Skydive the Beach - Out of the flying plane and into Cairns shire.

Whilst accompanied by a rights raising of close to $20m, the relatively low price multiple of RT (4x EBITDA versus SKB's almost 10x) makes the acquisition highly EPS accretive.

This is a meaningful acquisition event for 3 reasons:

1. It indicates SKB's willingness to move outside its traditional skydiving model, majorly increasing its potential market size and announcing to the industry its intention as an ongoing acquirer.
2. It will highlight the meaningful synergies available through back-end bookings, deal packaging and logistics and further solidify SKB's no.1 position in the domestic adventure tourism space.
3. It is almost guaranteed to push the company through a market cap of $250m (a far cry from the $58m value it listed at in March 2015) opening it up to interest a host of new investors.

Raging Thunder operates 4 main business lines out of Cairns:

• White water rafting
• Hot air ballooning
• Canyoning
• Fitzroy Island ferry cruises

These four business will achieved revenue of around $14m and a profit of $3m in FY16. Combined with SKB's existing operations in Mission Beach, its shop front presence in Cairns and existing network of bus transportation we expected synergies of a further $1m will be extracted in the coming year.  This is arguably the most exciting of the 3 major acquisition made since becoming a listed company.

It's worth remembering that with just 8 months of contribution in FY17, the RT acquisition will contribute to earnings growth well into FY18.  Our current forecasts conservatively see the company earning around $15m in FY18 placing it on a modest PE of 16x, which we believe is more than attractive giving both its incredible track record to date and obvious growth prospects.

Cyan has been a holder in SKB since IPO and has steadily increased its holding  at every new milestone.  With the current momentum in the business we can only envisage this investment trend continuing.

Link here:  (VIEW LINK)

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