sharetrader
Page 6 of 6 FirstFirst ... 23456
Results 76 to 87 of 87

Thread: Skyline

  1. #76
    Legend
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    6,431

    Default MDRT check: FY2017 Perspective

    The question I wish to pose is this. If SKE wanted to direct all of their underlying earnings into paying off debt, how long would that take?

    Bank Debt $28m {A}
    Underlying Net Profit After Tax $45.799m / year {B}
    Minimum Debt Repayment Time 0.61 years {A}/{B}

    Being able to pay off all your company debt within 8 months is an enviable position to be in. So we can now proceed to the 'Buffett Growth Model' and see what kind of numbers pop out. Don't take this post as an endorsement to buy SKE yet though. All I have looked at so far is what you get, and what you get looks very good. From an investment perspective though, the most critical thing is what you pay. And I haven't made any assessment at all about market value yet. Paying too much for something good is not good investment practice. So how much would be too much to pay for SKE? Let's see.

    SNOOPY
    To be free or not to be free. That is the cash-flow question....

  2. #77
    ShareTrader Legend Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    13,798

    Default

    Hi Snoopy,
    Unfortunately for your SKC investment Mrs Beagle needs no help from me in making sure she gets her snout into a very fulsome array of dishes at the Fortuna Buffet. I am not too sure the hound house with our $27.90 x 2 contribution for the festive season banquet lunch contributed anything or was indeed a possible negative contribution towards your next sin stock dividend feed, however I am pretty sure they made a profit on the carparking so all is well

    No need to delve too deep into is this value question in my opinion, see post #61 and others. Trading on ostensibly the same PE as THL but whilst THL's outlook and long term profit growth looks robust, to this hound this extract from the 2017 annual report looks suspiciously like a profit warning that any astute food loving beagle should be very wary of.
    Looking Forward We need to be mindful the next five years may not mirror the past five. During this period, it is anticipated the Skyline Queenstown Development and several other major projects will impact Skyline Enterprises trading profit. The capital cost of the Skyline Queenstown project and disruption during construction to the business should not be underestimated. This project will provide future capacity and maintain long term profitability of our flagship business. During this five year period the downside will be offset to some degree by additional earnings as International Luge projects come onstream.
    Comparing that warning with THL's long term profit growth on the face of it, at least to this hounds keen nose, smells like the difference between chalk and cheese.
    Last edited by Beagle; 26-11-2017 at 04:01 PM.
    No butts, hold no mutts, (unless they're the furry variety).

  3. #78
    Legend
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    6,431

    Default Buffett Growth Model FY2017 perspective: the data....

    Time to apply the Buffett growth model. The key pieces of data are:

    1/ The business cycle return on shareholder equity,

    FY2013 FY2014 FY2015 FY2016 FY2017 Average
    ROE 14.5% 9.3% 12.3% 13.0% 12.4% 12.3%

    We use this figure to work out the projected earnings from the start of the financial year shareholder equity.




    2/ The proportion of equity retained each year to grow the business.

    FY2013 FY2014 FY2015 FY2016 FY2017 Average
    dps/eps 35% 56% 36% 34% 41% 40.4%

    We use this figure to derive: (a) the proportion of earnings retained for future growth and (b) paid out as dividends.




    3/ The multiple the market has applied to future earnings.

    FY2013 FY2014 FY2015 FY2016 FY2017 Average
    Share Price @ 31st March {A} $8.45 $10.80 $12.75 $17.10 $20.55 NM
    eps {B} $0.92 $0.66 $1.02 $1.22 $1.34 NM
    PE Multiple @ 31st March {A}/{B} 9.2 16.4 12.5 14.0 15.3 13.4

    We use this figure to determine the value of the company in ten years time, based on teh expected earnings in ten years time.



    Now we have the key pieces of data, we can proceed to create the earnings projection spreadsheet

    SNOOPY
    Last edited by Snoopy; 27-11-2017 at 12:24 PM.
    To be free or not to be free. That is the cash-flow question....

