|SALES (₹ Crs)||137.90||159.50||184.10||212.50|
|NET PROFIT (₹ Cr)||33.50||38.00||45.10||53.50|
Monday, June 23, 2014
WONDERLA HOLIDAYS LIMITED : MORE WONDER TO COME !!!
CMP: Rs. 201.95; Accumulate at every dips.
Medium to Long Term Target: Rs. 226; STOP LOSS – Rs. 185.80; Market Cap: Rs. 1141.03 Cr; 52 Week High/Low: Rs. 226.40 / Rs. 125.00.
Total Shares: 5,65,00,670 shares; Promoters : 4,01,00,222 shares – 70.97 %; Total Public holding : 1,64,00,448 shares – 29.03 %; Book Value: Rs. 21.50; Face Value: Rs. 10.00; EPS: Rs. 5.90; Dividend: 15.00 %; P/E: 22.93 times; Ind. P/E: 10.89; EV/EBITDA: 8.60.
Total Debt: 18.60 Cr; Enterprise Value: Rs. 1133.20 Cr.
WONDERLA HOLIDAYS LIMITED: Incorporated in 2002, Wonderla Holidays Ltd is one of the largest operators of amusement parks in India. The company came out with an IPO on April 2014 offering 1,45,00,000 equity shares of Rs. 10 each for Rs. 125 per share raising Rs. 181.25 Cr. The object of offer for sale was to set up an amusement park in Hyderabad and for other general corporate purposes. Wonderla Holidays Limited (Wonderla) is an operator of amusement parks in India. The Company owns and operates two amusement parks in Bangalore and Kochi under the brand name Wonderla. The Company also owns and operates a resort beside its amusement park in Bangalore under the brand name Wonderla Resort. The Company’s amusement parks offer a range of water and land based attractions catering to all age groups. Wonderla Kochi is located just 15 kilometers from Kochi city, is home for approximately 55 amusement rides. The dry rides at Wonderla comprise of land rides, sky rides and hi-thrill rides. Currently, Wonderla Holidays is in the process of setting up their third amusement park in Hyderabad. They also own and operate a resort beside the amusement park in Bangalore under the brand name 'Wonderla Resort' which has been operational since March 2012. Wonderla amusement parks offer a wide range of water and land based attractions catering to all age groups. They have 22 water based attractions and 34 land based attractions at Wonderla Kochi, situated on 92.95 acres of land and 20 water based attractions and 33 land based attractions at Wonderla Bangalore, situated on 81.75 acres of land. Wonderla Resort is a 'Three Star' leisure resort located beside their amusement park in Bangalore comprising of 84 luxury rooms, with amenities including banquet halls, a board room, conference rooms, a multi-cuisine restaurant, a solar heated swimming pool, recreation area, kid’s activity centre and a well-equipped gym. Wonderla Holidays Limited is locally compared with Nicco Parks & Resorts Ltd, Galaxy Entertainment Corp Ltd, Cineline India Ltd, Delta Corp Ltd, H.S India Ltd, T. Spiritual World Ltd, Oriental Hotels Ltd, B.L. Kashyap and Sons Ltd, Viceroy Hotles Ltd, Mahindra Holidays & Resorts India Ltd, Sterling Holidays & Resorts Ltd, EsselWorld, Appu Ghar, Queens Land, Vismaya, Tikuji-Ni-Wadi, Funtasia Water Park, Snow World, Jalavihar, Aquatica, Adlabs Imagica, Ramoji Film City and globally compared with The Walt Disney Company of USA, Twenty First Century of USA, Dreamworks Animations Plc of USA, Cedar Point of United states, Europa Park of Germany, Port Aventura of Spain, Six Flags Great Adventure and Wild Safari of USA, Blackpool Pleasure beach of United Kingdom, Everland of South Korea, Canada’s Wonderland of Canada, Ocean Park of Hong Kong, Efteling of Netherlands, Dreamworld on the Gold Coast of Australia, Busch Gardens of USA, Wisconsin Dells of USA.
