Research: Consumer
SATS continues manifestly to deliver on its strategy of premiumisation with currency adjusted membership revenue up 11% in Q423 (15% for the full year) and assurance of ‘significant unleashed potential’ within the existing estate in terms of capacity utilisation and membership yield. Operating leverage, complemented by tight cost control (Q423 currency adjusted opex down 2%) and minimal expansionary capex for the time being, provides scope for lucrative marginal revenue growth (Q423 EBITDA up tenfold on 13% higher revenue). Making the most of current resources is expediting debt reduction with leverage targeted to fall below 2x (2.3x at end 2023). On SATS’ preferred metric of pre-IFRS 16 adjusted EBITDA, the consensus forecast of NOK732m for 2024 gives an EV/EBITDA of 6.6x.
SATS |
Lean and healthy
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Recreational services |
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26 February 2024 |
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SATS continues manifestly to deliver on its strategy of premiumisation with currency adjusted membership revenue up 11% in Q423 (15% for the full year) and assurance of ‘significant unleashed potential’ within the existing estate in terms of capacity utilisation and membership yield. Operating leverage, complemented by tight cost control (Q423 currency adjusted opex down 2%) and minimal expansionary capex for the time being, provides scope for lucrative marginal revenue growth (Q423 EBITDA up tenfold on 13% higher revenue). Making the most of current resources is expediting debt reduction with leverage targeted to fall below 2x (2.3x at end 2023). On SATS’ preferred metric of pre-IFRS 16 adjusted EBITDA, the consensus forecast of NOK732m for 2024 gives an EV/EBITDA of 6.6x.
Clear strategy
Despite the long-term opportunity as a major player for consolidation in both its home and new markets (guidance of an average eight to 12 openings per year), SATS is at pains to confirm its immediate priorities of optimisation and deleveraging, as set out at its latest capital markets day in Q422. Scope for meaningful gains across its large estate of 276 clubs and 731,000 members is evident in the steady rise in demand for fitness and SATS’ ever-widening and unrivalled product offering, with membership up 10,000 in 2023 despite higher pricing, tough macro conditions and a post-COVID-19 bounce and Q423 average revenue per member up 6% despite predictably lower additional sales (physical training and retail), given the economy. Members per club still lag pre-pandemic levels, with space utilisation yet to benefit significantly from recent initiatives, such as downsizing.
Consistency of message in Q423 and beyond
The high-visibility subscription revenue model and disciplined implementation of premiumisation, with proven high profit and cash conversion, ensured no upset with SATS’ strong Q423 outturn (adjusted pre-IFRS 16 EBITDA NOK128m against NOK12m in Q422) and positive outlook statement. January saw continued good momentum in the number of workouts (up 4% on a demanding comparative), the company’s key metric for likely member retention and satisfaction.
Valuation: Fair
SATS’ FY24e EV/EBITDA of 6.6x looks to be similar to that of its peers, Basic-Fit and Gym Group, which have yet to report FY23 results (due in mid-March).
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Consensus estimates
Source: Consensus per company website (2024) and Thomson (2025). Note: *Pre-IFRS 16 and excluding exceptionals. |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Investment Companies
Georgia Capital (GCAP) reported a Q423 NAV total return (TR) of 7.7% in Georgian lari (GEL) terms (3.4% in sterling terms), bringing the FY23 NAV TR to a strong 26.5% (20.4% in sterling terms). The considerable increase in the sterling share price of Bank of Georgia (BoG) was the main contributor, adding c 5.1% and 19.5% to GCAP’s opening NAV in Q423 and FY23, respectively. This was further assisted by positive revaluation of all large and investment-stage private holdings, except for the hospital business. In aggregate, GCAP’s private holdings added 1.9pp to its Q423 NAV TR. NAV-accretive buybacks of US$8.3m added a further 0.9pp.