WB - Whistler Blackcomb Holdings

[biaggio]

Price:$9.70

Dividend yield:10%

 

I think there "owner's earnings" or FFO will be ~ $1.20-1.30 per share.

 

Not widely followed.

 

Street estimates for earnings is for 0.65

 

Street not appreciating that they will have ~ $20 million in depreciation +amort charges vs maintenance cost of ~ $6.5 million. Big capex was spent getting already for the Olympics so they don t have to spend much. Government spent a lot on roads + airport, etc

 

Had ~$52 million in net earnings after adjusting for olympic expenses (for last year...they had to close down for some of the Olympic games)

 

add ~ $13.5million in non cash charges

 

subtract non controlling interest of ~ 25% (Nippon Cable owns 25%)

 

divide by 37.8 million shares

 

=~$1.29

 

Positives

 

-Has captive audience---people who visit could care less that market has decreased 15%, or that there is any macro problems

-can raise prices

-I think it has a significant enduring competitive advantage (nobody is going to fabricate a ski hill with that many vertical feet/its a great venue)

 

Negatives:

 

Management/insider ownership could be better

 

~$255 million in debt

  $361 million in tangible capital

 

Could be good for 10% return. My expectation is for minimal growth, but will pass on inflation to customers---so can get real return of 10%.

 

[ubuy2wron]

Was this thing designed to blow up. I remember the IPO it was created to bail out fortress I think they own the debt it was structured to get as much cash as possible from the public cut the divy and the price will collapse. I am not sure that Fortress is shareholder friendly. With that said it is a pretty decent business it is by far the most popular ski resort in North America as a skier who has spent many days on its slopes on a good day it is impossible to beat.

[biaggio]

It was issued at $12

 

"Was this thing designed to blow up. I remember the IPO it was created to bail out fortress"

 

LOL, I think I remember that they had to re-price it a couple times.

 

I am not sure who owns the debt. I think they are earning there interest x 3.

 

There are 2 or 3 guys from Fortress that are on the BOD.

 

Do you think this will be an issue?

 

I have a weakness for high divided yield.

[oddballstocks]

Another skier here.. Never skied WB though.  The problem for me is the economics of the ski industry are pretty bad.  Most places make a nominal amount off the ticket prices (which are becoming outrageous) and most of their money selling real estate.  Canadian real estate still seems pretty frothy so this could be a decent play, ride the wave.

 

Just my antecdotal observation, local resorts (PA,MD,WV) seem to be a lot emptier recently with the economy in the dumps.  Whereas more national resorts (Utah etc) haven't been affected as much.

 

One big downside for Whistler is the loonie, with the loonie strong many US visitors will just avoid Canada and hit up a US resort. I'd love to ski some of the Canadian resorts but I won't venture up unless it was cheaper than a US resort, given the extra travel time, customs, expensive airfare.  The strong loonie cuts the other way as well, when I was out at Snowbird last winter it seemed every third person was Canadian.

[biaggio]

Well worth the effort to visit Whistler

 

If you re in the U.S, fly to Seattle + drive up (couple 3 hrs...the drive is beautiful...I have done in 3 x)

 

The actual costs are otherwise pretty much the same.

 

It strikes me that folks who ski at these places are not very sensitive to price i.e have seen people paying these prices who should have been spending their dollars elsewhere.

 

Most all the revenue seem to be ski related, very minimal is real estate related i.e tickets, ski lessons

[oddballstocks]

The tip on flying to Seattle is a good one.  It's on my list for sure. 

 

I have to admit I'm a bit cheap myself and for the money you can't beat Salt Lake City.  I can get round trip airfare for $200, stay cheaply downtown and ski incredible terrain at a different resort each day.  There is also enough skiing that the mountains are pretty empty (looking at you Snowbasin).  Of course I'm only there to ski, I don't care about a posh resort, or the night life, skiing and skiing only.  Incidentally the back-country stuff is looking more and more inviting as resorts are continuing their transformation into winter Disneyworlds.  The "earn your turn" movement seems to be growing pretty rapidly.

 

 

[Uccmal]

Whistler is a resort of choice for wealthier Asians.  The best lay skiers I have ever seen there were all Japanese.  The Yen is more than holding its own.  

 

It also has the best snow on Earth, in terms of total volume, and you dont need to suffer gruelling cold.  More likely to ski the bottom in the rain from time to time.  It will stay busy.  I have never looked at the economics of Whistler on its own.  Looked at Intra-west years ago and we sort of know how that ended up.  

