Story. Grand Banks Yachts (“GB”) is an iconic brand in the luxury boating industry with more than 50 years of experience in the business of manufacturing and selling luxury boats. However, the current credit crisis has dealt a severe blow to near-term prospects.

Point. GB Yachts is renowned for its craftsmanship and innovation and about two thirds of the models that GB is selling today were launched within the past three years. Capacity has increased by more than 10 boats per year
due to higher efficiency, allowing GB to launch new models like the 41EU and take on orders for 30 of the same to be delivered within a year. Prior to the crisis, the industry had been holding up pretty well and despite the slowdown in the US economy, which is GB’s main market, the yacht market had been expected to continue growing globally, driven by the increasing number of wealthy individuals in emerging markets. However, the crisis has unfolded to global proportions now and order flow this year across geographies and
across models has slowed significantly.

Relevance. 68% of GB’s revenue currently comes from the US, rendering it more vulnerable to the US slowdown than its European peers. The Group’s exposure to higher growth Ultra HNWI markets of Russia and the Middle East is limited as well.

Price Target : 12-Month S$ 0.58
Reason for Report : Initiating Coverage
Potential Catalyst: Orders from emerging markets