What I find interesting:
According to the chart in Prsentation 1 page slide 4 Spinco will own 100% of the non-US business and own the US business through a holding with a 3rd party investor owning prefered shares in this US holding company. Sounds like they need someone else to provide money for whatever (survival, developing new resorts or whatever?) Who might this be?
Presentation 1 slide 11:
50% of 2010 revenues of 1.3 bln was from sale, 18% from resrot management, 15% from financing timeshares and 15% from rental. So management of our resorts does not sound too important to them?
Slide 20: Strategic priorities includes: "Opportunisticaly dispose of excess assets and selectively pursue "asset light" deal structures" What could that mean? Selling undeveloped land or also selling whole buildings to non-timeshare comapnies? What could Asset light deals be? Find exisitng and close to sold-out resorts to manage?
Slide 21-24:
In North America they plan to complete phases under construction, add new resort inventory or vacation experiences over time and monetize excess undeveloped land. In Asia they plan to add new resort locations (bud do not talk about building). In Europe they try to sell out existin resorts by 2015 and continue to manage them (doesn't sound like building e.g. Tuscany). Luxury (Ritz) will monetize excess inventory and undeveloped land and expand through affiliations.
Does not sound like they will build too much in the future...
Page 18 (of pdf document):
2011 planned revenue slightly higher than 2009 and 2010 but still way below 2008 or even 2007.
Page 21:
2011 planned net income negative 162 -169 mln manily due to impairment charge of 324 mln. Sounds like they had to write down inventory or land values. Expect to be profitbale (41 - 44) mln again in 2012.
Presentation 2 is about how great the resorts are and:
Page 11 (of pdf):
365,000 owners with 550,000 weeks
83,000 owners enrolled 153,000 weeks
23% of owners enrolled, this is way more than I would have expected.
$46 mln cash from enrollment fees
So average enrollment fee per enrolled owner was $554. Sounds like most enrollers had bought from the developer and lots of owners only enrolled one week.
Of weeks owners who tour onsite: 47% enrolled and 30% bought additional points, average purchase amount was $17,000.
I can absolutely not believe these numbers! But assuming I would not know of the resale market and had spent > $30,000 for my timeshare the $495 enrollment fee sounds cheap for the additional options....
Presentation 3:
Slide 58:
Owner profile: 95% are homeowners, average household income $150.000, 80% college educated, 75% married, average age 56 years
Slide 64:
9 in 10 tour participants experience high satisfaction according to 35 question survey to all tour participants (I did never have to answer these?!?)
Slide 65:
Volume per contract is around $24,000 in 2011. Revenue per tour is about $2,600. (Wow!)
Slide 75:
North American invesntory strategy includes:
Complete existing projects
Opportunistically reaquire inventory (ROFR)
Acquire distresse developer inventory (sounds like adding new resorts built by other developers)
Build new projects where justified, Asset Light, Turnkey, Greenfield (Whatver all this means?)
Slide 76:
Currently $320 mln North America inventory completed with a expected contrct (sales) value of $840 mln
Slide 77:
Asia Pacific Inventory Strategy:
Complete existing projects
Opportunistically reaquire inventory
Partnerships, Turnkey projects and Co-located properties
Slide 85:
"Balanced Growth" includes:
Strategic Alliances and new brands
Slide 90:
Financing of timeshare sales: Typical COupon 12,5% - 13,5%, borrowers average FICO score 737.
Who in his right mind with good credit would take out a loan at 12,5% for 10 years???
Slide 100:
Sales of timeshare weeks/points are lower in 2011 than in 2010 and 2009
Slide 102:
Marketing and sales expenses as percentage of contract sales have peaked in 2009 at 56%, now down to 50% with a target of 42%-46%
Slide 103:
Margin (profit left over from sales) now 9%-13%, long term goal 20%. Bottom was only 2% in 2009, 2007 was 15%
This is way less than I would have expected.
Slide 109:
Marriott royalty fee is $50 mln per year plus 2% of contract sales. (Wow!)
The management income of 60-70 mln does at least cover the royalty
Funny thing about the presentation is that slides talking about Europe have pictures of US resorts and vice versa. So Markeing / IR people seem not to know the resort portfolio too well...
My conclusion:
Although I love the product, I see no reason to buy Spinco Shares.
