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Imperial Capital Upgrades ClubCorp To Outperform

Imperial Capital Upgrades ClubCorp To Outperform

Imperial Capital has upgraded ClubCorp Holdings Inc (NYSE: MYCC) to Outperform from In Line, saying shareholder pressure will result in unlocking value for the company. Furthermore, the brokerage sees the company as a potential acquisition target.

The upgrade comes after FrontFour Capital, a 3.4 percent owner sent a letter to ClubCorp CEO Eric Affeldt, calling for improvement in its messaging, disclosure and capital allocation strategy. FrontFour also called for the board of directors to pursue strategic alternatives.

"We see potential for the letter to compel management and the board to re-focus ClubCorp's strategy and more fully unlock the value of its assets, which include 30K owned acres and several trophy properties. Additionally, MYCC generates approximately $150 million in annual operating free cash, allowing for more aggressive share buybacks or debt pay-down," analyst George Kelly wrote in a note.

Related Link: What Clubs Will Tiger Woods Use For His Comeback?

Kelly also sees potential for ClubCorp to be the target of an acquirer at levels above the current trading given its strong operating cash flow and is nearing the end of a heavy acquisition and investment cycle.

"We believe the spending cycle will fall in 2018 and approach more normal levels, returning to a MSD percent range of revenue. Private equity firms have historically been very active in the golf, leisure, and fitness spaces," Kelly noted.

The analyst also raised its price target to $21 from $14, while the stock closed Thursday's regular trading at $15.47. At time of writing Friday, ClubCorp was seen trading at $16.01, up 3.49 percent on the day.

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Latest Ratings for MYCC

Jul 2017MKM PartnersDowngradesBuyNeutral
Jul 2017Imperial CapitalDowngradesOutperformIn-Line
Mar 2017MacquarieUpgradesOutperformNeutral

View More Analyst Ratings for MYCC
View the Latest Analyst Ratings

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