Skydive the Beach Group Ltd (ASX: SKB)

SKB Details

Robust FY17 result: Skydive the Beach Group (ASX: SKB), which provides tandem skydiving, had reported a solid result for FY17, beating earnings guidance despite adverse weather conditions that impacted processing rates. The group has been benefitting from organic growth and many acquisitions in Australia and New Zealand. The group’s market share has now surged up to 70% in said regions. SKB has also been able to benefit from adventure experiences including white water rafting and ballooning.With increased efficiency driving the margins and skydiving demand, the group is witnessing a double digit like for like revenue growth. The group has been upgrading its fleet with new engines and larger planes; and this indirectly, has been able to increase jump throughput while the cost per jump to SKB has lowered. Margins are being driven by acquisition cost synergies and scale benefits.

On one side, adverse weather conditions impacted jump completion rates last year; on the side, the group’s efforts helped the organic revenue growth to be about 12%. Thus, any improvement in the normal jump completions can help boost the revenue growth which is otherwise anticipated to be in line with earlier year. Further, the group’s FY18 bookings, passenger numbers and revenue growth have been tracking above management expectations.

Strategic Initiatives: With the move on name change from Skydive the Beach to ExperienceCo, the group expects to become a major adventure tourism enterprise in Australia and New Zealand. Recently, the group also announced for a $20m acquisition and a capital raise to support the buying of GBR Helicopters at less than 5x EBITDA on a stand-alone basis. The acquisition is said to be immediately EPS accretive. 

Amended FY18 Forecast (Source: Company Reports)

The group’s efforts seem to bode well for continued growth in FY18. Further, the full year contribution from the acquisitions of Raging Thunder and Reef Magic Cruises, which have delivered ahead of expectations is expected to drive performance to a higher level. SKB is thus expected to witness more upside potential in the coming period, and we give a “Hold” on the stock at the current price of $ 0.78


SKB Daily Chart (Source: Thomson Reuters)

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