Skydive The Beach (ASX:SKB) - the tourism pure-play

With a dominant market position in tandem skydiving (16 drop zones across 4 Australian states and New Zealand), SKB has several tailwinds: Increased tourism - visitor arrivals into Australia for holiday purposes for the year ended March 2016 were 3,732,000 up 15.8% YoY. The main driver has been Chinese arrivals (23.7% 5-year CAGR); Selfies - more people are buying the video to share on social media, driving volume increases and price rises for the photo / video packages; Reduced costs - lower fuel prices, more efficient planes, and in house video production are helping to reduce overall costs per jump. While the shares have performed well since listing, they are only trading on 16x FY17 earnings, without factoring in additional earnings accretive acquisitions such as the Skydive Wanaka deal announced this week. Management have proven their ability to successfully negotiate and integrate acquisitions while showing good price discipline. Valued at $170m today, SKB is set for strong growth to become a significant pure-play tourism company. This justifies a higher P/E multiple and our target price is currently 75c.