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Skydive the Beach Group Ltd share price rockets on huge profit growth

The Skydive the Beach Group Ltd (ASX: SKB) share price has climbed higher by over 10% to 63 cents this morning after the adventure company reported a huge jump in earnings.

Here’s what you need to know:

  • Total half-year revenue increased 58.9% to $39.1 million.
  • Earnings before interest, tax, depreciation, and amortisation grew 82.2% on the prior corresponding period to $8.2 million.
  • EBITDA margin widened to 21% from 18.3%.
  • Net profit after tax increased 37.4% to $3.6 million.
  • Earnings per share of 1.7 cents.
  • Net Cash from operating activities increased 192.1% to $6.5 million.

Whilst the company posted solid organic growth during the half, the biggest driver of the strong result was the acquisitions of Raging Thunder Adventures, Nzone Skydive, and Skydive Wanaka.

According to the release bookings grew 54.3%, with 27.3% of this growth coming organically.

Although net profit increased at a slower rate to revenue, this was the result of a lower tax rate during the prior corresponding period. The tax rate for the first-half of FY 2016 was 18% compared to 30% this half due to the impact of asset revaluation reserves and deferred tax liabilities.

Without this tax discrepancy net profit growth would have been in line with revenue growth by my calculation.

For the full-year, management expects to post revenue of $89.8 million and EBITDA of $21.8 million. This equates to year-on-year growth of 53.5% and 61.5%, respectively.

Is it a buy?

Like Mantra Group Ltd (ASX: MTR) and Event Hospitality and Entertainment Ltd (ASX: EVT) I think Skydive The Beach is a great way for investors to gain exposure to the tourism boom in Australia.

Its shares may be a little on the expensive side at 30x trailing earnings, but I believe its strong growth prospects more than justifies the premium.

Its shares aren’t the most liquid on the market, so setting a limit price for in or around 63 cents might be the best way to grab hold of shares.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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