Canlan Ice Sports (TSX:ICE): Undervalued Momentum in Recreation Leadership

Canlan Ice Sports Corp. (TSX:ICE) has emerged as a standout player in the recreational facilities sector, with its recent operational and governance milestones underscoring a compelling investment thesis. Despite a 10% year-to-date (YTD) decline in its share price to CAD 3.60, the company's robust Q1 2025 financial results, record-breaking director election outcomes, and strategic initiatives suggest the stock is mispriced. Investors should view this dip as a rare opportunity to capitalize on a company positioned for sustained growth.

Unanimous Governance Signals Confidence

The June 19, 2025 Annual General Meeting (AGM) delivered a decisive vote of confidence in Canlan's leadership. With 77.56% of outstanding shares represented—far exceeding the sector average—shareholders overwhelmingly endorsed all eight director nominees, with 99.99-100% support. This near-unanimous mandate reflects strong alignment between management and shareholders, a rare and valuable trait in today's volatile markets.

The results are particularly telling given the timing: shareholders are betting on Canlan's ability to execute its growth strategy amid macroeconomic uncertainties. Such high participation and support bode well for long-term stability, as institutional and retail investors alike have “put their money where their votes are.”

Operational Momentum: Revenue Growth and Margin Expansion

Canlan's Q1 2025 performance further reinforces its value proposition. Total revenue surged to $28.0 million, a 6.8% year-over-year (YoY) increase, driven by higher pricing and volume across nearly all revenue streams. Third-party surface rentals, ASHL, soccer leagues, and event bookings all saw significant gains. Operating earnings rose 11.3% to $8.5 million, outpacing revenue growth, a clear sign of operational efficiency.

The company's ability to grow margins while expanding into adjacent markets—such as its She Plays Hockey initiative, which targets underrepresented demographics—positions it to capture incremental demand. Management's focus on technology upgrades and facility expansions, including roof remediation and indoor field installations, also signals a commitment to long-term asset optimization.

Dividend Consistency Amid Growth

While many companies cut dividends during market volatility, Canlan maintained its quarterly payout of $0.03 per share—a critical signal of financial discipline. With $19.8 million in cash and a manageable debt-to-equity ratio (59.2%), the balance sheet remains resilient. The dividend, yielding ~3.3% at current prices, adds a defensive layer for income-oriented investors.

Strategic Initiatives: Unlocking New Growth Frontiers

The She Plays Hockey initiative, launched in early 2025, is a strategic masterstroke. By addressing gender disparities in hockey participation, Canlan is tapping into a demographic with significant untapped potential. Early progress suggests this program could boost recurring revenue through league sign-ups, merchandise sales, and facility bookings—a win-win for both social impact and profitability.

Meanwhile, capital projects like tech-driven user experience enhancements and facility upgrades are lowering operational costs while improving customer retention. These moves align with Canlan's core advantage: owning and operating high-traffic recreational hubs in key urban centers.

Valuation: A Mispriced Opportunity

At CAD 3.60, Canlan trades at a 7.8x EV/EBITDA multiple, well below its five-year average of ~10x. This compression ignores the company's improved margins, diversified revenue streams, and balance sheet strength. Even factoring in macro risks, the stock appears undervalued relative to its earnings trajectory and dividend yield.

A quick comparison to peers like National Bank Sports & Entertainment (which operates Maple Leafs arenas) or Ice District in the U.S. underscores this point. Canlan's smaller scale and niche focus may have contributed to the discount, but its execution record suggests it can outperform in recovery cycles.

Risks and Considerations

The company's forward-looking statements acknowledge risks, including economic downturns and competitive pressures. However, Canlan's geographic diversification—operating facilities across Canada and the U.S.—mitigates regional risks, while its recurring revenue model (league memberships, event bookings) offers insulation against short-term volatility.

Investment Thesis: Buy the Dip

Investors should view Canlan's YTD underperformance as a buying opportunity. Key catalysts include:
1. Execution of strategic initiatives (e.g., She Plays Hockey's impact on participation rates).
2. Balance sheet flexibility to pursue accretive acquisitions or capital projects.
3. Dividend stability in a low-interest-rate environment.

A 12- to 18-month price target of CAD 4.50 (14x 2025E EBITDA) reflects a reversion to historical multiples, offering a 25% upside. For conservative investors, the dividend provides a steady return while awaiting valuation recovery.

Final Take

Canlan Ice Sports is a rare blend of defensive stability and growth potential. Its strong governance, operational execution, and undervalued shares make it a compelling buy at current levels. As recreational spending rebounds post-pandemic and demographic initiatives unlock new audiences, this dip could prove fleeting—and the entry point of a decade.

Recommendation: Buy ICE at CAD 3.60 with a target of CAD 4.50. Risk-averse investors may consider dollar-cost averaging into the position.