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A Trending Small-Cap Stock to Hold On to - MBUU

Aug 06, 2021 | Team Kalkine
A Trending Small-Cap Stock to Hold On to - MBUU

Malibu Boats, Inc.

MBUU Details

Malibu Boats, Inc. (NASDAQ: MBUU) designs, manufactures, and markets a recreational and performance powerboats portfolio. MBUU is a market leader in the performance sport boat category through its Malibu and Axis boat brands and operates via three segments, i.e., Malibu, Cobalt, and Saltwater Fishing. Its boats facilitate water sports, including water skiing, wakeboarding, and wake surfing, as well as general recreational boating. It operates through a network of independent dealers in Europe, Asia, the Middle East, South America, South Africa, and Australia/New Zealand.

New Product Launches: During July 2021, MBUU introduced two new towboats for 2022. The Malibu Wakesetter 25 LSV is a 25-foot flagship of the company's Luxury Sport V-Drive (LSV) line and offers vast interior space, storage capacity, and ballast, with unbelievable wakes and waves. The Malibu Wakesetter 21 LX is a 21-footer affordable towboat and includes the standard Malibu features and performance, along with a new Hybrid Bow.

Q3FY21 Results: During Q3FY21 (ended March 31, 2021), the company reported a 49.8% increase in revenue to USD 273.16 million vs. USD 182.31 million in Q3FY20, owing to a 36.6% increase in unit volume and a favorable model mix in its Malibu and Cobalt segments. Unit volume for Q3FY21 increased to 2,454 units, supported by the recent acquisition of the Maverick Boat Group in January 2021. Net income for the quarter was USD 33.80 million, compared to USD 22.78 million in Q3FY20.

Key Risks: MBUU derives most of its sales from one to three-year agreements with its network of independent dealers. Its top ten dealers accounted for 38.5% of its net sales for FY20 (ended June 30, 2020), with sales to dealers under common control of OneWater Marine, Inc. accounting for 15.2% of net sales in FY20. Accordingly, losing any of these critical dealers could adversely impact MBUU's financials. Further, General Motors LLC is its sole supplier for Malibu and Axis engines. While the acquisition of Maverick may have mitigated these risks to some extent, their possible effects remain significant.

Outlook: In its Q3FY21 earnings release, MBUU stated that it expects its FY21 revenue to grow 38% YoY, with an adjusted EBITDA margin of 20.5%.

Valuation Methodology: EV/EBITDA Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

  • % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MBUU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: MBUU stock surged 12.79% in the past six months and is currently leaning toward the higher-band of the 52-week range of USD 46.37 to USD 93.00. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 66.98. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 91.77. Considering the uptick in the stock price, new product offerings, the "market leader" status, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 84.11, down 0.90% as of August 05, 2021, 1:32 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.