Wonderla Holidays

Adding to this

  • there is a time cost involved here. A park typically needs 18 - 24 months for completion
  • New park takes 1 - 2 years to get reasonable number of footfalls. The initial 1 years ticket prices need to be discounted heavily to pull the crowd.

Overall dragging the earnings growth

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Well this applies to every business. Plant capex and commission takes a few years, and capacity ramp-up takes another year or so in usual case.

Main issue have been pointed by bheeshma lucidly.

As with retail where ssg is the key metric, we need to watch spg with amusement parks. Adding new slides every year or so stiil won’t retain me as a customer as the overall proposition and newness wd atill not worth my time and money.

As a park matures, it’s very difficult to post reasonable growth imo.

There are lots of other problems as well.

Yes. @bheeshma has consolidated points very well. Seeing the high range of PE multiples wonder la commanding, if the earnings doesn’t support the anticipated growth, stock price will remain range bound disappointing investors who entered the stock just seeing the OPM , NPM and long run way

Hi @Mridul and @khs

Footfalls is clearly the main number to be tracked and in the recent concall - the mgt reiterated that fact forcefully. They were also confident that the business will return to earlier operating margins sooner rather than later. If it does that then even with all the valid concerns , its one of the better businesses out there with good economics.

The other aspect is the intent is there to reinvest earnings so as long as that is there one can give it more flexibility with tepid footfall growth for a while as its not easy to run debt free large format amusement parks in a cost conscious country like ours.

Going forward , the Chennai park will play a vital role in football growth as in 4-6 quarters Hyderabad will also hit peak and slowdown like Kochi and Bangalore have.

The mgt has indicated that they are targeting 13% overall growth in footfalls in fy19 and some signs of revival have been indicated in recent mgt commentary.

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Not surprised at all by the de-growth in footfalls in Bangalore amusement park. The traffic on Mysore road has turned nightmarish on weekends. I think further growth here looks very doubtful as more avenues have opened up for activity/entertainment in the multitude of public badminton courts/swimming pools/skating rinks that have opened up in Bangalore.

I haven’t even heard the mention of Wonder la in my circles other than when referring to how the nightmarish traffic becomes stupendously nightmarish after crossing Wonder la when returning from Mysore. Improving the already high ARPV of 1219 as well looks very doubtful.

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As from Ground reality the Kochi park has seen a sharp fall in Footfall during this quarter, due to local factors like Heavy rains and importantly the out break of Nipah Virus https://www.aljazeera.com/news/2018/06/india-kerala-state-alert-nipah-virus-outbreak-180605112720057.html

So i expect the footfall number in Kochi wont surprise mostly this quarter with a growth

Arun has taken a sabbatical and resigned as MD. Need to understand the reasons and the consequences.
f1aad3d0-623a-4009-8409-20e79578f90f.pdf (55.4 KB)

Dial in details for todays concall at 12 pm to discuss recent events are as follows -

022-62801341
022-71158242

Best
Bheeshma

I wrote to Arun on twitter he says he will be back for this standard reply. Anyways we need to focus on business than the person. I suspect Q1 will not be very good. CEO and MD both going within one year is bit problem but lets see how business pans out (Chennai project is also not going anywhere).

In recent past their CEO Mr.Sachdeva also resigned within 2 years of joining. Something is definitely not right at Wonderla. Family feud?

I attended the concall today and my notes:

On the sabbatical

  • Going to Toronto to be with family and will return in 6-8 months and by next FY
  • Will be available on phone and email
  • most changes have been effected. No big ticket items planned, no new rides planned and plan for the year is already budgeted in April so this is an opportunistic time to take break
  • Mr. Kochouseph Chittilappilly is anyway joining in executive role and he is better than me in certain areas (like overseeing Kochi park)
  • Anyway not involved in day to day park operations. Park management side there is no change only in corporate side.

