100 EBITDA in 2012 is possible 20 Maint Cap Ex 20 Interest
minimal taxes. Market cap of ~200. Will generate 40-50m in FCF (that's on a 30m cap ex # that includes the building of 2-3 new clubs). It's 4-5x free cash flow! They will do over $2 a share in FCF in 2012.
And your net debt # is way wrong. It's about $265 right now and will be ~200 year end 2012. The EV/EBITDA on 2012 #s is about 4x! Net Debt will be a reasonable 2x EBITDA. Under levered.
I like the company, belong to one of their nicer clubs, but sold 3/4 of my shares once above $9.50.
Don't get me wrong, I liked the jump, but there are no metrics behind it besides a possible short squeeze.
The economy is not improving, we still have well over 15% real unemployment and more importantly, we are starting to see "Do not apply if your unemployed" being sent out... in other words, companies want to only hire people who have jobs already, and if you have been out of work for a year, your prospects have gotten a lot weaker.
Gym memberships are a discretionary item. When gas goes higher, food which is still going up, and the possibility that interest rates will rise, will people stay in health clubs, find cheaper ones, or go without.
In the future I can see a squeeze on revenue, higher costs to maintain the facilities, higher cost to acquire/retain members, and even a possible contraction of facilities to reduce costs.
I am very happy with my 30%+ return, but will wait for it to drop back into 7s or lower to buy back in. Was only a year ago this stock was in the 2s... Wish I had bought then.
Revenues are down over 2 years, so is income. While they have gotten some of the costs under control, this is still a company that shows $2M income from operations of $460M Revenue. While it looks like they have turned the corner the last few quarters, they still have a large amount of debt to be serviced. It also does not surprise me to see a rise in these metrics since so many of their clubs are in the North East where one would expect a rise in membership over the winter as well as the New Years Resolution bump.
Many retailers make or break their year over the Christmas holiday build up, and those sales hold them through the doldrums of summer... CLUB reminds me a lot of that sort of ebb and flow.
Best of luck to holders. I like the company which is why I hold the stock, but I also see it more fairly priced to performance in the $6 - $8 range than $10+ Maybe there is big new over the horizons, but I see membership retention being difficult, I see people cutting back on group programs, many classes I see that charge get cancelled at my club for lack of turn out where they used to have a wait list, and I see growing pressure for cities and towns to tax buildings, land, facillities and business through corporate taxes and property taxes to pay for local shortfalls.