Comprehensive Analysis of Grand Banks Yachts and Its Peers

Broker Name: Lim & Tan Securities

Date of Report: 25 November 2024

Grand Banks Yachts: Sailing Towards Greater Heights

The latest report on Grand Banks Yachts Limited (GBY) reveals a company in full sail, riding the waves of impressive financial performance and strategic expansions. In 1QFY25, Grand Banks reported revenue of S\$40.0 million, marking a 29% year-on-year increase, while net profit surged by 95% to S\$5.4 million. This success follows a blockbuster FY24, where the company achieved record-high revenue of S\$133.7 million and net profit of S\$21.4 million, an astounding 112% increase from the previous year.

Despite an 85% increase in share price year-to-date, Grand Banks remains attractively valued, with a forward P/E of 4.5x, a P/B of 1.2x, and an EV/EBITDA of 2.0x. The company’s strength lies in its ability to produce superior boats at competitive prices, a competitive moat that it plans to leverage to capture more market share in the U.S. The upcoming completion of a new yard in December 2024 is expected to enhance efficiency, reduce lead times by 15%, and allow for the production of higher-margin stock boats, setting the stage for significant growth by FY26.

Valuation and Financial Health

Grand Banks’ balance sheet remains robust, with a net cash position of S\$35.8 million, accounting for 35% of its current market capitalization. Excluding this cash, its FY24 ex-cash P/E is a mere 3.2x. The company’s order book stands at S\$116 million, a slight decline from the previous quarter, but not alarming given its improved efficiency post-COVID-19.

Strategic Moves and Market Position

Grand Banks is poised to capitalize on its expanded yard capacity, enabling the production of stock boats and multiple boat types simultaneously. This strategic shift is expected to drive higher margins and meet the demands of Ultra High Net Worth clients who seek prompt delivery. Participation in major boat shows across the USA, Europe, and Australia has become a key sales channel, allowing the company to sell directly to consumers and maintain robust profit margins.

Recommendation

The report recommends a ‘Buy’ for Grand Banks Yachts with a target price of S\$1.05, representing an upside of 89.2% from the current share price of S\$0.555. The company’s strategic initiatives and financial performance position it favorably compared to its peers.

Industry Peers Analysis

Ferretti SPA: Navigating Through Challenges

Ferretti, a much larger peer of Grand Banks, trades at a higher valuation of 11x forward P/E despite exhibiting lower margins. With a market cap of S\$1.2 billion, Ferretti has faced a 15.3% decline in stock performance year-to-date. The company’s forward P/E stands at 10.9x, with an EV/EBITDA of 4.3x and a P/B of 1.0x. Its return on equity is 10.3%, and it offers a dividend yield of 3.8%.

Universal Robina Corporation: Maintaining Resilience

Universal Robina Corporation, with a market cap of S\$5.0 billion, has seen a 14.6% decline in stock performance year-to-date. The company’s forward P/E is 16.5x, with an EV/EBITDA of 10.3x and a P/B of 1.8x. It boasts a return on equity of 10.2% and a dividend yield of 3.8%, reflecting its resilience in a challenging market environment.

Alexander Marine Co Ltd: Facing Market Pressures

Alexander Marine Co Ltd, with a market cap of S\$1.1 billion, has experienced a significant 26.5% decline in stock performance year-to-date. The company’s forward P/E is 12.9x, with an EV/EBITDA of 16.3x and a P/B of 3.9x. Despite a high return on equity of 36.0%, the company’s stock has been pressured by market conditions, offering a dividend yield of 4.3%.

Sanlorenzo SPA/Ameglia: Riding the Waves

Sanlorenzo SPA/Ameglia, with a market cap of S\$1.8 billion, has seen a 14.6% decline in stock performance year-to-date. The company’s forward P/E is 12.6x, with an EV/EBITDA of 7.6x and a P/B of 3.4x. It boasts a return on equity of 28.8%, with a dividend yield of 2.8%, reflecting its strong position in the luxury yacht market.

Catana Group: Sailing Steadily

Catana Group, with a market cap of S\$0.2 billion, has faced a 22.4% decline in stock performance year-to-date. However, the company’s forward P/E is a lower 5.3x, with an EV/EBITDA of 4.2x and a P/B of 1.7x. It boasts a high return on equity of 33.6% and offers a dividend yield of 3.4%, positioning it as a steady player in the market.

MarineMax Inc: Navigating Turbulent Waters

MarineMax Inc, with a market cap of S\$0.9 billion, has seen a 22.9% decline in stock performance year-to-date. The company’s forward P/E is 13.8x, with an EV/EBITDA of 8.5x and a P/B of 0.7x. Despite a lower return on equity of 5.3%, MarineMax remains a significant player in the marine retail sector.

Italian Sea Group SPA: Steady as She Goes

Italian Sea Group SPA, with a market cap of S\$0.6 billion, has maintained a relatively stable stock performance with a 0.6% decline year-to-date. The company’s forward P/E is 9.7x, with an EV/EBITDA of 7.1x and a P/B of 3.3x. It boasts a return on equity of 30.6%, reflecting its solid market position.

Beneteau: Navigating Challenges

Beneteau, with a market cap of S\$1.2 billion, has faced a 21.8% decline in stock performance year-to-date. The company’s forward P/E is 15.0x, with an EV/EBITDA of 5.3x and a P/B of 0.9x. Despite a return on equity of 14.3%, Beneteau offers a high dividend yield of 7.5%, indicating its commitment to returning value to shareholders.

Brunswick Corporation: Charting a Course

Brunswick Corporation, with a market cap of S\$7.1 billion, has seen a 16.5% decline in stock performance year-to-date. The company’s forward P/E is 17.0x, with an EV/EBITDA of 10.3x and a P/B of 2.6x. It boasts a return on equity of 13.3%, reflecting its solid performance in the marine industry.

Malibu Boats Inc: Navigating Market Dynamics

Malibu Boats Inc, with a market cap of S\$1.1 billion, has experienced a significant 26.1% decline in stock performance year-to-date. The company’s forward P/E is 16.9x, offering a challenging environment for the company to navigate, despite its negative return on equity of -9.8%.

Conclusion

The analysis of Grand Banks Yachts Limited and its peers paints a picture of a dynamic and competitive industry. While Grand Banks stands out with its robust financial performance and strategic initiatives, its peers face varying challenges and opportunities. Investors are advised to consider these factors when making investment decisions in the luxury yacht manufacturing sector.