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Checkout ATRI fantastic growth record last six years. Just announced a material shortfall for this year all due to one client which will correct. Stock has dropped signifiicantly. Might be a good entry point for a long term holder.

 

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Packer,

 

Thanks for the ideas. I've been looking at WOLF for a few hours, a few thoughts;

 

- it is very cheap on a MV/EBITDA basis (~ 1.6), but the debt is enormous (D/E ~ 4), meaning they have to assign a large portion of their cash flows to servicing this debt (last year 47 Mio interest expense on an EBITDA of 83 Mio).

- They have been strenghtening their balance sheet over the past years, but there is still a lot of work to do. No debt maturities till 2014.

- EBITDA expected to grow ~ 5-10% this year.

 

So, I agree that if consumer spending increases and this company continues to delever a huge amount of value can be delivered to shareholders. However, I don't really see the huge growth going forward - can you give some pointers?

 

Thanks!

 

Bart

 

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A large portion of their debt is non-recourse (Only $80.5 million is recourse to WOLF).  About $65.5 million is associated with Gen I resorts which is on a 25 year amoritization.  WOLF could step away from this loan and have no effect on FCF and about $6.0 million on EBITDA.  This is the only loan that is close to its covenants.  The level of debt about 5.5x EBITDA (net cash and other investments) is at the high-end of what you see in other resort/detination-type properties but the LT amortizations and the non-recourse nature provide some protection.  At its current level of operations its E/FCF multiple is 6.8 with a free option on its Anahiem development and continued growth.  The have grown their EBITDA to pre-crisis levels.

 

This group of hotels are the premium ones in this niche.  I have talked with folks in my office and this place is a great and afforable place to take a family (a less expensive version of destination parks like Disney).  In addition, the franchising EBITDA is about 10% of the total.  With a value of only 7.1x EBITDA, it cheaper than other theme parks (FUN and SIX) and other hotels chains.  Given the franchising cash flow and the option of future development, I think WOLF should trade a premium to other chains.  Given the value nature of WOLF's pricing, if a downturn were to occur I would think they would not be effected to same extent as other resort destinations. 

 

The upside is with the non-recourse debt where if WOLF were trade at the same level as FUN, SIX or other hotels at 9.0x EBITDA, the stock price would double.  Also, given its low EBITDA multiple it could be acquired and be very accretive to hotels (H, MAR opr HOT) cash flows.  These hotels trade at 13 to 15 times EBITDA. 

 

Packer     

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