Four weeks ended March 12 in review
For the FOUR weeks ended Friday, Intrawest fell 5.2% on the TSE, 8.5% on the NYSE to 23.65 and 15.438 respectively.
No matter how look at it, Intrawest has not been performing in the style that I would have expected. Time to bail? Not yet, in my opinion.
As I mentioned earlier this week, Intrawest has been under pressure through its industry association with Vail Resorts (MTN) and American Skiing Company (SKI). Message 8250544 For reasons highlighted in that post, both MTN and SKI have been in free-fall since January. Despite strong fundamentals (and some encouraging technicals), Intrawest has been unable to escape the resultant downdraft that has pulled the entire sector down.
Intrawest's fundamentals.
On February 22 ITW released their second quarter (Q2) results for the period ended December 31. Sure, there was some bad news, but there was a whole raft of good stuff too. newswire.ca
First, the bad news:
1. A Q2 EPS of $0.07, down from last year's $0.12,
2. Reduced revenues at their Colorado resort, Copper, and at their East Coast resorts, Snowshoe and Stratton, due to poor weather, and
3. A 32% decline in Q2 real estate revenue over the previous year (though real estate operating profit was down by only 9% for the period).
Now, the good news:
1. Despite the bad news just listed, Intrawest booked a total company EBITDA for the Q2 period that was virtually unchanged from the previous year,
2. Dan Jarvis, Intrawest's executive vice president and chief financial officer, stated for the record that the company expects to book a total company EBITDA for the fiscal year in excess of 40% over last year,
3. Q2 ski and resort revenues were up by 9%, while operating profits rose by 26%,
4. On a year-to-date basis, revenues and profits were even better. Respectively, they're up by 40% and 34%,
5. Intrawest's real estate division managed to boost their year-over-year Q2 operating margins from 16.4% to 21.9%,
6. Despite the weather problems in Colorado, Intrawest successfully launched Copper Mountain's resort village project in February and March with a complete sell-out of available inventory, a process that booked the tidy sum of US $78.5 million to their balance sheet, and finally
7. Intrawest's real estate presales total a staggering $276 million for delivery in 2000/2001.
So there you have it folks. A poor Q2, but an "all runs open" report for Intrawest's all-important Q3 period (expected to be released on or about May 12). In light of this, Intrawest's current $0.94 mean earnings estimate for Q3 looks very conservative.
From a technical standpoint, Intrawest's "good story" has not been lost on the market. Compare ITW's marginal 0.8% price decline this week to MTN's 6.8% dive. Consider that ITW closed Friday on the day's high with good trading volume.
And perhaps most telling was ITW's market depth just before Friday's close. The five closest bid levels were clustered over a tight $0.35 range, while the five closest asks were spread out over a huge $3.10 range (all the way up to $27.00). Restated, buyers were falling all over themselves to get a piece of ITW, while sellers were pulling back. This kind of "come to papa" attitude by sellers is very bullish.
For the coming week(s), I expect this bull trend to continue. Intrawest's strong fundamentals and bullish technicals provide convincing evidence that this stock has "major rebound" written all over it.
Thomas
|
