Drive Shack is an interesting prospect for a longer hold. Historically it was known as Newcastle Investment Corp and invested heavily in real estate (which imploded in '08). Since then, they've been selling off assets and have been largely trying to get out of the real estate business. Their focus now is on golf (as they purchased American Golf in 2006) with 78 golf courses with $28M in EBITA and a 9% growth projection for 2017.
More importantly is their growth plan for the future which will be to compete with Top Golf and their driving range concepts. If you're unfamiliar with Top Golf, its basically a driving range where the balls have chips in them and you can compete in various games, drink beer and also play other games (think boomers but for adults and centered around a driving range). They currently have 25 sites in their pipeline with the first rolling out later this year in Orlando. Using Top Golf as an example, each site produces roughly $3-6M in EBITA and DS plans to mimic this concept and it has potential as the demographics show that most guests aren't traditional golfers and 68% are 34 and younger.
Assuming DS continues to liquidate the remainder of its debt assets, it will have ~$250M in cash. Debt levels are hovering around $216M ($102M loan maturing in 2019, $52M in junior notes and $62M in various preferred stock arrangements). Current market cap is $270M and the estimated EV is $236M.
Basically what you have is a company with solid cash flow from its existing golf courses and a healthy cash pool which it plans to use to build out its driving range business. Assuming management isn't blowing smoke up everyone's ass and using the lower range, they should have 10 units up and running within 5 years with each producing ~$3.5M EBITA. This should more than double its current business and price which currently sits at 3.47.
Submitted May 29, 2017 at 11:46AM by Lost_in_Adeles_Rolls http://ift.tt/2sdWpkD
