Author Topic: MTN - Vail Resorts, Inc.  (Read 3386 times)


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Re: MTN - Vail Resorts, Inc.
« Reply #10 on: March 12, 2020, 09:51:47 AM »
Bought a starter position today at $130ish, no doubt this will temporarily get hit from all this corona debacle on the travel industry, but I think on a normalized FCF yield it's around 10% which is pretty attractive for a business like this which has grown pretty nicely, has the biggest scale (on a high fixed cost business) and acquisitions have been quite accretive.

The demand side of skiing seems like it oscillates between 50-60mm skiiers, very dependent on weather and the economy. More geographic diversification should serve them well, and more pass products they sell the more it looks like a subscription business. I bought my first season pass for next year now that they have mountains close to where I live, plus I can go to Colorado, Utah, Canada as well (which I usually do once a year). Interesting to see how they expand into Europe and Asia/Japan.

The supply side is what makes this really interesting, limited competition (IKON being the main one) and pretty much impossible to start a new ski resort from scratch. Favorite part of the 10-k:

There is limited opportunity for development of new destination ski resorts due to the limited private lands on which ski areas can be built, the difficulty in obtaining the appropriate governmental approvals to build on public lands and the significant capital needed to construct the necessary infrastructure. As such, there have been virtually no new destination ski resorts in North America for over 35 years, which has and should continue to allow the best-positioned destination resorts to benefit from future industry growth.
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Re: MTN - Vail Resorts, Inc.
« Reply #11 on: March 15, 2020, 01:11:56 PM »
Market valuation has come down and yesterday MTN (along politicians) announced a temporary cessation of activities. Whistler-Blackcomb, by far, is the most attractive ski resort for Asian skiers so the economic impact perception may be significant.

The basic idea (moat) is that Vail is there to stay. It is likely (although variably and to a lesser extent compared to the last low-hanging fruits years) to continue to grow market share in a mature and even declining overall market. It is reasonable to project that, in the longer term, demand decrease will be outpaced by supply decrease. The top management can probably manage any scenarios and have done well (strategy and vision wise) on the EPIC pass and the acquisition fronts. They also have put in place a pricing premium strategy that is segmented and that captures well consumer surplus. The valuation below comes with some assumptions. First, normalized earnings are adjusted down by 10 to 15% because of the possibility that the discretionary nature of the premium product will have a harder time going forward (the typical "guest" tends to report a very high income). Second, after reviewing some stuff, normalized earnings are adjusted down to take into consideration climate change (shorter seasons, more rain, less snow...implying larger capex to improve conditions with only partial pricing power for that aspect). Third, the PE multiple used is kept relatively low given what I see as a more conservative valuation of leveraged companies going forward.

As far as valuation, this is not a natural selection for deep value people but recent developments may arouse interest if long term patience is available.
One could go with a free cashflow yield, an EV/EBITDA-type or even a DCF type of falsely precise number but here's simplified and grossly adjusted PE version.
Evaluating present normalized earnings (EPS) at 8.20 and adjusting for the above assumptions: entry point = +/- 75-90$ per share.

Just a while ago, this analysis looked completely stupid and now it looks only stupid. It's reasonable that MTN's market value would go down by 70% once a recession is recognized and MTN traded as high as about 250 just a short while ago and almost touched 300 last summer.