Bauer Performance Sports Ltd. BAU-TSX
Thursday’s close: $11.91
52-week trading range: $8 to $12.44
Annual dividend: none
Analysts’ rating: There were five buys, three holds and no sells, according to Bloomberg data. Target prices ranged from $11.50 a share as estimated by Scotia Capital analyst George Doumet to $15.50 a share by Paradigm Capital analyst Corey Hammill.
Recent history: Shares of the Exeter, N.H.-based hockey equipment maker have climbed 48.5 per cent over the past year as Bauer continued on the acquisition trail. Bauer has about 50 per cent of the global market in ice hockey equipment. It was owned by athletic giant Nike Inc. until the company was purchased in 2008 by U.S.-based Kohlberg & Co. along with Canadian businessman Graeme Roustan for about $200-million (U.S.). Bauer, which is now 40-per-cent owned by Kholberg funds, went public in March, 2011, at $7.50 (Canadian) a share. Bauer recently closed a deal to buy bankrupt Ottawa-based Combat Sports Group, a designer of baseball bats, hockey sticks and lacrosse shafts. Last year, it acquired Cascade Helmets Holdings Inc., a New York-based designer and maker of lacrosse helmets and eye wear, and Toronto-based team sports apparel provider Inaria International Inc.
Manager insight: Bauer is a leader in hockey equipment, but it’s an emerging growth story because of its goals to be dominant in other sports and in the apparel business, says Frank Mersch, a portfolio manager and co-founder at Front Street Capital. The company is No. 1 globally in areas like hockey helmets and skates.
With the acquisition of Cascade, lacrosse is another key leg because it is the fastest-growing collegiate U.S. sport, said Mr. Mersch, who has owned shares of Bauer since it went public. Bauer is also gaining a higher profile as sponsor for the University of Notre Dame’s men’s lacrosse team.
Bauer is also trying to penetrate the apparel side, he added. The NHL licence is held by Reebook, which is part of global giant Adidas AG, but that contract is coming up in 2016 “so it will be bidding for that,” he added.
Along with hockey, lacrosse and apparel, Bauer would like to make another acquisition, he said. “When you think about helmets, sticks and other equipment – if they can use their technological expertise in another leg to that stool – it is just another driver going forward.”
The third quarter was weak because “one of their competitors was dumping inventory,” but the first quarter beginning in June is traditionally the strongest for Bauer as teams purchase equipment for the upcoming season, Mr. Mersch said. He has a “conservative” target of $13-to-$15 a share on its stock over the next 12 months.
A recession is one risk, as consumers may not have enough money to buy expensive equipment, and other rivals could enter the market, he said. “Nike exited hockey, but you never know about a big sports company. They could always come back and take on Bauer.”
But Bauer is focused on being niche player, he said. “What we have found … is that those niche players who dominate in their positions can control their margins and their profitability.”