Market leading position allows high margins

Market leading position allows high margins

SkiStar are able to grow and maintain an EBIT-margin above 20% in the next 5 years. SkiStar has a market share of 47% in Sweden and 30% in Norway, making SkiStar the leading operator in the region. As a result, SkiStar is the first choice for many customers. This allows SkiStar to have a high degree of pricing power.

In combination with effects of economies of scales, the pricing power allows the company to maintain an EBIT-margin above 20% during the next 5 years.

In addition to increased revenues from SkiPasses, sales of equipments, clothes and properties further contributes to higher revenues. As a result, a CAGR of 7.4 % is estimated in the next 5 years.

High level of investments allows continuous growth and maintaining of high margins in the long term. Historically, SkiStar has invested around 15% of total revenues in infrastructure around their ski slopes, which indicates a long-term strategy. This also allows Skistar to grow and maintain their strong market position as they are able to maintain a higher investment budget than any other competitor, while continue offering their customers a complete experience.

Investments in snow production has drastically decreased SkiStar’s dependence on weather conditions.

DCF valuation indicates a value per share of 110 SEK, indicating that the share is fairly priced currently. Given a WACC of 7.6%, a DCF valuation indicates that the company is fairly priced.

The share is currently trading at an EV/EBIT multiple of 16.8x, which is slightly below the 5-year average of 17.5x.

A share price around 100 SEK, which is 10% below the value that the DCF indicated, could offer an attractive entry to this high-quality company. With a high ROIC of over 10%, an FCF-Yield of 5.4% in 2019-2020 and continuous good cash flow generation in the following years, SkiStar can be a wise long-term investment.

Analysts: Magdalena Johansson & Andreas Magnusson