Wonderla Holidays, promoted by the Chittilappilly family owns and operates amusement parks in Kochi and Bangalore along with a resort adjacent to its Bangalore Park under the brand name 'Wonderla Resort' which has been operational since March 2012. The company is in the process of setting up their third amusement park in Hyderabad. Both the amusement parks offer wide range of water and land based attractions and attracted combined footfalls of 23 lakh in FY 13 while total footfalls have witnessed 7.4 % CAGR over FY11-13. Bangalore amusement park and resort accounted for 60 % of 9mFY14 revenues while EBIDTA Margin stood at 47 %. Company has acquired 50 acres of land for its proposed Hyderabad Park and has invested about Rs. 38 Cr so far out of the total cost of Rs. 260 Cr. Company has developed an in-house facility in Kochi to construct the rides used in its amusement park and it has constructed 42 rides so far. This has helped to reduce Capex incurred on the rides. The cost of a ride manufactures in-house is one third of the cost of procuring the ride externally. This has helped the company to build in-house maintenance capabilities thereby reducing the cost of maintenance and downtime for a ride. India’s amusement industry is at nascent stage as compared to its global peers, this is evident from several indicators such as the relative small size of Rs. 260 Cr with about 150 amusement parks and high share of ticket sales in overall revenue pie as opposed more or less even split amongst entry fees, accommodation and F&B. This industry witnesses an annual footfall of around 58 lakhs to 60 lakhs; the industry is far undersized in terms of footfalls as compared to some of the large global amusement parks. In terms of seasonality, with four months of monsoon and less extreme weather conditions in several Tier 1 Cities, India offers very conducive environment for amusement parks. Company main customers are kids, and these are the major drivers of amusement parks, school vacations around Diwali, Christmas and summer attract major crowds to amusement parks. Accordingly, Q1 and Q3 are usually the best months for amusement parks. Amusement parks require large upfront capex though once park operations stabilize, growth can be driven by twin factors of rising footfalls and better revenue mix especially in an Indian context where F&B, merchandising and rentals have vast scope for improvement. Amusement parks are broadly categorised into Large Parks, Medium Parks & Small Parks. Capex required for Large parks are more than Rs. 70 Cr with land size of more than 40 Acres and can have annual visitors of around 5 lakhs. Large parks are usually located in Metros cities and in outskirts like Essel World of Mumbai, Nicco Park of Kolkata, Kishikinta of Chennai, Wonderla of Kochi & Bangalore, there are 16 to 18 such Large Parks in India. Medium Parks: Capex required for Medium parks are between Rs. 30 Cr to Rs. 70 Cr with required land size of between 10 to 40 Acres and can have annual visitors of around 3 to 5 lakhs. Medium parks are usually located in Outskirts of metros, Tier 1 Cities like GRS Fantasy Park of Mysore, Ocean Park of Hyderabad, there are about 40 to 50 such parks in India. Small Parks: Capex required for Small parks are about Rs. 30 Cr with required land size of around 10 Acres and can have annual visitors of around 3 lakhs. Small parks are usually located in Tier II cities, small towns, outskirts of metros and Tier 1 Cities like Fun N Food Kingdom of Dehradun, there are about 85 to 95 such parks in India. Wonderla’s existing business enjoys robust returns on its business and more importantly, a sustainable EBIDTA margin which is in excess of 40 %. Return ratios like RoE and RoCE have historically remained healthy. With a large upfront capex on Hyderabad project could impact return ratios in the near term; however, eventually it is expected that these ratio to trend higher once the park starts contributing in a meaningful manner. Wonderla enjoys RoCE of more than 30 % supported by free cash generation from amusement parks as they attain maturity due to high EBIT margins, lower incremental capex and improved revenue mix. Company came with an IPO and those funds are intended to utilise to finance its amusement park in Hyderabad at a total cost of Rs. 26o Cr. This is expected to be operational in FY17.
