.2x 5-year total shareholder return suggest that longer term holders have experienced stronger momentum than recent buyers.

Compare Ratio Energies - Limited Partnership’s situation with other regional producers by scanning hand-picked list of solid balance sheet and fundamentals (203 results) that could better withstand contract or regulatory disruption.

Ratio Energies now trades with fresh deal risk reflected in the price, while Leviathan exposure remains intact. Does it make more sense to step in here or wait for clarity before paying up?

Preferred P/E of 13.3x: Is It Justified For Ratio Energies?

On roughly ₪4.66 per unit, Ratio Energies - Limited Partnership trades at a P/E of 13.3x, which screens as richer than both its Asian Oil and Gas peers on 11.9x and the SWS DCF fair value estimate of ₪1.31.

The P/E ratio compares the current unit price with earnings per unit. For a producer focused on the Leviathan field, this metric effectively tells you how much investors are willing to pay today for each shekel of current profit given its reserve base, regional exposure, and regulatory backdrop.

RATI carries a high 24.6% return on equity and reports high quality earnings, yet it also has a high level of debt and funds its balance sheet entirely through higher risk borrowing rather than customer deposits. With earnings declining 2.6% over the past year and a 7.62% dividend that is not well covered by earnings or free cash flow, the P/E level suggests the market is paying up for the current profitability profile even as near term profit trends and leverage introduce extra financial strain.

Against the Asian Oil and Gas industry average P/E of 11.9x, Ratio Energies - Limited Partnership trades on a meaningfully more expensive multiple. That gap indicates investors are valuing each unit of its earnings more highly than peers despite the DCF estimate of future cash flow value sitting at only ₪1.31, well below the current price, which points to a stretched valuation if those cash flow assumptions hold.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-earnings of 13.3x (OVERVALUED)

Still, unresolved regulatory questions and fresh contract uncertainty around Dalia Energy could pressure sentiment toward Ratio Energies and challenge the current earnings multiple.

Find out about the key risks to this Ratio Energies - Limited Partnership narrative.

Another View On Ratio Energies' Value

The P/E ratio presents Ratio Energies - Limited Partnership as expensive at 13.3x, but the SWS DCF model is far harsher. Based on those cash flow assumptions, fair value sits at ₪1.31 per unit, which indicates that the units are trading well above that estimate. Which lens do you consider more useful for a long-term holding?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Ratio Energies - Limited Partnership for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 198 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If this mix of contract risk and rich valuation around Ratio Energies - Limited Partnership leaves you on the fence, move quickly to inspect both sides of the ledger yourself. To get a clear view of the trade off between caution and optimism, start with the 1 key reward and 2 important warning signs.

Looking For More Investment Ideas Beyond Ratio Energies?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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