Macquarie Prefers Vail Resorts In Ski Stocks Group

In a report published Monday, Macquarie analyst Matthew Brooks said that the "bull case" for mountain resorts was based on the "lack of new supply," with no new destination resorts in North America since 1981 and the number of US resorts gradually declining. "While skier visits are roughly flat, or even rising at the larger resorts, the lack of new supply means the ski industry has structural pricing power that goes beyond the economic cycle," analyst Matthew Brooks said. Brooks initiated coverage of Vail Resorts, Inc.

with an Outperform rating and a price target of $125. "We favour the economics of Vail's model," Brooks said, while adding that the company had exhibited solid long-term pricing power, supported by a high-end customer base. "The phenomenal value of the Epic Pass also allows MTN to manage weather risk, while at the same time creating a network effect to support their acquisition strategy," the Macquarie report said. Brooks expects Vail to sell more passes in Australia and attract "a greater share of the 1m a year in Australian skier visits to their US resorts." The report added that the company seemed to be building "a mountain of cash" and could have $1.1bn in equity for acquisitions by 2020. Brooks initiated coverage of Intrawest Resorts Holdings Inc

with a Neutral rating and a price target of $12. While saying that Intrawest was similar to Vail as it owns a portfolio of resorts that have attractive economics, Intrawest's pricing power is likely to be offset by a weak Canadian currency, the analyst said. Macquarie initiated coverage of Peak Resorts Inc

with a Neutral rating and a price target of $7.70. "The problem is that we do not know what the weather will be like in 2015/16 and we think this is more important for SKIS as a normalised year of earnings is already spent. If the weather is bad, we think the 8% dividend yield is at risk. We also think more debt will be needed to fund acquisitions, and 41% of EBITDA already goes to interest," Brooks mentioned.