Outlook and Valuation:
Wonderla Holidays Limited is a part of the Kochi based V-Guard group. Wonderla Hoildays is a very unique in business model with inherently strong profitability at an attractive valution. Wonderla has high operating margins; high ROCE, niche & ambitious expansion plans make it an attractive stock to pick. The company's Kochi theme park is spread across 93 acres of land of which only 29 acres is used, this park has 55 rides which consists of 22 water and 33 land rides with 270 employees. It also has 7 restaurants (food is charged extra) and its entry fee is aound Rs. 400 to Rs. 600. Kochi park has a footfalls of 11-12 lakh and have seen a growth of 4 % CAGR. The company's Bangalore park is spread across 82 acres of land of which only 39 acres is currently used, this park has 55 rides which consists of 20 water and 35 land rides with 306 employees. It also has 7 restaurants (food is charged extra) and its entry fee is aound Rs. 600 to Rs. 800. Bangalore park has a footfalls of 11-12 lakh. Wonderla Holidays Ltd garnered Rs. 181.25 Cr through its IPO during the month of April 2014. The company will use the net IPO proceeds to fund its third amusement park in Hyderabad. This third amusement park is being set upped in Ranga Reddy District near Hyderabad which is now a part of Telangana for which 49.57 Acers of land have been acquired for Rs. 25 Cr. The total cost of the park is pegged at Rs. 256, of which Rs. 173 Cr will be funded via IPO proceeds and Rs. 45 Cr via debt funding from State Bank of Travencore and balance Rs. 33 Cr from internal accruals. Till date Company has already spend Rs. 37.70 Cr on this Hyderabad Park mainly towards land purchase and placing order for the new rides. The estimated total cost of the upcoming park in Hyderabad would be similar to the existing gross fixed assets of the company, which implies return ratios like RoCE would be suppressed as the park is likely to commence operation by FY17. Wonderla Bangalore Park which spreads around 93 Acers is operative since 2000 and owns and operates 3 star 84 rooms resort since March 2012 which accounted for Rs. 6 Cr or 4 % of Wonderla’s Annual Revenue. With footfalls of 23.4 lakhs in FY13 at these two parks the company clocked in total income of Rs. 139 Cr of which income from Services was Rs. 125 Cr while sale of products accounted for Rs. 13 cr. While the comapny has seen the footfalls growth of 9 to 10 % in last two years, its revenue rose 22 % in FY13 on back of 19 % growth in services income which was mainly from ticket sales and 54 % jump in sales of products such as food & beverages and mementoes etc. For FY13 it earned EBITDA of Rs. 64 Cr and Net Profit of Rs. 33.5 Cr resulting in EBITDA margin of 46 % and Net Margin of 24 %. Wonderla’s earning per Share for FY13 stood at Rs. 7.97 on the equity of Rs. 42 Cr. During 9 months ended 31 Dec 2013, its total income rose to Rs. 122 Cr with EBITDA of Rs. 58 Cr & Net Profit of Rs. 31 Cr giving an expansion in net margin from 24.1 % to 25.5 %. Company’s 9 month FY13 EPS stood at Rs. 7.38 as against Rs. 7.97 for FY13. The book value of Wonderla as on 31 Dec 2013 stood at Rs. 36.3 with debt of Rs. 18 Cr with a liquid investment of Rs. 15 Cr making it debt free company. Since, footfalls and revenue is seasonal in nature Wonderla’s Q1 and Q3 are better performing than Q2 and Q4. Wonderla is likely to witness a maintained footfalls a 7‐8 % CAGR, while its ticket prices have also seen a similar growth of 8‐9 % CAGR which are likely to be sustained in the future. It is expected that its EBIDTA margins to remain stable though return ratios like RoE and RoCE are expected to be dampened due to the large upfront capex for Hyderabad amusement park. Based on post IPO diluted equity, it is expected that its FY15 EPS to be t Rs. 8.00 & its FY16 EPS to be at Rs. 9.5. Comparing Wonderla with its peers on a PE basis, it appears that enough valuation headroom is left, given that larger US‐listed peers like Six Flags, Cedar Fair trade between 14x‐27x on CY14 basis. Amusement parks attain maturity; they can throw up significant cash flows since they require only maintenance capex: for instance, in FY10 and FY11, when there was no large ongoing project, capex/sales was just 5 to 7 % which helped generate large free cash flows. Given attractive valuations, robust growth prospects and inherently strong profitability, One can buy into this Stock with a target price of Rs. 226 for FY15. At the CMP of Rs. 201.95, the stock is trading at a P/E of 25.24x FY15E and 21.25x FY16E. The company can post EPS of Rs. 8.00 for FY15E and Rs. 9.50 for FY16E. One can buy WONDERLA HOLIDAYS LIMITED with a target price of Rs. 226.00 for Medium to Long term investment.
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