Whistler is expected to benefit from the weaker Canadian dollar, which will help attract American skiers.John Lehmann/The Globe and Mail
Investors looking for a high-yield stock reaching new altitudes are sizing up shares of Whistler Blackcomb Holdings Inc., even as doubts linger over the B.C. mountain resort company's limited growth opportunities.
Shares of the company behind the iconic Whistler Blackcomb ski destination, a key venue during the 2010 Olympic Winter Games, touched a record high Tuesday of $20.74, before closing at $20.59. The stock is up about 24 per cent in 2014.
The company recently reported record earnings and a jump in revenues per visitor. Going forward, it is expected to benefit from the weaker Canadian dollar, which will help draw American skiers and keep more Canadians at home.
Among nine analysts who cover the stock, five rate it "buy," while four say "hold," according to S&P Capital IQ. The analyst consensus price target over the next year is $22. Its dividend yield is about 5 per cent.
"It's a very stable business with an excellent asset and, as a result of that, there's very attractive cash flows that support the dividend and maintenance capital," said CIBC World Markets analyst Mark Petrie.
But Mr. Petrie has a "sector performer" rating on the stock and a $21 target, believing the company has some growth limitations.
"The challenge is that it's a single asset and lacks the diversification that some of the other businesses in the same industry might offer," Mr. Petrie said.
Whistler Blackcomb generates about 85 per cent of its revenues in the winter. Michael Bowman, portfolio manager at Wickham Investment Counsel, said he doesn't own the stock because of its reliance on the weather. For example, the company reported that ski visits were down 4.7 per cent for the year ended Sept. 30, due to lower than normal snowfall in the first half of last year's ski season.
"I don't see much growth in the share price. It's more of a yield play in my mind," he said.
Whistler Blackcomb is looking at ways to lure more visitors year round. Some options it is considering are new trails and lodges, as well as summer attractions such as rock climbing and a water park. The company is seeking approval from the government of British Columbia to allow for new development since it operates on Crown land.
"It's a niche business, but we've got a remarkable asset in a unique space that has pricing power," chief executive Dave Brownlie said in an interview. "In good times and not so good times, this asset and this resort perform."
Raymond James analyst Theoni Pilarinos cites many successful examples of ski resorts also expanding their non-ski attractions including Vail Resorts Inc.'s Adventure Ridge, which includes snow tubing and ski biking.
"Longer-term, we believe development of [Whistler Blackcomb's] non-ski business will help to grow and weatherproof earnings," Ms. Pilarinos said in a recent note. She rates the stock "outperform" and recently increased her price target to $23 from $22.
The stock hit a previous 52-week high of $20.70 on Dec. 11, the day after the company reported record earnings for the fourth-quarter and fiscal year ended Sept. 30. Revenue per visit increased 7.8 per cent for the year ended Sept. 30, driven in part by higher lift ticket prices.
TD Securities analyst Derek Lessard has a "buy" on the stock and increased his target to $23 from $22, citing growth in summer visits which he said points to an "improving resort event strategy."
He believes the company is close to renegotiating its development agreement with the province, which will allow it to build more attractions for year-round visitors.
"Until then, we believe that a 5-per-cent dividend yield, along with some modest upside to the share price in the interim are attractive incentives for investors to wait for the next phase of growth to be announced," he said.