 

May be okay as a dividend payer but I dont see any growth prospects whatever.  They have already done what they can with real estate, and get the maximum income they can from the village.  To my mind there are more good resorts than skiers so pricing themselves out of the market wont work either.

[oddballstocks]

 

It also has the best snow on Earth, in terms of total volume, and you dont need to suffer gruelling cold.  

 

Best snow really?? The water content for West Coast snow is really high compared to the Rocky Mountain stuff.  The drier the snow the better the powder skiing, wet snow is like cement too much friction.

 

A really good book about the ski industry is "In Search of Powder", the book brings up the demographic problem the industry is battling.  Mainly that baby boomers are the biggest consumer and they're skiing less as they get older and there aren't as many younger adults getting into the sport.  Snowboarding has helped this some but it's only stemmed the losses, it hasn't resulted in growth (outside of some niche markets). 

 

Interesting note about international travel.  I remember meeting a couple on a lift who were from Ireland, they said it was cheaper to fly to Colorado, rent a condo and ski for a week then heading down to the Alps.  If the strong Yen persists that could be a nice tailwind for Whistler.

[DCG]

Haven't skied Whistler, but have skied in Washington State, where the snow was wet and heavy. Nowhere can beat Utah's snow. I lived in CO for five years and loved skiing there, but Utah powder is usually epic.

[biaggio]

have skied Whistler, Vail, steamboat they were all  great.

 

Gotta try Utah.

 

Oddball, DCG is Utah skiing better then colorado?

 

UCCMAL -agree no growth expected. I think WB resort pretty mature + saturated. Expect any price increase to rise with CPI. I am building a basket of dividend paying stock-because they are high yielding, this and FTR scare me so I don t want to put too much in the basket.

[oddballstocks]

I personally really prefer Utah for three reasons:

 

1) Quality and variety of terrain

2) Ease of access

3) Snowsure

 

I can fly out early on a Friday, ski Friday afternoon, Saturday, Sunday, Monday and take the red-eye home and only end up taking two days off.  When I've gone to places like Steamboat, Big Sky or Breck it was always such a process to actually get to the resort, I'd end up burning a day traveling. 

 

I do have a very soft spot in my heart for Steamboat though, had the most epic powder day of my life out there, 40in of powder!! 

[biaggio]

Thanks for the post Oddball

 

You re right about the travel from the airport.

 

Its August and have the sudden itch to ski.

[DCG]

I personally really prefer Utah for three reasons:

 

1) Quality and variety of terrain

2) Ease of access

3) Snowsure

 

I can fly out early on a Friday, ski Friday afternoon, Saturday, Sunday, Monday and take the red-eye home and only end up taking two days off.  When I've gone to places like Steamboat, Big Sky or Breck it was always such a process to actually get to the resort, I'd end up burning a day traveling.  

 

I do have a very soft spot in my heart for Steamboat though, had the most epic powder day of my life out there, 40in of powder!!  

 

Had the best week skiing of my life at Steamboat. My wife had a conference there, so we stayed at the slopeside Sheraton. Got at least a foot of snow every night for the first 4 days, and blue skys during the day (actually proposed to my wife there as well). I was actually just back in Steamboat a few weeks ago. Beautiful place in the summer as well.

 

Vail is great a amazing as well, although you definitely spend a lot of time on catwalks getting to different parts of the mountain.

 

Alta and Snowbird in Utah are on their own level though.

 

Anyway..I've looked looked at Vail Holdings before as well, but it's more of a play on real estate and hospitality than it is skiing. Tough industry right now.

 

[ubuy2wron]

This thread seems to have meandered off topic a little, which is like most here and one of the reasons it is so fun to spend time reading all of the posts. WB was taken public because Fortress investments was in a world of hurt they still are I believe. Often companies are taken public by the PE crowd and they are designed to fail. You take a  decent business place a lot of debt on the balance sheet which is held by the selling party slap a high div against it to attract a retail investor leave enough cash to pay for 18 months of dividends and then wait for the train wreck to happen. A bunch of Trusts were created in Canada with exactly that business model. I am not sure if this is in fact the case with WB but before I placed my hard earned dough in the equity I would ask the questions of do the dollars budgeted for cap ex and maintenance seem right and what are the terms on the debt and who owns the debt. WB is definately a trophy property and a world class asset that should be able to derive above average margins with average mgmt. The company asset was actively shopped at a very difficult time and the price they could get was below what they got with the going public route.  I am just guessing here but a 1/3 drop in price is prolly around what the PE bids were when it was being shopped so an attractive price would prolly be some discount to that number to give you some margin of saftey.