  4. #79
    Legend
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    6,431

    Default Buffett Growth Model FY2017 perspective: the calculation

    Now we have the key pieces of data, we can proceed to create the earninhgs projection spreadsheet

    Year Equity SOFY Earnings Dividend Paid Retained for Reinvestment
    2018 $10.86 $1.34 $0.54 $0.80
    2019 $11.66 $1.43 $0.58 $0.85
    2020 $12.51 $1.54 $0.62 $0.92
    2021 $13.43 $1.65 $0.67 $0.98
    2022 $14.41 $1.77 $0.72 $1.06
    2023 $15.47 $1.90 $0.77 $1.13
    2024 $16.60 $2.04 $0.83 $1.22
    2025 $17.82 $2.19 $0.89 $1.31
    2026 $19.13 $2.35 $0.95 $1.40
    2027 $20.53 $2.52 $1.02 $1.50
    2028 $22.03 $2.71
    Ten Year Dividend Total $7.57

    We now answer the question: What return can we expect, compounding annually for ten years, if we buy shares in Skyline at $24.60 today?

    p(1+i)^10=(13.4*2.71 + 7.57), p= $24.60 (today's share price)

    <=> (1+i)=[(13.4*2.71 + 7.57)/24.60]^0.1

    => i = 5.96%

    So the net average compounding return we can expect by investing in Skyline today at $24.60 over ten years is 6% per year. With tax at 30% this is equivalent to a gross return average of 8.5%. Not bad, but given the development risk ahead, not a good enough return for me. Warren Buffett looks for a 15% compounding return. What share price would he have to buy at to get this?

    Buffett Price

    p(1.15)^10=(13.4*2.71 + 7.57) => p= $10.85

    If the share price ever got down to $10.85, I would be backing up the truck myself. But such a low share price in the future seems very unlikely. Considering the quality of the underlying assets I would consider a 12% compounding return over 10 years acceptable. What purchase share price does that imply?

    Snoopy Growth Price

    p(1.12)^10=(13.4*2.71 + 7.57) => p=$14.13

    What we have here are some price points at which the purchase of Skyline Enterprises shares looks good depending on what return you the investor sees as acceptable. For me a 6% net return is not high enough. SKE is a fantastic company. But it is very fully priced by Mr Market when stacked up against historical metrics. I would not recommend buying any at $24.60. But I do recommend watching and waiting for a better entry price!

    SNOOPY
    Last edited by Snoopy; 15-08-2019 at 09:12 PM.
    To be free or not to be free. That is the cash-flow question....

  5. #80
    Legend
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    6,431

    Default

    Quote Originally Posted by Beagle View Post
    No need to delve too deep into is this value question in my opinion, see post #61 and others. Trading on ostensibly the same PE as THL but whilst THL's outlook and long term profit growth looks robust, to this hound this extract from the 2017 annual report looks suspiciously like a profit warning that any astute food loving beagle should be very wary of.

    Comparing that warning with THL's long term profit growth on the face of it, at least to this hounds keen nose, smells like the difference between chalk and cheese.
    I hear the 'warning' Beagle. But I also recognise that good businesses that operate flagship tourist sites do need to be able to spend before they can earn. So I still have a positive 'spin' on the site reinvestment proposals.

    Like you I was researching SKE as a 'measuring stick', but putting it up against that other great tourism operation: SKC. SKC, like SKE are also in the midst of a large capital spend. But SKC Auckland, and the convention centre, will be fully on line soon. Furthermore I am happy with my projected SKC gross return of 6.5% (My valuation 'Capitalised Dividend valuation: FY2018 NZ Perspective' SKC thread post 568). The other advantage of SKC is that you don't need $100k of capital to get a starter position!

    Nevertheless I would be keen to join the SKE club if I can get in at the right price. It sounds 'vulture like' but I think now is the time to watch and wait and be ready to pick up some SKE scraps should things go wrong!

    SNOOPY
    Last edited by Snoopy; 27-11-2017 at 01:23 PM.
    To be free or not to be free. That is the cash-flow question....

  6. #81
    ShareTrader Legend Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    13,798

    Default

    Plenty of potential for things to go wrong Snoopy. The initial capex projection for the Gondola was $60m quickly revised two months later to $100m without any explanation..yes that's not a typo, the estimated cost in 2016 went up 67% in two months without a word. We all know constructions costs have ballooned badly since then, (what other plausible explanation is there for FBU losing close to ~ $200m on a the ~ $400m fixed price construction of the convention center ?) Factor into the recent environment court ruling that they must supply a multi level carpark to meet the extra demand for car parking caused by the expansion, I could not find a car park for love nor money when down there twice in the last 12 months) and its fair to say that I would pay good money to be a fly on the wall when the directors get their quotes for the construction of this revamp. Won't surprise me in the slightest to see the final cost well north of $200m when its finally completed...and then there's the disruption to this key business during the very lengthy redevelopment process.

