Guide to the recreational boat, yacht & Superyacht industries

After covering the industry for >2 years, we publish a guide addressed to investors to gain a full understanding of the industry and the current moment

Hi there,

This week, coinciding with the quarterly results of almost the entire sector, we took the opportunity to share our Guide to the recreational boat, yacht & superyacht industries. We believe there is nothing similar on the internet applied to publicly traded companies. We also analysed the results of other companies that we follow but are not related to the superyacht industry

Guide to the Recreational boats, Yachts & Superyachts industry

We explain from scratch its main players (manufacturers, dealers, brokers), the role of each and the important details / differences to take into account when analysing them. We also carry out an objective analysis of the situation - updated post 3Q23 results - (The Italian Sea Group, Sanlorenzo, Ferretti, Beneteau, Catana, Marine Products, Brunswick, Malibu, Onewater Marine, Marine Max, Mastercraft Boats & Twin Vee) - Fountaine Pajot is included but not detailed.

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Guide to the Yacht & SuperYacht industry

The yacht and superyacht industry is relatively recent in the stock market, with the majority of companies incorporating in the last three years, partly due to the COVID-19 boom. However, these companies have been in the industry for many more years.

Three key players should be distinguished:

• Manufacturers: They are the builders of the boats, primarily divided by length. For smaller yachts (<20m), the distinction between monohull and multihull is also important (a newer market that is growing rapidly).

  • Small yachts / recreational boats (American companies): Malibu, Brunswick, Mastercraft Boat, Twin Vee, Forza X1

  • Medium yachts, French companies: Fountaine Pajot, Beneteau, Catana Group

  • Large yachts: Ferretti, Sanlorenzo

  • Ultra-large yachts: The Italian Sea Group

• Dealers: They focus on marketing the product (yachts) and often diversify by also selling accessories and parts (repairs) to mitigate cyclicality. To varying degrees, they own Real Estate (marinas) where they sell boats.

  • OneWater Marine, Marine Max

• Brokers: These individuals maintain a client portfolio globally, playing a crucial role, especially for larger yachts. Manufacturers often have a strategic relationship with brokers to connect them with clients. Brokers also represent clients throughout the design and construction process, acting as managers during the yacht's lifespan by scheduling inspections, etc. Their average commission is around 3% of the yacht's price. Some important brokers include Burgess, Northrop & Johnson, Fraser, IYC, Moran Yacht & Ships, RJC Yacht & Ships.

As the vast majority of the public companies in this industry belong to the manufacturers segment, the article will be focused on it. However, it is pretty important to understand their relationships with dealers and brokers. We also will explain the dealer segment where inventory management is crucial. Brokers will be set aside as they are not publicly traded companies and are not the main focus of interest, although acknowledging their role is important for understanding the industry

To discuss manufacturers, we'll divide them into two categories: boats and small yachts and large boats. The reason is simple; their economics are entirely different, resembling two mini-industries within one, with key distinctions.

• Impact of Economic Cycle

   - Small Boats: Interest rates play a crucial role in the demand for small boats, as the majority of buyers use credit for purchases. This is in stark contrast to superyacht buyers, who typically make cash transactions. Therefore, superyacht manufacturers are more concerned with the percentage growth of Ultra High Net Worth Individuals (UHNWI).

• Inventories

   - Small Boats: Understanding inventories is a fundamental part of analyzing small boat manufacturers. They need to manage inventory levels, and what they build is influenced by current demand. 

   - Large Boats: For larger boats, especially superyachts, inventory management is less significant. Construction usually happens when the boat is already sold. It's important to note that this distinction primarily applies to superyachts. In cases where manufacturers, like Ferretti, have both large and small boat divisions, the dynamics of small boat economics may still apply.

• Relationship with Dealers/Brokers

   - Small Boats: Dealers, often situated in marinas, play a crucial role in selling small boats. They purchase from manufacturers and handle direct sales to individuals. 

   - Large Boats: For larger boats, especially custom-made superyachts, the focus shifts to brokers. Brokers manage client portfolios, facilitate buyer-side transactions, and coordinate the buying process. Unlike dealers, they do not hold possession of the yachts since these are often bespoke orders and don't involve maintaining a stock.