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In February 2016, Diamond Resorts International Inc (NYSE: DRII) launched a strategic review to unlock shareholder value. MKM Parners’ Christopher Agnew initiated coverage of the company with a Buy rating and a price target of $27.
Analyst Christopher Agnew expects leisure focused businesses to outperform in 2016, backed by strong consumer demand.
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High Customer Satisfaction
Diamond Resorts benefits from repeat purchases, with 60 percent of its VOI sales to existing members. Another 20 percent sales are to non-members at home owners’ associations that are managed by the company. Only 20 percent sales are to new members.
Higher ROIC
Diamond Resorts reacquires recycled inventory from owners who are fully paid off, can no longer pay maintenance fees. “Inventory reclamation is more capital efficient, has minimal project level risk, and has a higher ROIC,” Agnew wrote.
Gross VOI Sales Growth Potential
Diamond Resorts is targeting same-store VOI sales growth of 10-15 percent over the next 2-3 years. The analyst expects the company to look to “consolidate the fragmented industry with similar sized deals of Intrawest Resort Group (~$85mn).” He added, “DRII has more flexibility, opportunity and higher potential synergies with no brand affiliation (royalty deals, brand standards) than its peers.”
Recurring Fees
More than 30 percent of the company’s revenue is contributed by recurring fees, Agnew noted.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.