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SPWH - LT Beneficiary Of Weak NICS - Small MSA Mom & Pops Will Fold

|Includes: Sportsman's Warehouse Holdings, Inc. (SPWH)

Target Price Still $11 (+100%); multiples will stay muted 6-8x but steady EBITDA growth gets the stock back

- FY18* 3.2 million SF * $270/SF = $864 million (consensus 860) @ 9% = EBITDA 78M (consensus 84M)

o Bear Case 6x FY18 EBITDA = (468-217)/42 = $6 (no downside from here)

- FY19* 3.5 million SF * $275/SF = $963 million (consensus 932M) @ 9% = EBITDA 87M (consensus 91M)

o Bull Case 8x FY19 EBITDA = (696-245)/42 = $11 (+100%)

- *Half of EV is net debt & January Year End

- *Sales/SF should lift with smaller footprint mix

- *FY16 $272 Sales/SF; LTM EBITDA Margins 10% structurally higher

Peak fear from the outdoors-men group / baby with the bath water

- CAB/BASS merger arb +44%; GMTN bankruptcy; but SPWH still growing!

- VSTO disgusting guidance; AOBC & RGR slammed on Trump 2A gun deregulation

RE: Gun sales slowing with no regulatory fear (half gun mix)

- RE: Bad NICS - Guns are still a LT +5-8% growth market; ammo has found supply & demand balance

- *Short Term BAD NICS is actually a long term tailwind; will shake out the small mom & pop gun stores*

Liquidity Concerns Overblown - Currently 2.7x Levered (218/80); $25M available on revolver

- Assuming revolver is fully drawn by year end, should be 2.8x levered (245/88)

- Company usually runs cash light, as of October 2016, only $3M in cash

Currently 75 Stores with 3.2 million gross SF, 85-87 @ year end

- Started 2009, originally 45K SF evolved to 30K SF focused on small MSAs with 50k-250K people

- Currently avg. SF of 43K vs. Cabela's 75K-95K SF; opening 15K SF locations - currently 5, +2-3 2017

Small Town Focus

- Reminds me of CKEC vs AMC; CSV vs SCI; SKIS vs. SNOW, small player focused on small towns

- Small MSA focus, Small store foot prints, everyday low prices; where more outdoorsmen live

Focus on no frills & everyday low prices

- Guest experience is a simple, d├ęcor is simple, shelves are more dense, translates to lower prices

- Year one new stores target teens four wall EBITDA & 20% ROIC

RE: Outdoorsmen oversaturation

- Landscape for big boys is oversaturated; morphing with the Gander bankruptcy & CAB deal

- Still ample whitespace; fighting 11K mom & pop shops in geographies too small for CAB & Bass

Supporting Documents

  1. SPWH_ICR_Conference_Presentation_FINAL.pdf

Disclosure: I am/we are long SPWH.