Wealth – March 10th 2015
By Tim Morris
Company: Skydive the Beach Group Ltd
ASX Code: SKB
Shares on Offer: 80m
Listing Price: $0.25
Market Capitalisation: $68.3million
Listing Date: Mar 30th
Skydive the Beach Group Ltd (“SKB”, “the Company”) is an Australian leisure services company focused on skydiving. It provides tandem skydiving services at eleven sites around Australia, utilising a fleet of 16 aircraft with 200 employees and contractors. Founded in 1999, the Company provided over 41,000 tandem skydives in FY14.
Tourism and leisure enterprises contribute approximately three per cent to Australia’s GDP. Whilst value of the nation’s tourism exports rank as the world’s eighth largest, residents are the backbone of Australia’s tourism industry, historically generating three quarters of all expenditures. A modest, but growing niche within the tourism and leisure industry is skydiving.
Amid its beginnings more than half a century ago, recreational parachutists required written permission from the Director General of Civil Aviation. However following introduction of ‘tandem jumping’ during the early 1980’s, this ‘leisure’ activity entered the civilian realm. Since 2010, the number of annual tandem skydives in Australia has risen around 50 per cent.
The activity’s growing popularity is driving the coming listing of Skydive the Beach Group. Founded in Wollongong more than 15 years ago, the Company now provides tandem skydiving services at eleven sites around Australia. Utilising a fleet of 16 aircraft, 200 employees and contractors, the Company served over 41,000 tandem jumpers during FY14. With this figure more than doubling over the past three years, Skydive the Beach Group has seen revenue and earnings expand at strong double digit rates.
Proceeds from its Initial Public Offer are scheduled to fund the acquisition of rival Australia Skydive Pty Ltd. The $14.7million deal is scheduled to expand operations to 16 sites, national market share to 54 per cent, and earnings growth into a fourth year. Contingent on achieving the maximum subscription level of its IPO, management have also flagged debt reductions and a 1c/share dividend, payable in October.
Risks facing participants in the IPO are associated with integration of Australia Skydive Pty Ltd. Scale of the acquisition may create operational challenges that could impact financial forecasts for further growth. Competitive dynamics are also subject to change with barriers for new entrants to the industry not significant. However with management interests aligned via a dominant shareholding and dividend payments on the cards, the outlook appears favourable for participants in the IPO.
Author: Tim Morris
Mar 10, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.