2022 second quarter net income attributable to shareholders was $17.8 million or $0.87 per diluted share, compared with 21Q2’s $19.5 million or $0.93 per share. The decline in EPS occurred despite a 21.8% increase in revenues to $235.6 million.
System-wide sales (SWS) of vacation ownership interests (VOIs) were $198.5 million in 22Q2, up 21.5% from $163.4 million in 21Q2. Fee-based sales fell 48.8%, as BVH focused on selling its own inventory. That caused a comparable decline in commission revenue. Interest income advanced 20% with the growth in the securitized notes portfolio.
The increase in revenues was more than offset by a greater increase in costs and expenses. The cost of vacation-ownership interest (VOI) inventory doubled, but off of a low base, as such costs represent only 11% of VOI sales. SG&A expense increased 30%, due mostly to higher marketing spend. Net income before non-controlling interests declined 8.6% to $21.8 million.
The decline in 22Q2 earnings was accompanied by a decline of 28% year-over-year and 3.8% sequentially in vacation packages sold, a leading indicator of VOI sales. In addition, the rate at which Bluegreen converts guest tours to sales declined 180 bp to 14.7% in 22Q2. Both are signs that buyers may be stepping to the sidelines. If so, the company should be cautious in its drive to expand its marketing infrastructure to grow sales. However, slowing inflation and a leveling off of interest rates may limit the downside risks to the economy, encouraging buyers to come back into the market.
BVH’s stock has underperformed both the S&P Small Cap 600 Index and its peer group this year. It now trades at an even wider discount to peers. Under the assumption that inflation will recede, interest rates will level off by year-end and the economic outlook will improve, I believe that BVH can still deliver higher EPS in 2022 and 2023, which should lead to modest multiple expansion. Accordingly, I am raising my performance rating a notch to “2” (outperform) and also my price target from $25 to $27. The new target equates to a forward multiple of 7.2 times projected 2023 EPS of $3.76 and a potential total return of 15.3%, including the stock’s 2.5% dividend yield.
This is a summary of my recent update report on Bluegreen Vacations Holding Corp. (BVH). To obtain a copy of the full report, please reach out to me using the contact information listed below.
August 12, 2022
Stephen P. Percoco
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Linden, New Jersey 07036
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