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Analyst says new Sea-Doo Spark a ‘game-changing’ intro

BRP unveiled its 2014 lineup of Can-Am and Sea-Doo models Sunday night to kick off its dealer meeting in Orlando, and the results, according to BMO Capital Markets analyst Gerrick Johnson, were impressive.

“… We view the new lineup very favorably. Based on the reaction from dealers, we believe the 2014 lineup has several other game changing introductions, particularly in Can-Am Spyder Roadster and Sea-Doo Personal Watercraft, which could offer incremental upside to the company’s earnings going forward,” Johnson reports in a research note provided to Powersports Business.

The new value-priced Sea-Doo Spark ($4,999 MSRP) “we think has the potential to significantly re-energize this mature market,” Johnson writes. “The Sea-Doo Spark line of PWCs will be the least expensive PWCs on the market, ranging in price from US$4,999 for the base 2-up 40HP model to US$7,199 for a 3-up version with a 90HP engine and intelligent braking system. This compares to current PWCs on the market range from US$7,999 for the Yamaha WaveRunner VX Sport on the low end to US$17,999 for the Kawasaki Jet Ski Ultra 310X. Prior to the Spark announcement, the base price range on 2013 Sea-Doo PWCs was US$8,399 to US$16,999.”

Johnson likened the potential success of the Spark to another innovative product in the motorcycle segment.

“Not only can this lineup go a long way in enticing new buyers both domestically and abroad to enter the PWC market, but we have found in our research that nothing can kick start a replacement with existing customers like a shot of new innovation,” Johnson said. “We think a correlation can be derived from Kawasaki’s tremendous success of its Ninja 300 street bike in the motorcycle market. This motorcycle, valued priced at under US$4,500 was likely the best single selling motorcycle in North America in 2013 and sold out at many dealers by late June. BRP expects 10% cannibalization within its current PWC lineup, and is currently forecasting C$65-C$70 million in sales from spark in FY2015, with C$35 million in sales lost due to cannibalization. We are not adjusting our model at this time, but note that the Spark lineup, should it get off to a good start in southern hemisphere markets this winter (Australia, Brazil, etc.), could be source of incremental upside going forward.”

Johnson was also impressed by the release of the Outlander 6×6 to the Can-Am ATV lineup.

“With its Rotax 1000 engine, 82 horsepower, extra large dual-level dump box, 800lbs of hauling capacity, and six-wheeled traction, the Outlander 6×6 is the company’s first true utility vehicle, and appears to be a first step in finally addressing a very large greenfield opportunity in the utility market,” Johnson said. “We believe utility vehicles comprise over half of the ORV market, and is currently a US$3.1 billion worldwide market, which we think can grow to US$4.7 billion by CY2015.”

Johnson notes that the vehicle was created by the company’s development team in Finland, and will be in international markets in spring 2014 and the U.S. in fall 2014 as a 2015 model.

Within the Spyder roadster brand, “the big news out of Spyder is the RT touring roadster will incorporate a new, more powerful engine, which goes a long way in addressing several key issues that have prevented the line from generating faster sales growth, in our opinion,” Johnson writes. “The new Rotax ACE 1330cc, six-speed, in-line triple engine will power the 2014 Spyder RT, and is a big improvement over the legacy 998cc, five-speed V-twin engine (which will still power the RS and ST models), generating 40% more torque.

“We think this is a very important upgrade, as a complaint we have heard from dealers is that the Spyder was underpowered and not an optimal machine for distance highway touring. While providing ample power for cruising, customers complained that the five-speed 998cc engine revved too high when traveling highways at 70 MPH+. This new engine addresses those concerns and should help to expand the market for Spyder roadsters, now making it a truly viable touring alternative to a traditional two-wheeled motorcycle.

“In addition to generating sufficient power to create an adequate touring bike, the development team highlighted improved efficiency, which should significantly reduce the cost and hassle of ownership, requiring less frequent oil and coolant changes, spark plug and transmission filters replacements, and valve adjustments — another set of complaints from dealers and consumers. With the new, more efficient engine, the 2014 Spyder RT offers a fuel range of 250 miles on a 6.9 gallon tank (compared to 6.6 gallon tank that provided a range of about 150 miles).”

Johnson rates BRP as “Outperform.”


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