22Q3 net income attributable to shareholders was $23.0 million or $1.19 per diluted share, compared with 21Q3’s $23.1 million or $01.06 per share. Revenues grew 17.0% to $250.8 million, but operating expenses rose 19.8% to $152.9 million. The increase in EPS was due to a 12.2% reduction in weighted average shares outstanding as a result of share buybacks completed this year.
System-wide sales (SWS) of vacation ownership interests (VOIs) were $206.9 million, up 14.6%. Fee-based sales fell 60%, with a similar decline in commission revenues, as BVH has focused on selling its own inventory. Net financing revenue rose 22.5% with growth in the receivables portfolio.
The cost of vacation-ownership interests (VOIs) sold doubled, but off a low base, as such costs represent only 8% of VOI sales. SG&A expense rose 15%, due to higher marketing spend, but the increase was much slower than in 22Q2. Net income attributable to shareholders rose 1.2% to $27.6 million.
VOI sales growth was driven by an 18.7% rise in the average sales price, partially offset by a 3.0% drop in the number of sales transactions. Vacation packages sold, a leading indicator of VOI sales, fell 22%, the third consecutive YOY decline, but sequential sales have been stable in each quarter this year. The guest tour conversion rate slipped again to 14.5%, the lowest since early in the pandemic. Buyers who have stepped to the sidelines should come back if concerns about the economy recede.
On Nov. 9, BVH launched a cash tender for up to 4.5 million shares of its Class A common stock at a price of $22.17 per share, a 30% premium to the Nov. 2 price of $17.05. If completed, the tender will reduce Class A shares outstanding by nearly 30% at a cost of $99.75 million. The reduced share count raises future EPS significantly but combined with BVH’s stepped-up capital spending program, it will also add leverage to BVH’s balance sheet. My projections assume that BVH repurchases half of the share tender maximum, or $50 million, which results in projected 2023 diluted EPS of $4.15. If BVH purchases all $99.75 million, 2023 EPS is $4.92; if none 2023 EPS is $3.55.
BVH’s stock has underperformed the S&P Small Cap 600 and peers since my last report. Assuming no recession, my projections anticipate modest growth in 2023 earnings which, combined with the reduction in the share count from the tender, produces significant EPS growth. I am lowering my price target from $27 to $25, which equates to a one-year forward multiple of 6.1 times (unchanged from the current forward multiple) applied to projected 2023 diluted EPS of $4.15. From the current price of $20.85, the price target represents a potential total return of 23%, including the 2.9% dividend yield. Thus, I am also raising my performance rating a notch to “1” (strong BUY).
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 provided below.
November 16, 2022
Stephen P. Percoco
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Linden, New Jersey 07036
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