Global Yachting Group – GYG Plc (LON:GYG) has delivered a robust set of H1 forecasts, which are marginally ahead of our forecast given in our recent initiation note at the adjusted EBITDA level. Strong growth was delivered at all levels, and was mainly organic growth, with a 60bps improvement in EBITDA margins delivered YOY. We are maintaining our FY forecasts on the back of these results, and are comfortable with the H2 weighting given the seasonality in the business. While the shares have performed well post IPO, we believe the valuation remains undemanding, and believe the FCF yield, ROCE, dividend and organic growth potential remains highly attractive.
H1 results: Revenues were +19.4% YOY (mainly organic growth), with adjusted EBITDA (pre-exceptional items, which mainly relate to transaction and IPO costs) +26.9% YOY at €3.3m, which is marginally ahead of the €3.2m we indicated in our recent initiation note. Adjusted EBIT was +29.7% YOY, with adjusted PBT coming in at €1.8m vs. €1.3m last year. Cash generation was strong with cash conversion in excess of 100% due to a strong working capital position. Net cash was €4.7m vs. €6.2m last year. There is no dividend due to the timing of the company’s listing but the policy is firmly set.
Key performance drivers: Results have always been H2 weighted as owners of superyachts typically undertake an annual haul out and general maintenance in the off season to keep vessels in optimal condition and to ensure availability during the peak months. The core Refit and New Build business performed well with revenues +23.3% YOY, and ahead of the headline rate of 19.3%. Supply revenues were running at +3.9% in H1, which is ahead of the 3% modelled for the full year, and we see further scope for growth as it expands its offering. The 60bps increase in EBITDA margins coming through was testament to efficiency and cost savings management have been working on for some time. The order book of refit and new build advanced to €56.7m to August 2017 from €41.8m in June, which we believe is encouraging.
Forecast assumptions: We are maintaining our forecast assumptions on the back of these results. We are comfortable with the H2 weighting implied by this performance relative to last year. We are also encouraged by the growth in order book since June, back with a record pipeline. The market also continues to grow as expected with superyacht numbers currently at record levels.
Valuation: At the current share price GYG trades on a 2017E P/E of 14.7x (falling to 11.9x in 2018E) and an EV/EBITDA of 10.0x (falling to 7.8x in 2018E), which we believe is compelling in the context of a 5.0% yield from 2018E. Our valuation is also supported by our DCF and intrinsic value analysis, which implies a valuation over €120m (£105m) if the strategy is executed successfully. Overall we believe these are a robust set of results, with GYG well positioned to hit our FY forecast assumptions, and set for attractive medium term growth.
