ClubCorp (MYCC) reported another boring but efficient quarter.  Headline results were boosted by the acquisition of Sequoia Golf last year but growth in same club revenue of 2.8% and same club EBITDA of 8.6% were at least as good as expected.  Membership also continues its steady march higher with consistent 1% gains annually.  Northlake was pleased to see the margin expansion indicated by much faster EBITDA than revenue growth.  MYCC is not a business with a lot of operating leverage but it does have economies of scale and a good plan to invest in and “reinvent” clubs it acquires.  We think this should offer some margin upside especially coming off a year of many acquisitions.  Management raised its 2015 guidance primarily reflecting recent single club acquisitions.  More importantly, the company established a long-term EBITDA target of $300 million in 2018.  This equates to a CAGR of 8.4%, quite healthy, and excluding any further acquisitions.

With the recent acquisitions starting to drive accelerated EBITDA growth, we think the shares can continue their strong recent run.  Confidence in the long-term target should be quite high.  This could lead to multiple expansion that has the potential to drive MYCC shares to the upper $20s and beyond.  We have long felt that MYCC should be valued more similarly to lodging companies given the hospitality nature of the business.  Lodging stocks trade at a significant premium to MYCC even after the 15% up move in MYCC over the past six weeks.

One other positive for MYCC is that management remains quite firm that the collapse in energy prices is not having any impact on its concentration of clubs in Texas, including those in oil-centric Houston.

MYCC is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.  MYCC is a net long position in the Entermedia Funds.  Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.