    I can't help wondering if a far more modest expansion would have been more appropriate and stick the price northwards quite a LOT to dampen down rampant demand.
    A superb buffet lunch and gondola ride is $65 is very cheap for what you get in my opinion, (considering other Queenstown pricing for tourism activities).
    By comparison a far more modest buffet lunch and trip on the Earnslaw across to the Walter Peak farm is $105, still a very good experience and one I would highly recommend even at that price. I would think Skyline could match that $105 price and few if any tourists would bat a single eyelid.
    Skyline gondola ride and buffet lunch $65 https://www.bookme.co.nz/things-to-d...restaurant/984
    Earnslaw Walter peak cruise and buffet lunch $105 https://www.realjourneys.co.nz/en/ex...met-bbq-lunch/

    My conclusion is there is plenty of risk in the business in the near future and the shares are priced as though everything is going to work out just fine and dandy...but what if it doesn't ?
    Not listing on the NZX and pricing disparities like the one illustrated above make me wonder how commercial the directors really are ?
    Old boys club who are very wealthy and don't need to make much more money ?

    Tell you what Snoops, that Real Journeys is a company going places with a brilliant moat. If they were to ever list at a reasonable PE I'd be very keen to put a paw or three up for some
    Last edited by Beagle; 27-11-2017 at 05:34 PM.
    No butts, hold no mutts, (unless they're the furry variety).

  7. #82
    Legend
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    6,431

    Default

    Quote Originally Posted by Beagle View Post
    Plenty of potential for things to go wrong Snoopy. The initial capex projection for the Gondola was $60m quickly revised two months later to $100m without any explanation..yes that's not a typo, the estimated cost in 2016 went up 67% in two months without a word. We all know constructions costs have ballooned badly since then, (what other plausible explanation is there for FBU losing close to ~ $200m on a the ~ $400m fixed price construction of the convention center ?) Factor into the recent environment court ruling that they must supply a multi level carpark to meet the extra demand for car parking caused by the expansion, I could not find a car park for love nor money when down there twice in the last 12 months) and its fair to say that I would pay good money to be a fly on the wall when the directors get their quotes for the construction of this revamp. Won't surprise me in the slightest to see the final cost well north of $200m when its finally completed...and then there's the disruption to this key business during the very lengthy redevelopment process.

    I can't help wondering if a far more modest expansion would have been more appropriate and stick the price northwards quite a LOT to dampen down rampant demand.
    A superb buffet lunch and gondola ride is $65 is very cheap for what you get in my opinion, (considering other Queenstown pricing for tourism activities).
    I did the Skyline Buffet at Rotorua a couple of years ago Beagle. Rode the gondola on the way up and down rode the luge too at the top and had a good outing. The experience is remembered long after the price is forgotten and I had a good 'morning plus lunch'. I did recall the lunch was a 'good middle class effort' rather than a top class effort though. With a buffet this is almost inevitable. So I would balk at paying a top price for such a lunch. I would say that part of the reason for the experience being 'relatively cheap', is that Skyline must also cater for the local market. Overseas tourists come once, but locals can and should be enticed back every year if they don't feel like they are being ripped off. That plus the fact that the cost to run the gondola would be the same whether it is carrying one person or 200 people. An empty car going up the mountainside represents a loss of cash for whatever activities are at the top, while there is no cost saving for Skyline in having that empty gondola car.

    I am not sure what a more modest expansion at Queenstown would look like. If they were to put a six person gondola car in instead of a 10 seater, I doubt it would be 60% of the cost. They may not need a 10 seater car immediately. But it does future proof the business.

    As for the existing gondola experience, I am not saying there is no room for improvement. But IMO Skyline have their price point about right. YMMV.

    SNOOPY
    Last edited by Snoopy; 28-11-2017 at 11:10 AM.
    To be free or not to be free. That is the cash-flow question....

