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Lindblad Expeditions Holdings Inc: Cruising Into

Pro t

Hidden Value Stocks: Lindblad Expeditions Holdings Inc.

The simplest way of describing Lindblad is to call it a cruise line operator although there is much more to the company than
just cruising.

Lindblads offers exclusively natural geographic cruises, which it coordinates with the well-known nature brand. The two
entities have signed a multi-year agreement (expires 2025), so Lindblad wont lose this exclusivity any time soon.
 (http://hiddenvaluestocks.com/wp-content/uploads/2017/01/lindblad.png)

The Lindblad difference

Lindblad does not just offer basic cruises. These are highly specialist one-of-a-kind offerings, that Lindblad has the
exclusive rights to. As a result, the company has pricing power and economic moat. No other cruise line operator in the
world can use the National Geographic brand to sell cruises to some of the worlds most beautiful natural destinations
including Antarctica and the Galapagos Islands.

Wealthy retirees and millennials desire to spend money on experiences over tangible consumer goods will insure the
demand for the companys services remains robust. Further, the fact that Lindblad offers a one-of-a-kind offering, means
the company can charge more than traditional cruise line operators (the company enjoys industry-leading net yields in
excess of $1,000 compared to $200 or less for industry leaders such as Carnival, Royal Caribbean and Norwegian. The
average trip price is $10,900.).

Even though Lindblad has been operating for decades, the companys shares have only been publicly traded for around 12
months. During this period theres not been much action in the shares.

The company came to the public markets via way of a reverse merger into Capitol Acquisition Corp II a SPAC, which was
renamed Lindblad on completion of the acquisition. This structure is unusual and has scared off some potential investors,
but any doubts should be allayed by the fact that Sen-Olof Lindblad, who founded the company in 1979 and has remained

at its head ever since owns around half of the outstanding shares. Concerning skin in the game, its dif cult to be more
invested than Mr. Lindblad.

Hidden value stocks

Before 2015, Lindblad expanded adjusted EBITDA by 27% per annum between 2010 and 2014 while revenue grew 15% CAGR. At
the time the business was drumming up investor interest to go public, management was promising the doubling of EBITDA
between 2015 and 2020.

Lindblad hasnt stopped growing just yet. The company has two new ships on order for delivery during the next ve years.
The ships have been self-funded from operating cash ow and cash on the balance sheet. As investments go, these two
new boats de ne how attractive Lindblad is as an investment.

When in service, the ships are expected to generate annual EBITDA of $8 million by the second year on duty for a cost of
$40 million. Over the long-term new builds are estimated to have a return on invested capital in excess of 20%, well above
Lindblads cost of capital no matter which funding route it uses. The rst of the two new builds is expected to be delivered
during the rst quarter of 2017 with the next planned for delivery during the second quarter of 2018.

To help drive long-term growth the company recently acquired travel agency Natural Habitat and has plenty of repower
for additional acquisitions. At the end of the third quarter cash and cash equivalents were $149 million. During the three-
month period, the company generated $15.7 million from operations and spent $50.6 million on new ship acquisitions. The
purchase of Natural Habitat added $14.6 million in sales to Lindblads top-line during the third quarter and boosted
adjusted EBITDA by $625,000. The company also has a $35 million stock and warrant repurchase plan in place.

A highly attractive opportunity

Lindblad is a well-run business with a high return on capital, high inside ownership, deep business moat and room for
steady growth over the next ve years and unfortunately, the market has recognized the companys attractiveness.
Lindblads valuation is not what one would call cheap but considering the companys growth projections and compared to
its peers; the shares might turn out to be a very lucrative long-term investment. For example, at the time of writing shares in
Lindblad are trading at a forward P/E ratio of 29.6, compared to Carnivals 14.9, Norwegians 12.2 and Royal Caribbeans 12.7.
Factoring debt into the equation, however, gives a different picture. Lindblad is currently trading at an EV to EBITDA ratio of
11.3 compared to 10.1, 12.4 and 12.2 respectively for the three cruise line operators above.

Lindblad deserves to trade at a much higher multiple. For full-year 2015, the company reported a return on equity of 21.8%;
the other three operators all chalked up returns on equity of less than 12% for the year. Further, as noted above during the
past ve years Lindblads revenue and EBITDA has grown at a high double-digit percentage every year. Only Norwegian has
produced a performance to rival that although unlike Lindblad, Norwegian has doubled its net asset base over the same
period. Lindblads earnings have grown while assets have remained constant.

Overall then, Lindblad is a very attractive small-cap extremely worthy of further research.

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Disclosure:The author may own one or more shares mentioned within this article. For a full list of the authorsholdings click
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