Hidden Gems of the Middle East: Small-Caps Poised to Soar Amid Regional Transformation

The Middle East is undergoing a quiet revolution. While global investors focus on megacaps and tech titans, a trio of small-cap companies in Saudi Arabia, Israel, and Turkey are quietly building moats in sectors primed for growth—food manufacturing, energy exploration, and defense technology. These hidden gems—Nofoth Food Products (Saudi Arabia), Ratio Energies (Israel), and Altinay Savunma (Turkey)—are riding waves of regional economic reform, ESG integration, and geopolitical stability. Here's why investors should act before valuation gaps close.

Nofoth Food Products (Saudi Arabia): Debt-Free Growth in a Boom Market

Saudi Arabia's Vision 2030 has turbocharged domestic industries, and Nofoth Food Products is a prime beneficiary. The company has grown revenues by 14% annually since 2021, hitting 3.65 billion SAR in 2024 (). Its debt-free balance sheet—with equity rising to 141 million SAR in 2024—gives it flexibility to expand through franchising and new brands like Qalb Iceream.

The catalyst? ESG-driven efficiency. Nofoth slashed costs via automation, renegotiated supplier contracts, and adopted sustainable practices, boosting net profit margins to 14% in 2024. With a share split in 2023 and plans for a capital increase, the company is primed to capitalize on Saudi's rising consumer class. Investors should note its dividend policy: a 2024 payout was recommended, though specifics remain undisclosed.

Ratio Energies (Israel): Undervalued Energy Play in a Strategic Region

Ratio Energies is a contrarian bet in a sector often overlooked. The company holds stakes in Israeli exploration fields like Sarit (25%) and Gal (90%), and its revenue hit $357 million in 2024 (). Yet its Price-to-Sales (P/S) ratio remains attractively low: it rose to 3.00 in 2025 from 2.08 in 2021 but still lags peers ().

The tailwinds here are geopolitical stability and energy demand resilience. Israel's diplomatic normalization with Gulf states has opened new markets, while its shale gas reserves position it as a regional energy hub. Ratio's operational leverage—with EBITDA jumping from -213 million ILS in 2021 to 644 million ILS in 2024—suggests it can capitalize on rising energy prices.

Altinay Savunma (Turkey): Defense Upside in a Volatile Region

Turkey's defense industry is booming, and Altinay Savunma is a key player. The company's revenue surged from 263 million TRY in 2021 to 1.77 billion TRY in 2024 (), driven by contracts in drones and military systems. Its EBITDA jumped from -213 million TRY in 2021 to 644 million TRY in 2024, with a 3-year CAGR of 44.5%.

The catalyst here is geopolitical demand. Turkey's strategic location and strained ties with NATO members have spurred self-reliance in defense tech. Altinay's R&D spending (TRY 212 million in 2024) is a red flag for cash flow strain, but its net cash position (TRY -57 million debt) and rising book value per share (TRY 14.47) suggest resilience.

Why Now? The Confluence of Catalysts

1. Economic Reforms: Saudi Vision 2030, Israel's tech-driven growth, and Turkey's defense modernization are creating fertile ground for these companies.
2. ESG Integration: Nofoth's automation and Altinay's tech-focused R&D align with global ESG trends, attracting sustainable investors.
3. Valuation Gaps: All three trade at P/S ratios well below their growth rates. Nofoth's P/S of ~0.39x vs. revenue growth of 18% is a glaring mispricing.

Investment Thesis and Risks

Buy: All three are undervalued and positioned to benefit from secular trends.
Hold: Wait for clarity on Nofoth's dividend policy and Altinay's cash flow management.
Risks: Geopolitical flare-ups (Turkey-Israel tensions?), global energy price drops, and regulatory hurdles.

Final Take: Act Before the Crowd

These small-caps are the beneficiaries of a tectonic shift in Middle Eastern economies. With strong fundamentals, manageable debt, and catalysts that can't be ignored, they're the type of opportunities that vanish once institutional money flows in. The question isn't whether to invest—but whether to wait.