Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Magic Software Enterprises Ltd. is a supplier of vertical software solutions, platforms for business process integration, and related professional services. Information technology (IT) outsourcing services are offered by the company.

1.2 The Key Positives, Negatives, and Investment summary

1.3 Key Metrics:

According to the graph below, MGIC is more effective than its industry counterparts in generating profits at all stages of operation. In addition, as seen in the graph below, MGIC was successful in producing greater ROE for its shareholders in comparison to its peers. Finally, MGIC has outperformed its Free Cash Flow number on a YoY basis due to efficiency at all levels of operations, appropriate cost management and operational strategies, and record revenue numbers.

1.4 Top 10 shareholders:

The top 10 shareholders together form ~69.41% of the total shareholding, signifying concentrated shareholding. Formula Systems 1985 Ltd, and Harel Insurance Investments and Financial Services Ltd are the biggest shareholders, holding the maximum stake in the company at ~46.28% and ~9.43%, respectively.

Section 2: Business Updates and Corporate Business Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

2.2 Insights of Q3FY22:

Section 3: Key Risks

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: Price/Earnings per share Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 23, 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

 Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

 Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.

Disclaimer

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