Undervalued Small-Cap Opportunities in the Middle East: A Focus on Saudi Cement, Max Stock, and Y.D. More Investments

In a global market marked by volatility and shifting macroeconomic currents, small-cap stocks in the Middle East have emerged as compelling opportunities for investors seeking resilience and long-term value. While large-cap names dominate headlines, smaller firms like Saudi Cement Co. (TADAWUL: 1020), Max Stock Limited (TASE: MAXO), and Y.D. More Investments Ltd. (TASE: YDM) are quietly building strong fundamentals. These companies exemplify the potential of undervalued small-caps to deliver outsized returns when positioned correctly.

Saudi Cement: A Pillar of Stability in the Construction Sector

Saudi Cement Co., a mid-sized player in the Middle East's cement industry, has demonstrated robust financial performance in 2025. The company reported a 14.12% year-on-year revenue increase to SAR 431.5 million in Q2 2025, driven by higher sales volumes despite declining average local prices. While net profit margin dipped slightly to 22% from 23% in the prior year, this was offset by a 9.39% YoY rise in net profit to SAR 95.5 million.

The company's debt-to-equity ratio of 18.69% underscores its conservative capital structure, with total assets of SAR 3.23 billion and liabilities of SAR 992.16 million as of Q2 2025. Its TTM net profit margin of 25.17% and ROI of 20.83% highlight operational efficiency. Valuation metrics suggest fairness: the stock trades at 41.15 SAR, nearly aligned with its intrinsic value of 41.1 SAR (derived from DCF and peer multiples). Analysts project a 16% upside to 47.88 SAR over 12 months, making it a compelling long-term hold.

Max Stock: Operational Resilience in Israel's Retail Sector

Max Stock Limited, Israel's leading extreme-value retailer, has navigated macroeconomic headwinds with disciplined cost management. In Q2 2025, the company achieved a 26.0% surge in adjusted EBITDA to ILS 56.5 million, driven by a 6.1% revenue increase to ILS 336.3 million and a 210-basis-point gross margin improvement to 43.8%.

Debt reduction has been a strategic focus: the debt-to-equity ratio has fallen from 356.4% five years ago to 19.5%, with total debt dropping to ILS 37.2 million as of June 2025. A one-time dividend of ILS 40 million (~ILS 0.29 per share) further signals confidence in its financial position. Despite a 6.3% decline in GAAP net income due to hedging revaluation costs, the company's operational leverage and margin expansion position it as a resilient small-cap.

Y.D. More Investments: High-Growth Financial Services with Prudent Leverage

Y.D. More Investments Ltd., a privately owned Israeli investment manager, has leveraged its expertise in provident and pension fund management to drive growth. In 2025, the company reported revenue of ILS 230 million, up from ILS 188 million in 2024, with net income rising to ILS 31.62 million (from ILS 17.11 million). Its debt-to-equity ratio of 62.65% is balanced by a 60.3x interest coverage ratio, indicating strong earnings capacity to service debt.

The firm's 29.63% revenue growth and 29.48% earnings growth outpace industry averages, supported by a diversified revenue stream from provident funds, mutual funds, and portfolio management. While its valuation is not explicitly detailed, its inclusion in the “Top 10 Undiscovered Gems” list by Simply Wall St. underscores its potential.

Why Now Is the Optimal Time to Act

The Middle Eastern small-cap landscape is uniquely positioned for growth. Saudi Cement benefits from the Kingdom's infrastructure boom, while Max Stock and Y.D. More Investments capitalize on Israel's innovation-driven economy. These firms share common traits:
1. Strong Earnings Momentum: All three companies have delivered double-digit revenue and profit growth.
2. Prudent Debt Management: Conservative leverage ratios and improving interest coverage mitigate downside risk.
3. Attractive Valuation Discounts: Saudi Cement trades near intrinsic value, while Max Stock and Y.D. More Investments offer growth at manageable risk.

Investors should consider these stocks as long-term holdings in a diversified portfolio. For Saudi Cement, the focus is on steady cash flow and sector tailwinds. Max Stock and Y.D. More Investments offer higher growth potential, albeit with closer attention to macroeconomic shifts.

Conclusion

Undervalued small-caps in the Middle East are often overlooked by institutional investors, creating opportunities for those who prioritize fundamentals. Saudi Cement, Max Stock, and Y.D. More Investments exemplify the resilience and growth potential of this segment. As global markets remain volatile, these companies offer a compelling case for capital appreciation—provided investors adopt a patient, value-oriented approach.