Callaway Golf (ELY): TopGolf is 'Undiscovered Gem' Worth $3/sh - KeyBanc
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Price: $21.33 --0%
Rating Summary:
15 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Rating Summary:
15 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
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KeyBanc maintained a Buy rating on Callaway Golf (NYSE: ELY) and raised its price target to $14.00 (from $10.00). Analyst Scott W. Hamann thinks TopGolf is an "undiscovered gem" worth $3 per share.
"Following our proprietary analysis of TopGolf, a business in which ELY owns a minority stake (KBCM estimated high teens percent), we believe the investment is not appreciated by the market and could represent as much as $3 per share to ELY by 2017 given the Company's unique product offering, the recent acceleration in unit growth and attractive white-space opportunity," said Hamann.
"TopGolf is a high-growth sports entertainment facility company that is best described as a cross between bowling and a traditional driving range (Figure 1) complete with food and beverage offerings and private event services. Our $3.15 per share value (Figure 4) assumes TopGolf opens seven units annually beginning in 2015, incorporating a 12.0x exit multiple (supported by historical "high-growth" retail/restaurant IPO multiples; Figure 7). Our model makes different growth assumptions for legacy units and uses two stages of growth for next-generation units, while assuming a four-wall EBITDA margin 25.5% for legacy units and 33.0 35.0% for next-generation units. That said, we believe the potential exists for TopGolf to ramp unit growth to 10 units per year, equating to a value of $5.45 per share (Figure 5) at a higher 15.0x exit multiple. Bottom line, our thesis on ELY remains intact and we now believe the TopGolf business represents an attractive option value to ELY shareholders," he added.
For an analyst ratings summary and ratings history on Callaway Golf click here. For more ratings news on Callaway Golf click here.
Shares of Callaway Golf closed at $9.48 yesterday.
"Following our proprietary analysis of TopGolf, a business in which ELY owns a minority stake (KBCM estimated high teens percent), we believe the investment is not appreciated by the market and could represent as much as $3 per share to ELY by 2017 given the Company's unique product offering, the recent acceleration in unit growth and attractive white-space opportunity," said Hamann.
"TopGolf is a high-growth sports entertainment facility company that is best described as a cross between bowling and a traditional driving range (Figure 1) complete with food and beverage offerings and private event services. Our $3.15 per share value (Figure 4) assumes TopGolf opens seven units annually beginning in 2015, incorporating a 12.0x exit multiple (supported by historical "high-growth" retail/restaurant IPO multiples; Figure 7). Our model makes different growth assumptions for legacy units and uses two stages of growth for next-generation units, while assuming a four-wall EBITDA margin 25.5% for legacy units and 33.0 35.0% for next-generation units. That said, we believe the potential exists for TopGolf to ramp unit growth to 10 units per year, equating to a value of $5.45 per share (Figure 5) at a higher 15.0x exit multiple. Bottom line, our thesis on ELY remains intact and we now believe the TopGolf business represents an attractive option value to ELY shareholders," he added.
For an analyst ratings summary and ratings history on Callaway Golf click here. For more ratings news on Callaway Golf click here.
Shares of Callaway Golf closed at $9.48 yesterday.
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