Skiing too expensive? Then buy the resort

Whistler Blackcomb Holdings Inc. (TSX─WB) showed some pretty impressive slope side action during its fourth quarter of fiscal 2014 according to Sheila Broughton, managing director and head of research at PI Financial. Headquartered in Vancouver, PI Financial staffers probably have more first-hand knowledge of Whistler than your average Bay Street denizen.

Based in its namesake city of Whistler, B.C. in the Coastal Mountains about 125 kilometres north of Vancouver, Whistler Blackcomb Holdings has a 75 per cent stake in Whistler Mountain Resort LP and Blackcomb Skiing Enterprises LP.

Ms. Broughton continues to get a lift from Whistler Blackcomb. She’s sticking with her “buy” recommendation, as well as her risk rating of above-average. But she’s raising her 12-month price target to $23 from $19.25 a share. Discussing the company’s fourth quarter results, she writes:

Not only was the ski resort’s  revenue 9.8 per cent higher year over year, but at $79.39, its revenue per visit was 4.8 per cent higher, as were its total visits which rose to 395,000. Thanks, in part, to more summer visits, as well as better pricing, Whistler saw lift revenue rise 8.2 per cent to $13.5 million.

Elsewhere, the company saw rental revenue rise 11 per cent to $6.9 million — mainly because of higher spending per visit, as well as Whistler’s purchase of Affinity Sports in 2013. And, thanks in part to strong pricing, the company saw revenue from its snow and bike school jump 18 per cent to $1.4 million.

Not surprisingly, Whistler logged an increase in food and beverage sales by 7.9 per cent to $4.8 million.

As well, the company posted a 12 per cent increase in revenue from employee housing, heli-skiing, travel agency bookings, along with retail management. That number? Roughly $4.8 million.

On the cost side, Whistler’s operating expenses rose 6.5 per cent to $23.1 million — mainly because of higher sales costs for retail, rental and food services. The increase also reflected maintenance expenses and the cost of supplies. But at $6.1 million, the company’s selling, general and administrative expenses were largely bang-on with the previous year.

All told, Whistler saw adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the fourth quarter zoom 312 per cent to $2.2 million. This, in turn, reflected a seven per cent EBITDA margin compared to a 1.9 per cent margin in the fourth quarter of 2013. Stronger EBITDA mainly reflects higher quarterly sales partly offset by higher operating costs.

Elsewhere, Whistler posted depreciation and amortization of $10.1 million — generally consistent with its levels in 2013.

Moreover, because of lower interest rates in its new credit facility, the company saw long-term financing costs fall 58 per cent to $1.9 million. Still, because of higher required payments, Whistler’s finance expense for its limited partnership of $2.3 million was $400,000 higher than in the fourth quarter of 2013.

Nonetheless, the company managed to report $100,000 in other income, thanks to insurance payments for a building that burned down in September 2013.

Then, too, because of changes in the estimates of provisions for deferred income tax, Whistler posted a $3.2 million benefit in income taxes — $2.5 million more than in the fourth quarter of 2013. Still, this was offset by a one per cent rise in the company’s effective provincial tax rate of 20 per cent. Whistler’s income tax expenses include taxes on its 75 per cent stake in the partnerships’ net earnings, as well as the company’s wholly owned subsidiaries.

All told, Whistler saw its net loss narrow to $11.4 million from $14.9 million for the comparable period last year. The company also saw its net loss attributable to stockholders narrow to $6 million, or $0.16 a share, from $9.1 million, or $0.24 a share, for the similar period in 2013.

But partly because of higher operating earnings, Whistler’s cash from operations rose to $7.9 million from $5.4 million in 2013.

Effective ticket prices and revenue per visit remain key growth drivers for the company. And to fuel them, Whistler makes strategic investments.

For our part, we’re now pegging the company’s sales for fiscal 2015 at $272 million, instead of $271 million; we’re also forecasting EBITDA of $100 million, not $98 million. In addition, we see net income rising to $0.68 from $0.66 a share.

For fiscal 2016, we’re forecasting revenue of $289 million — 6.5 per cent higher than in fiscal 2014.

We’re also plumping for adjusted EBITDA of $107 million and net income of $0.84 a share.

But we see Whistler making no change to its minority interest distribution policies, or to its dividend. Indeed, we think the company will stick with its quarterly dividend of $0.24375 a share.


Investor’s Digest of Canada, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846

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