Shikun & Binui (TASE:SKBN) Eyes Somaliland Projects, Is The Stock Already Pricey?

News that Shikun & Binui (TASE:SKBN) is exploring large infrastructure prospects in Somaliland, shortly after its bribery conviction in Kenya, has pushed governance, compliance and reputational risk back to the forefront for investors.

At a share price of ₪17.9, Shikun & Binui has seen a 4.25% 1 day share price gain and a 4.07% 7 day share price return, while the 1 month and year to date share price returns are still down. At the same time, the 3 year total shareholder return is close to doubling investor capital, which suggests recent Somaliland headlines are being weighed against a longer record that shareholders are still digesting.

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Shikun & Binui looks like a sizeable infrastructure platform with global reach. After the recent rebound, the harder question is whether that complex mix of projects and controversies is already fully reflected in the current price.

Preferred Price-to-Sales of 1.1x: Is It Justified for Shikun & Binui?

On a simple yardstick, Shikun & Binui trades on a P/S ratio of 1.1x, slightly above peers on 1x, which points to a modest valuation premium at the current ₪17.9 share price.

The P/S multiple compares the market value of the equity with the revenue the group generates and is often used for contractors and infrastructure groups where earnings can be choppy. For Shikun & Binui, that lens matters because reported profit is affected by large one off items and the business only became profitable again this year.

This is not a case of the market paying up for a spotless record. Earnings have declined by 18.4% per year over the past 5 years, return on equity is low at 0.2%, interest costs are not well covered by profit and funding relies entirely on external borrowing rather than lower risk customer deposits. Against that backdrop, a premium to peers suggests investors are giving the group some benefit of the doubt on its infrastructure platform and recent move back into the black.

Compared with the wider IL Construction industry, Shikun & Binui again looks expensive on the same measure, with its 1.1x P/S level described as high even against the 1.1x industry average. That signals investors are not getting a clear discount for the weaker long term earnings profile or governance concerns, and the ratio could move closer to sector norms if sentiment cools.