Hi everyone, hope all is well, just wanted to share my thoughts on Malibu Boats. Personally, I think it's a great company with a MOAT, however competes in a very cyclical industry with a small TAM (Total addressable market) of $13.1 billion.
Company Overview:
Malibu Boats is a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport boat, stern drive and outboard boats under eight brands – Malibu, Axis, Pursuit, Maverick, Cobia, Pathfinder, Hewes and Cobalt. They have the #1 market share position in the United States in the performance boat category through our Malibu and Axis brands and the #1 market share position in the U.S. in the 24' – 29' segment of the stern drive category through our Cobalt brand. They have top market share positions in their other brands too. From the periods 2010 – 2020, they have expanded market share in performance sports boats from 24.5% to 31.7% and stern drive from 14.2% to 36.1%.
What I Like (Why I think MBUU has a competitive advantage):
1) They have vertically integrated a number of key components of their manufacturing process making them less dependant on suppliers which is why they have good gross and operating margins for a boat manufacturer. They have begun manufacturing their own engines and is installed in some of their boats through their partnership with GM, they recently acquired a wiring harness business, and they design their own towers, boat trailers, soft grip flooring etc. Looking at their closest competitor annual reports, MasterCraft, they haven't mentioned these vertical integration strategies and still solely rely on other suppliers for all of their boat engines.
2)
- If you compare unit sales growth between MasterCraft & Malibu from 2017-2021
| 2017 | 2021 | |
|---|---|---|
| MasterCraft | 2790 | 3343 |
| Malibu | 3815 | 4841 |
MasterCraft sales per unit increased 19.8%. Malibu sales per unit increased 26.9%.
- Unit sales isn't the only thing Malibu is winning at though. If we look at Average Price Per Unit growth from 2017-2021 between MasterCraft and Malibu you will see:
| 2017 | 2021 | |
|---|---|---|
| MasterCraft | $82,000 | $109,000 |
| Malibu | $74,000 | $113,000 |
MasterCraft average price per unit growth was 32.93% and Malibu was 52.70% from this period. In 2022, Malibu net sales per unit was $131,267. No data from MasterCraft since 2022 annual report isn't released yet.
3)
- 2022 Malibu annual report indicates that unit sales for the industry has decreased in 2022 however all of Malibu boat sales have increased in unit volume, despite the increase in price.
4)
- Current Ratio is 2.14 and D/E is 0.7. Very healthy balance sheet.
What I Think:
I think the stock is a little too pricey at the moment but I think this company does have a competitive advantage due to their ability to grow their unit sales at a faster rate than competitors and increase their prices. This indicates the company has pricing power and a brand moat. This is also due to their extensive dealer network. However, the company does have a litigation issue which will cost the company around $140 million. Check it out and let me know what you think 🙂
** I have a more in-depth analysis on my profile if you want to check it out 🙂
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