News: VVA Viva Leisure Says FY23 Guidance Is Reaffirmed, page-2

Not many comments on this one.
But it looks worth having a look, for at least 2 reasons :
- focus on the interesting demographics (young adults, average age of their customers was 32 in 2019) while this demographics continues to spend for discretionary items*,
- strong recovery for their margins during the last 4 quarters (from 13.7 % in Q3 22 to 21.6 % in Q2 23).
One of the main drivers of their margins is the utilisation rate which keeps increasing from 65.6 % in Jan 22 to 73.6 % in Jan 23.

Another thing I like : they have been able to increase prices, without affecting the level of their utilisation rate.
They increased their member fees twice in 2022 (total increase of 6.5 %) expected to cover their expense increase of 6.5 %e (like for like) in FY 23.

Good that the company reaffirmed their guidance of 28-30 m of EBITDA 23.
Reminder : market cap of 121 m (at 1.34 $), net financial debt of 12 m and 240 m of lease liabilities.

They have a rather good level of free cash flow** of 8.1 m (taking only maintenance Capex, rather than total Capex).
However, the cash flow from operation (24.6 m) look high versus the EBITDA (14 m), so I need to understand the difference between the 2 elements to see if this level of free cash flow is sustainable.

Tough element with them is the valuation, given that they have a high level of leases.
So, we have to decide if we include these leases in their debt or not, when we calculate valuation ratios like FCF yield and EV/EBITDA.
Or we can just look at the PE 23 of 14.4 (based on H1 23 annualised).
The stock has also a rather poor liquidity, so you'd better have a strong conviction if you go with this one.

Still need to look deeper at this company.


* no sign of slowdown for VVA revenues so far in H2 23
** after repayment of lease