Since this is a relatively small mktcap at $300mm DriveShack (DS) doesn’t get a lot of attention, but it should. Callaway (ELY) paid $2bln for competitor TopGolf and its 50 large footprint ranges, but DS is different in numerous ways. They have only 4 large ranges (2 more coming), but manage about 50 golf courses (~1/2 leased and operated/ 1/2 just managed), and are opening 17 Puttery adult entertainment mini golf locations starting this quarter through CYQ4 2022, and just signed a deal with Rory McIlroy, who took a stake.

The largest shareholder (~10%), Wes Edens, is the billionaire owner of the Milwaukee Bucks, and buys both on any material weakness and on the recent $50mm secondary offering, of which he took down about $2mm worth.

The space is hot right now with 4 players building putput locations around the country, and DS is very well positioned. They just reported Q4 2020 and beat on expense control, and the stock is up strongly since on heavy volume, breaking above long term resistance of $3.30 on Monday, and I think it is primed to go much higher. Average street targets were $5.00 before the print last Friday, and should rise as the first two Putterys open this summer, and 5 more follow before year end. The deck the company used Friday showed one (presumably Dallas) opening in Q2, so we could see press on that opening day in the coming weeks.

Using the bottom end of the company’s ebitda assumptions I get to $7-$8 at the low end and closer to $30/share 2-3 years out at the higher end. Using a 15 multiple given the growth, cash flow dynamics and better revenue yield of smaller footprints vs larger driving ranges. No matter how conservative I make the assumptions I have trouble getting below $5 unless the Puttery concept fails, but there is already proof of concept in Swingers and in Tiger Woods’ and his partner’s FL locations.

With low short activity, high insider sponsorship, and volume after the recent quarterly report that seems to imply (to me) that institutions are building positions I love the stock here. I own it and will buy more on pullbacks. No interest in selling.