18-Feb-2021: Wilsons Equity Research: Experience Co (EXP): M/W: COVID-19 turbulence remains
Recommendation: MARKET WEIGHT, 12-mth target price (AUD): $0.22
- Share price @ 18-Feb-21 (AUD): $0.22
- Forecast 12-mth capital return: 0.0%
- Forecast 12-mth dividend yield: 0.0%
- 12-mth total shareholder return: 0.0%
- Market cap: $122m
- Enterprise value: $125m
- Shares on issue: 556m
- Sold short: 0.0%
- ASX 300 weight: n/a
Experience Co. reported 1H21a underlying EBITDA of $3.5m (pre-AASB 16, inc. JobKeeper), ahead of WILSe ($1.3m). Excluding JobKeeper, EBITDA was $0.0m (breakeven). We are encouraged management has been able to maintain profitability on a month-to-month basis and see medium-term upside to the new pontoon project. However, given the continued domestic border challenges, restricted international tourism and limited visibility on when volumes return we retain a M/W (market weight) recommendation.
Key points
Valuation: TP changed to $0.22/share (+57.1% vs/ prev.). We revise our valuation methodology to DCF and EV/EBITDA (blended) from NTA given the domestic border outlook is gradually improving, profitability has been retained, pricing is resilient and demand is improving for core demographics. Our DCF is $0.30/share.
Model changes: EBITDA forecasts -3.2% and -53.2% to $5.3m and $11.4m in FY21e and FY22e respectively. Our forecasts reflect 37.5% of FY19a Skydiving volumes in FY21e, growing by 67.2% in FY22e. We now expect New Zealand Skydiving and GBR Experiences to be loss making in 2H21e due to lower volumes and removal of funding.
Guidance: No quantitative guidance provided. While all operations appear to be open spot border closures due to hotspots are expected to be a theme in the near-term and the seasonal slowdown has commenced. EXP remains profitable on a mom basis.
Pontoon: The Marine World/Dreamtime Island pontoon is expected to be operational in CY22e at a total cost of $6.7m. Based on conservative Revenue and ROIC metrics, we believe this asset could deliver through-cycle EBITDA of $2.0-4.0m.
Skydiving: On balance, Skydiving has been the least impacted business in the period. Volumes continued to improve throughout the year in Australia with the core demographic willing to engage when restrictions were not in place. New Zealand operations were the hardest hit given reliance on international tourism.
Liquidity: EXP has $15.7m cash on hand and a new $20.0m debt facility (February 2022 expiry). Assuming monthly outgoings of $1.0m, we believe EXP has sufficient cash reserves to see it through current trading conditions.
Risks and catalysts
- Risks:
- decline in Queensland retail and consumer confidence conditions;
- increased discounting by competitors;
- softening global economic conditions.
- Catalysts:
- Tourism JobKeeper announcement March 2021;
- BOM monthly rainfall data;
- ABS monthly tourism data.
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