Importance of a Moat
Warren Buffett knows the importance of a moat. He buys companies like The Coca-Cola Company (NYSE:KO) that have an advantage over competitors. Coke has a brand. A brand that Pepsi or other competitors cannot beat. A brand that Buffett says he couldn’t compete with if he had billions in capital to use. This moat has allowed them to have a profit margin of 18.78% and growth sales around the world. Earnings are still increasing too, up 12% in the last year. This moat has helped Coke survive over 200 years. Whistler also has a powerful moat. Not as strong as Coke but still strong. It has an awesome brand and it is known as one of the best mountains in the world. Plus, you can’t just create another mountain to compete, especially not one as big and with great snow conditions. If you had billions in capital, could you create another Whistler Blackcomb Holdings Inc (TSE:WB)? Probably not.
Whistler Blackcomb Holdings Inc (TSE:WB) reported is 1Q13 earnings with revenue up 2.3% from 1Q13. EBITDA was $10.2 million, down from $10.7 million last year. Skier visits were unchanged year-over-year and the effective ticket price was up 2.5%. Operating expenses were higher versus last year due to higher labor and benefit costs. The first quarter is less important than the second which accounts for 80% of full year EBITDA. Whistler also announced an $18 million lift expansion. It will upgrade two lifts which will open next ski season. Transportation capacity will expand by 2,145 skiers per hour, a 56% increase for those runs.
The stock trades at around 10x FY13 consensus EBITDA and has little trading history or publicly traded peers for comps. Vail Resorts, Inc. (NYSE:MTN) does trade at around 10.6x FY13 EBITDA and is larger and has less risk given the higher number of properties owned.
Whistler Blackcomb has an attractive dividend yield and reasonable multiple. For an income investor, it is worth investigating and could outperform if it executes on growth plans.
Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.