Equity Research – Compagnie des Alpes

Compagnie del Alpes

Compagnie Des Alpes (CDA) stands as a major player in the European leisure industry, attracting more than 26 million visitors annually to its 22 managed sites: 10 large ski areas in the Alps, and 12 leisure parks, five and four of them in France and Belgium, respectively. We have to add to this figures, the 3.75 million players that visit their 5-a-side football and padel courts to the recently acquired subsidiary.

Map of main business facilities. Red: Leisure parks; Blue: Ski Areas

Positioned in high-altitude areas in the Alps, Compagnie des Alpes operates in some of the best ski areas in Europe. With great concessions and prime real estate in the French Alps, CDA enjoys a unique advantage: limited competition, which allows CDA to retain a loyal customer base and modestly increase prices each year. Their biggest business line is their theme parks, with some of them among the most visited in the EMEA region, such as Futuroscope or Parc Asterix. Their privileged locations in all divisions has enabled CDA to outperform its competitors and generate best-in-class EBITDA margins. Particularly, CDA is achieving close to 30% EBITDA margin in both Ski Areas and Leisure Parks segments.

CDA is immersed in a period of big capital expenditure, around €270 million each year in their ski areas and leisure parks, with the aim of making their facilities more attractive and increasing their visitorcapacity. Moreover, the company has made a recent acquisition that will suppose a new business line which is expected to have tremendous growth in the following decade: 5-a-side football and padel courts.

CDA has recently released the preliminary FY 23/24 (ending September 30), reaching €1.24B in sales and an estimated EBITDA of c. €350 million*- an increase of 10% and 15% over the previous fiscal year. With a market capitalization below €790 million and an estimated net debt (excluding IFRS 16) at around 2x EBITDA, CDA is trading at 4.5 times EV/EBITDA*. Moreover, we estimate a dividend yield of +6.5%. We believe the assets they operate, the current valuation, and its multiple growth drivers deserve a detailed analysis. *€350 million EBITDA, which we estimate +€315 million adjusting for IFRS 16. And a net debt above 640 million, resulting in an EV/EBITDA of 4.5 times.

Compagnie des Alpes 3 Business Units

The group operations and reporting are divided into 3 different business lines: Ski Areas, Amusement Parks (with the 5-a-side football and padel reported within this business line), and Distribution & Hospitality. The group started his history wiith the Ski Areas business which has a very marked seasonality pattern, which has been reduced gradually thanks to the introduction of complementary business lines detailed in today’s article:

Ski Areas and Outdoor Activities:

Under the French Mountain Act, Compagnie des Alpes operates ski areas via concessions from local authorities. CDA is responsible for the site management and for making the necessary investments in infrastructure (ski lifts, ski run development, artificial snow, etc) and in return, CDA receives the proceeds from the sale of lift passes, based on approved pricing scales. This arrangement includes indemnity protection, where the municipality would compensate CDA for the loss of earnings and past investments if a concession were revoked, more detail on the risk section.

As previously indicated, CDA operates solely in France, which is the biggest market in Europe, almost all the ski areas in the country (83%) are in the Alps. CDA sites are all high altitude (above 1,800 meters) which mitigates the snow conditions risks. Thus, the advantage and the moat of the business is clear, ski areas are irreplaceable and there will not be new ones which limits the entrance of competitors, this is even more pronounced in the best areas which of course are very correlated to the altitude.

Despite being a national market slightly decreasing in volume, around 0.7% yearly in the last decade, CDA has achieved a satisfying increase in volume, due to the best location and their good maintenance. Despite it, the French market has a solid and moderate variation in skier-days across the years as shown by the blue line in the first graph below. French nationals suppose around 65% of the visitors in French ski areas and 25% of the French nationals practice the ski at least once a year. So, CDA clients are in majority recurrent year over year.

The second graph shows how the average spending per skier-days has increased yearly 3.5% in nominal terms and 1.75% in real terms. The market structure is clear to us: there is a limited offer which cannot grow and a robust demand that is not very sensitive to prices, then the price tendency is obvious, to grow above inflation. To put in perspective the French prices, the French forfeit is cheaper than the Swiss or Austria, 17% and 11%, respectively.

If we focus on CDA, the average price of the skier-day is €39.1 (in 2023) for CDA vs €34.7 for the French market, with a much more aggressive increase in prices of CDA, profiting for the above-average installations.

Images from CDA’s presentations

One of the first concerns when analyzing the company is whether there will be the needed snow conditions to ski for the next years. And although, it is impossible to be completely accurate in the future, we can take a look at the snowfall days and conditions for some of the most important areas for CDA during the last 10 years and we observe that the conditions have remained quite stable. or at least not with a linear pattern. The graphs below are just two examples, but the rest of areas show similar patterns.

To reduce the seasonality and to profit from other business opportunities that the mountain can offer without depending on the snow conditions, the firm is expanding its offer of other outdoor activities through the subsidiary Evolution 2 such as hiking, mountain biking or Tyrolean traversing.

Pure Ski Players Peers

There are two (almost) pure ski-players listed in the public market, one in Sweden and the other in the US. Although both peers have slightly different business models than Compagnie des Alpes , we will compare only the Ski Areas, what is surprising to us is the divergence in the multiples that the market assign to Vail Resorts and Skistar, and the ones for Compagnie des Alpes .