Mailbu’s boats range in price from $89,000 to $243,000 dollars.
Malibu Boats/courtesy of Rodrigo Donoso
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Many people have been unsuccessful in their attempts to purchase a boat this summer. For months, dealers have been sold out. Matt Borisch, owner of Tommy’s, a prominent powerboat business in Grand Rapids, Michigan, adds, “Every dealer I know is out of inventory.” The boating industry, like cars, computer chips, and chicken wings, is undergoing a transformation. As holiday spots dried up due to the virus, families flocked to the ocean. Last year, sales of powerboats increased by 21% to $19.5 billion, the highest amount since 2008. According to industry research firm Statistical Surveys, new boat registrations are 38 percent ahead of last year’s pace.
As vaccinated consumers begin to spend their recreation dollars on trips to Europe and Disneyland, the tide may be cresting. However, one of the most well-known powerboat manufactures,
Malibu Yachts
(ticker: MBUU) is still in good shape, with orders expected to continue through 2022. “People started predicting a slowdown in demand a few months ago, but we haven’t seen it,” says Malibu CEO Jack Springer. He claims that the company has presold more than 80% of the boats it wants to build until June 2022, well exceeding the average 50% rate. Springer adds, “We’ve never seen an order book like this in our history.” He doesn’t expect inventories to normalize until 2024, based on present patterns.
Loudon, Tennessee is the company’s headquarters.
YTD Price:$68.91Recent Price:$68.91Recent Price:$68.91 2022E* Sales (bil):$1.12022E* Net Income (mil):$144.02022E* EPS:$6.902022E* Change:10% 2022E* Market Value (in dollars): $1.5 *Fiscal year ending June 2022*Dividend Yield:None FactSet is the source of this information.
Malibu’s stock has a low valuation since the market is uncertain that the good times will persist. Even if sales slow, Malibu should continue to thrive, because to market-leading brands, streamlined manufacturing, and cutting-edge technology that keep demand for its products high. Rayna Lesser Hannaway, manager of the Polen U.S. SMID Company Growth fund (PBMIX), which owns the shares, says, “They sell into the most attractive markets in the sector.” “They have the strongest brands in sports boats, and they run a well-managed business.” The corporation, based in Loudon, Tenn., has increased output and acquisitions in recent years. In 2017, the company purchased Cobalt Boats, followed by Pursuit Boats in 2018, and a $150 million transaction for Maverick Boat Group in January. Malibu presently produces 75 models, ranging in price from $89,000 to $243,000 for premium variants. Over the next year, production is planned to reach 10,000 boats. In order to address the saltwater fishing sector, the business recently upgraded its Cobalt operations and plans to increase output at Maverick by 30%. According to Berenberg analyst Rudy Yang, the strategy is working effectively, and the stock might touch $100, up from recent lows of roughly $70. He claims that the company effectively combined Cobalt and Pursuit, reducing expenses and increasing profitability. When Maverick is fully integrated, he anticipates similar synergies to generate top- and bottom-line growth.
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When compared to competitors, Malibu earns industry-leading margins.
Mastercraft Boat Holdings is a company that owns and operates boats.
(MCFT) and (MCFT)
Brunswick
(BC), partly due to the fact that it is more vertically integrated.) The business buys engine blocks from GM and Volvo and then “marinizes” them for use in boats, cutting out the middleman. Malibu also makes its own trailers, racks, and flooring, as well as custom-built boat towers or frame-coverings, including power-folding versions for limited spaces in marinas or under bridges. “If it can be made of metal, we’ll make it,” Springer adds. The Malibu is also recognized for its high-tech amenities, like as rear-facing cameras, big cockpit screens, and plush interiors. It has also played a key role in the development of wake-surfing boats, a rapidly increasing watersport. Wake surfing is popular on Malibu-brand boats, which are the company’s best-selling models. In 2012, the business introduced a patented surf gate that tailors the boat’s wake to the rider. Springer explains, “Wake surfing was difficult before, and this made it simpler.” Other manufacturers now provide similar features, but according to Statistical Surveys, Malibu has risen to the top of the ski/wake boat market with a 32 percent market share. Despite its virtues, Malibu appears to be undervalued. The stock is trading at a price/earnings ratio of 10 times expected earnings for fiscal 2022, which ends in June, which is lower than the five-year average of 12 times forward earnings. Earnings before interest, taxes, depreciation, and amortization, or Ebitda, is expected to rise 20% in fiscal 2022, according to Wall Street analysts. The stock trades at around seven times 2022 forecasts based on enterprise value to Ebitda. The stock’s skepticism reflects fears that the boating bubble would shortly burst: During economic downturns, the industry’s sales tend to dry up and take years to recover. Between 2006 and 2010, sales of sport boats fell by 63 percent. Even in a strong economy, retail sales were 20% lower in 2018 than they were in 2006. Hannaway says, “Most boating companies haven’t done a great job of sustaining growth.” “There is concern that the business will not be repeatable, and that the panic buying of boats during the pandemic will subside.” The market, on the other hand, may be punishing Malibu stock too harshly. She claims that the company is valued as if its business is more cyclical than current trends suggest. She expects revenue to rise in the “low teens” over the next five years, owing to increased production, improved margins, and some price increases. Demand is expected to continue, according to B. Riley Securities analyst Eric Wold, in part because many first-time buyers began boating during the pandemic, fueling a new replacement cycle. “It will take years to rebuild inventories, even to pre-pandemic levels of demand,” he says, predicting a stock price of $103 in a year. He points out that even at that price, it would trade in line with its historical average multiple. Malibu is expected to earn Ebitda of $222 million in fiscal 2022, rising to $243 million in fiscal 2023, according to consensus projections. Earnings per share are predicted to rise 18 percent to $6.85 over the following year as a result of these advances. The stock would trade about $90 at a multiple of 12 times estimated 2023 profits of $7.46. That appears to be a reasonable price for a boat manufacturer that may be riding a long wave of demand. Daren Fonda can be reached at daren.fonda@barrons.com./n
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