  8. #83
    ShareTrader Legend Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    13,798

    Default

    I think they are very different markets mate, Queenstown and Rotorua. Mrs Hound and I would rate the buffet at Skyline Queenstown as the best we've ever got our snouts into in our lifetime. Case of a premier resort attracting some of the best chef's and workers ? I haven't been to the Rotorua one for many years, (never eaten at their buffet so can't be sure on the comparison front) but the gondola ride is in a different category to the Queenstown ride in terms of its spectacular nature at the latter in my opinion too.

    Queenstown pricing is different from Rotorua and deserves to be too. Just look at the potential redevelopment cost of the Queenstown gondola and you arrive at the inevitable answer that for Skyline to get an acceptable return on capital the price is currently too cheap.

    I do agree with your assessment on the SP however, and see a fair amount of risk to the downside with very limited near term upside potential. Risks appear to well outweigh possible returns to my view for the foreseeable future.
    No butts, hold no mutts, (unless they're the furry variety).

  9. #84
    Legend
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    6,431

    Default

    Quote Originally Posted by Beagle View Post
    Plenty of potential for things to go wrong Snoopy. The initial capex projection for the Gondola was $60m quickly revised two months later to $100m without any explanation..yes that's not a typo, the estimated cost in 2016 went up 67% in two months without a word. We all know constructions costs have ballooned badly since then, (what other plausible explanation is there for FBU losing close to ~ $200m on a the ~ $400m fixed price construction of the convention center ?) Factor into the recent environment court ruling that they must supply a multi level carpark to meet the extra demand for car parking caused by the expansion, I could not find a car park for love nor money when down there twice in the last 12 months) and its fair to say that I would pay good money to be a fly on the wall when the directors get their quotes for the construction of this revamp. Won't surprise me in the slightest to see the final cost well north of $200m when its finally completed...and then there's the disruption to this key business during the very lengthy redevelopment process.

    I can't help wondering if a far more modest expansion would have been more appropriate and stick the price northwards quite a LOT to dampen down rampant demand.

    My conclusion is there is plenty of risk in the business in the near future and the shares are priced as though everything is going to work out just fine and dandy...but what if it doesn't ?
    Skyline revamp in Queenstown has got the go ahead. Environment Court has given this the 'big tick'.

    http://www.sharechat.co.nz/article/7...c-gondola.html

    Interesting to see the price for the upgrade is now quoted at "north of $100m". Also interesting to see that Skyline shares last traded on the unlisted market at 25c - LOL Shows how far the standard of business journalism has fallen. Only out by a factor of 100!

    SNOOPY
    To be free or not to be free. That is the cash-flow question....

  10. #85
    ShareTrader Legend Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    13,798

    Default

    Quote Originally Posted by Snoopy View Post
    Skyline revamp in Queenstown has got the go ahead. Environment Court has given this the 'big tick'.

    http://www.sharechat.co.nz/article/7...c-gondola.html

    Interesting to see the price for the upgrade is now quoted at "north of $100m". Also interesting to see that Skyline shares last traded on the unlisted market at 25c - LOL Shows how far the standard of business journalism has fallen. Only out by a factor of 100!

    SNOOPY
    LOL Classic. North of $100m is such a vague statement and might just qualify for the understatement of the year as they were talking $100m years ago and now have to build a major multi level car park as part of the resource consent and of course we all know construction cost inflation has been really rampant in recent years. I think this project will give their balance sheet gearing a pretty good stretch for quite some time and this might be closer to $200m than $100m by the time its all done. Will have another look when this whole project has been completed and the company de-risked. Still looks expensive to me.
    Last edited by Beagle; 04-03-2019 at 05:53 PM.
    No butts, hold no mutts, (unless they're the furry variety).

  11. #86
    Member
    Join Date
    Oct 2017
    Posts
    53

    Default

    I've not seen the plans etc but might the rebuild prove very disruptive of skyline gondola. there is no zero car-parking in that area, and if you start putting in builders etc cars, all the building equipment and access needs, surely it will affect patronage. It might also be disruptive to the experience up the top - views affected, noise, etc. Given the length of the proposed project - up to 2022 IIRC - this could be quite long-lasting.

    I get the SKYLINE is increasingly diversified, but suspect Skyline Gondola Qtwn is a pretty chunky contributor. Segments results don't break it down.

    As you can tell, I'm hoping for - and weakly expecting - a cheaper entry point! GLAH

  12. #87
    Ignorant. Just ignorant.
    Join Date
    Jan 2005
    Location
    Irresident
    Posts
    835

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •