CMP:
Rs. 313.10; Market Cap: Rs. 1,769.03 Cr; 52 Week High/Low: Rs. 355.50/ Rs.
152.20.
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. 29.10; Face Value: Rs. 10.00; EPS: Rs. 9.00;
Dividend: 15.00 %; P/E: 34.78 times; Ind. P/E: 56.15;
EV/EBITDA: 27.81.
Total
Debt: Rs. 18.59 Cr; Enterprise Value: Rs. 1,784.75 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 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.
Investment Rationale:
Wonderla Holidays, promoted by the Chittilappilly
family. Wonderla is one of the largest amusement park
companies in India and currently operates two amusement
parks – one in Kochi and another in Bengaluru along with a resort adjacent to its Bangalore Park under the brand name
'Wonderla Resort' which has been operational since March 2012. Amusement
parks offer a wide range of water and land-based attractions catering to all age
groups and Wonderla has 22 water-based attractions and 33 land-based
attractions at Wonderla Kochi which is situated on 93.17 acres of land and 20
water-based attractions and 35 land-based attractions at Wonderla Bangalore,
situated on 81.75 acres. Wonderla recorded total footfalls of 23,40,000 in FY13
and 22,90,000 in FY14 across the two amusement parks in Kochi and Bangalore. The
Total Footfalls across the two amusement parks have posted a CAGR of 7.42 %
from FY11 to FY13. The resort operated under the name, Wonderla Resort, is a
‘Three Star’ leisure resort located beside the 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, kids’ activity centre and a well-equipped gym. Company
has also acquired 49.57 acres of land for setting up the proposed amusement
park in Ranga Reddy district of Andhra Pradesh. Wonderla promoters launched
their first park in 2000 in Kochi under the name Veegaland, and then they
successfully launched the second park in Bangalore in 2005. The promoters have
experience of over 14 years in operating an amusement park. There are only
15-16 large players in India who operate large parks and Wonderla is one of
them. Wonderla enjoys the first mover advantage in Kochi and Bangalore where
there are only few medium and small parks but not a single large park. Wonderla
has excess land available in both the parks for future expansion. Wonderla is
coming up with its new amusement park in Hyderabad which is spread over 49
acres of land from which 27 acres has already been developed. The park is
expected to be operational from FY17 and part of the IPO fund will be used to
fund this park development. Development of a park takes 20-24 months post
approvals and 8-9 years for pay-back. Company is now aggressively expanding
business with the addition of two new parks in Hyderabad and Chennai (proposed)
which will drive long term growth. The Indian amusement park industry is still
at a nascent stage, the size of amusement park industry in India is estimated
to be Rs. 2,600 Cr ($0.4 billion) with 150 amusement parks in India and
globally the amusement park industry is of size of Rs 1,62,500 Cr ($25 billion),
and this gives a huge opportunity for this industry. Indian amusement park
industry got started with Appu Ghar in 1984. In late 90’s other large players
like Essel World and Nicco Park started their operations in Mumbai and Kolkata
respectively. Indian amusement park industry is growing in terms of footfalls
though still at a very nascent stage compared to its global peers. It witnesses
an annual footfall of 5.8 Cr to 6 Cr. The primary drivers to attract footfalls
are size of the park, proximity of location and innovative offerings. Water
parks are more popular in India due to the hot and humid weather. This Industry
is 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 t 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. The
domestic spend on tourism in India is expected to rise significantly which is
the one of the biggest growth driver for the industry. Domestic tourism
industry has clocked 13 % CAGR in past six to seven years. It is expected to
increase from $7,700 Cr in CY11 to $8,900 Cr in CY20. With rising income
levels, Indians are spending more on tourism related activities. Holidaying,
leisure and recreation related tourism constitutes major part of the domestic
tourism. Local residents form majority of the footfall of around 84 % followed
by domestic tourist, which forms 15 %. Foreign tourism constitutes negligible
part of less than 1 %, of total visitors in the park. One of the biggest growth
drivers for an amusement park is increased footfalls. Wonderla has been
successful in increasing the footfalls at 9 % CAGR over the last five years
from 16,10,000 visitors in FY10 to 22,90,000 visitors in FY14. Bangalore Park’s
being the new park in the market its footfall growth is higher compared to
Kochi. Bangalore market has grown from 7 lakh in FY10 to 11,90,000 in FY14,
marking a CAGR of 11 %, while Kochi has grown from 8,90,000 to 11 lakh during
the same period, marking a CAGR of 4 %. Attractive location and its proximity
to a city ensure footfalls addition for Wonderla and its three parks - Kochi,
Bangalore and Hyderabad are situated in the proximity of the main city.
Wonderla Kochi is located in Pallikkara, 15km from central Kochi, while
Wonderla Bangalore is located off the Bangalore-Mysore highway, 28km from
central Bangalore. Wonderla Hyderabad is in the Ranga Reddy District, Andhra
Pradesh which is 27km from central Hyderabad, 33km from Secunderabad Railway
Station and 12km from Hyderabad Airport. Also Wonderla has a flexi pricing
policy for peak season and offseason to ensure continuity of footfall in
offseason. As amusement parks attract larger crowd on weekends, prices are at
25 % premium than weekday prices. Rates are also differentiated based on the
festive season. Festive season rates quote at 8-10 % premium than regular weekend
rates. Festive seasons for Bangalore are Onam, Dussherra, Christmas and New
Year’s Eve, while for Kochi they are Onam, Ramzan, Christmas and New Year’s
Eve. Wonderla also offers discounts ranging from 10-30 % for group bookings and
corporate booking. It books revenue “net of discounts” and “net of taxes”, thus
reflecting prudent accounting. Another innovative pricing used by Wonderla is
“Fast Track” pricing strategy, which commands 100 % premium over regular
prices. Also Company issues 250 tickets per day as fast track tickets, which
reduce the average waiting time for a visitor substantially. Even though
average realization is high in Fast Track prices, Wonderla is also planning to
limit the number of tickets to 250 per day. Wonderla has set-up in-house
capabilities in Kochi to design, develop and manufacture rides. This reduces
the capex, maintenance costs and the down-time for a ride for Wonderla. The
Management claims to manufacture rides at 1/3rd of the cost of procuring
externally. Around 1/3rd of rides are manufactured in-house. As of January 31,
2014, company constructed 42 rides, of the total 55 attractions, Wonderla Kochi
and Bangalore has 10 and 18 rides imported respectively. Balance is either
in-house manufactured or domestically sourced. In-house manufacturing benefits
Wonderla with certain cost efficiencies such as saving on import duties and
other costs, besides improving the efficiency in rides maintenance. Wonderla
has relatively low ticket price base, management expects 5-7 % and 8-10 %
growth in footfall and ticket price respectively over the medium term at
existing parks. From existing parks, management guides operational cash flow of
about Rs. 40 Cr to Rs. 45 Cr pa. Wonderla is setting up its 3rd park in
Hyderabad which is spread across 50 acres and is expected to be operational in
1QFY17 this project has a capex of Rs. 250 Cr and which is partly funded
through IPO proceeds of Rs. 180 Cr. Wonderla also plans to set up a park in
Chennai and is currently looking for suitable land. Management plans to open more
parks every 3-4 years in other tier-1 cities as well. Setting up a park
requires high upfront capex and thus margins and return ratios would be under
pressure in the initial years of commencement of Hyderabad Park, after which
management expects improvement once the assets reasonably depreciate and asset turnover
picks up. Management guides the new park to be cash/PAT break-even in the
1st/3rd year, with full payback in 8-9 years. Wonderla’s existing business
enjoys robust and more importantly, sustainable EBIDTA margin in excess of 40
%. Wonderla’s Return ratios like RoE and RoCE have historically remained
healthy though a large upfront capex on Hyderabad project would impact return
ratios in the near term; however, eventually it is expected that these to trend
higher once the park starts contribution 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.
Outlook and Valuation:
Wonderla
Holidays Limited is a part of the Kochi based V-Guard group. Wonderla Holidays
is a very unique in business model with inherently strong profitability at an
attractive valuation. Wonderla has high
operating margins; high ROCE, niche & ambitious expansion plans make it an
attractive stock to pick. Wonderla is a large park and there are only
15-16 large amusement parks in India. As there are no large amusement parks in
the locations where Wonderla is situated, it is a huge advantage for the
company. Though there are few small and medium sized parks in Kochi and
Bangalore respectively, they cannot compete with Wonderla. Management believes
that an amusement park is not a price sensitive market and has been taking 10 %
price hike every year for the last five years, signifying the brand equity. The
new park coming up in Hyderabad may face competition from already existing
large players like Ramoji Studio. However, as Ramoji is a film city, it caters
to a different set of attraction and thus is not a direct competitor to
Wonderla. Amusement parks are targeted to
attract young generation. India, being one of the youngest countries in the
world and enjoys demographic dividend with the median age of 26.5 years, has
majority of its population between 15-59 years, which will be the biggest
growth driver for this industry. Countries like the US, Japan and China have
older population with median age of 37.1 years, 45.4 years and 35.9 years
respectively. As per the study conducted by E&Y, in India, children are the
key influences for amusement and theme parks visits. They generally come to
parks in school groups or with families. But they constitute only 25 % of the park
visitors and balance 75 % are adults. In India, around 28.50 % of the
population lies in the age group of 0-15 years, 63.40 % in 15-59 years and 8.10
% in 60 years and above, respectively. Ticket
sales form the major source of revenue stream for amusement parks in India. In India, the parks revenue constitutes areas like Food
& Beverages merchandising which contributes 18 % as against global average
of 34 %; Entry fees contributes 20 % as against global average of 33 %; Resort
rentals and others contributing 2 % as against global average of 33 %. Globally,
entry fee, food and beverages and resorts and rentals contribute similar
proportion to revenue. For Wonderla, Food
and Beverages contribute 3-4 % of the total revenue. There are two sources of
revenue in F&B segment. First revenue is from its own operating restaurant
and second is the revenue sharing model with other outsourced restaurants. At
both the amusement parks, Wonderla has seven operational restaurants which
offer various cuisines, including South Indian, North Indian, Chinese and
Continental etc. Of the total seven restaurants each in Kochi and Bangalore,
company has taken over the operation of one named Waves Restaurant at Bangalore
and Kochi Park since November 2012 and April 2013 respectively. Company follows
a revenue sharing model with other six contractors for the operation of
restaurants. Wonderla has entered into a revenue sharing agreement to receive
25 % of the revenue as its share, which directly improves earnings. Outside
food is prohibited in the park, though all food items are sold at maximum
retail price inside the park. Food and Beverages revenue is expected to grow at
15-17 % over next three years. F&B realization per visitor has increased
from Rs. 12 in FY09 to Rs. 37 in FY14, clocking in 21 % CAGR. The new rides and offerings ensures growth in
total realization per visitor from Rs. 414 in FY09 to Rs. 652 in FY14, marking
10 % CAGR. Based on management
guidance, Wonderla can register 5- 7 % footfall growth and 8-10 % annual ticket price
increases which imply 15 % plus revenue growth. The Commencement of the
Hyderabad park in 1QFY17 is expected by the company to further boost footfall and
revenue growth. Management expects that with limited incremental capex and
negative working capital, growth in cash flow generation is expected by the company
to be healthy. Wonderla has a healthy balance sheet with a total debt/equity ratio
at 0.14x as of FY14. Wonderla operates on a negative working capital business model
and typically requires low incremental capex which amounts to around Rs. 2.5 Cr-
5 Cr annually. Over FY09-14, Wonderla registered Revenue CAGR
of 20 %, EBITDA CAGR of 21 % and PAT CAGRs of 29 % with a 5-year average RoCE
of 39 % & RoE of 33 %. Based on post
IPO diluted equity, it is expected that its FY15 EPS to be t Rs. 11.00 & its
FY16 EPS to be at Rs. 12.20. 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 %‐7 % which helped generate large
free cash flows. Given attractive valuations, robust growth prospects and
inherently strong profitability. It is expected that with the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also.
| KEY FINANCIALS | FY14 | FY15E | FY16E | FY17E |
|---|---|---|---|---|
| SALES (₹ Crs) | 153.60 | 178.30 | 202.50 | 264.20 |
| NET PROFIT (₹ Cr) | 39.89 | 47.70 | 53.20 | 67.90 |
| EPS (₹) | 9.50 | 11.00 | 12.20 | 15.60 |
| PE (x) | 30.40 | 18.00 | 16.20 | 12.70 |
| P/BV (x) | 5.50 | 2.40 | 2.20 | 1.90 |
| EV/EBITDA (x) | 23.30 | 12.00 | 11.40 | 8.50 |
| ROE (%) | 29.60 | 18.90 | 14.20 | 16.10 |
| ROCE (%) | 37.80 | 27.50 | 21.10 | 24.00 |
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