On Chennai Park

  • Have been meeting the TN govt. for the last three months culminating with meeting the deputy CM, Mr. OPS, last week.
  • Govt. is keep to attract investments in TN and seemed receptive on our meetings/discussions
  • Will not start working on the park till there is no LBT and made this point to the govt too.
  • delay by 6 months now and might take more 2-3 quarters before final decision. We have to be patient now.
  • Chennai will be one of the biggest park and TN the biggest market. Chennai’s footfall will be as much as Bangalore if not more. TN is an important market as it is one vast stretch of urban landscape.
  • We have no plan to start work on new parks yet. Chennai project is 95% complete.

On business operations

  • After a challenging couple of years, things are looking up now.
  • There will be double digit growth in footfall.
  • Bangalore and Hyderabad is doing well. Kochi not so much and also price sensitive.

Please forgive for any errors. Those are mine alone and the above is not a transcript.

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Most of the points are covered by @drgrudge. Another point covered was :

They also have a new sales head who has rejoined them and sits at the bangalore park. He has the overall responsibility of driving sales.

Best
Bheeshma

I think expecting a PE of 10-12 is completely unrealistic (you are expecting to buy a business consistently generating 20%+ returns on it capital over the last 5-7 years at book value) unless its a 2008 kind of scenario. I wish you the best for it. All I know is if that price is ever reached - this stock will form > 50% of my portfolio. Here’s why:

  1. Growth can come from
    a. Increasing F&B spend
    b. Increasing ticket prices
    c. New Parks
    d. Increasing footfalls (I just buy the argument that footfalls have topped out) - the feature in the top attractions in tripadvisor which speaks about the quality of the park - continuous innovations and new ride additions always attract more visitors - per capita income of india is way to low to assume stagnant footfalls even in large cities like bangalore

  2. Add back depreciation to PAT and you will see that cash flow is at its highest point despite reduced “profitability.” On valuation - the price to cash is the most lucrative it has been in the last 4 years

  3. The footfall reduction is on a pre GST base - they have had a huge GST impact of 18% which has resulted in sudden price increase (until last quarter it was 28% - impact of price reduction takes atleast a couple of quarters as per management). Somehow they have been able to absorb this increase without reduction in revenues.

  4. This is a genuine business with a “natural monopoly.”
    a. It will be unviable for anyone to open a new park in an existing wonder la location unless that company is willing to burn 100’s of crores (proven by “successful” failure of Adlabs) even assuming the same replacement cost as market gets divided into 2 players thereby making little investment sense
    b. Replacement cost of parks is almost 3-4 times original cost of Wonder la (due to rising land cost and inhouse ride making capability of wonderla) making it impossible for someone to open a new park profitably in the same location

Disc: Invested looking to add more

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I meant to say - just DONT buy the argument of reducing footfalls.

Why to take sabbatical formally with announcement ? One can always go and stay in Canada for 9 months ? Specially if you are not involved in day to day operations (as mentioned by Arun himself).
I will cut position to half. So far it was my biggest position. But now totally confused and lost😟.
In INDIA promoter is “the most important thing”.

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If Annual Revenue Gr rate are less than 10% and 5 years EPS CAGR is negative giving it PE of 48 makes no sense . Even IT services one year back with better ROCE and Gr profile were available for less than 12 PE …

But yes each one has their own opinion … Best of Luck and wish you success with your investments

Wonderla Holidays FY18 Annual Report Notes

  • 24.87 lac visitors in FY18 as compared to 26.59 lac visitors in FY17.
  • Kochi = 56 rides, Bangalore = 62 and Hyderabad = 44 rides.
  • Today the three parks together we have 20 restaurants offering a wide variety of cuisines.
  • The revenue pie of F&B in the non-ticket revenue increased from 24% in FY15 to 39% in FY18.
  • Wonderla Resort in Bangalore is a three Star leisure resort attached to the amusement park launched in March 2012. The resort has 84 luxury rooms. The resort also has 4 banquet halls / conference rooms, with a combined space of 8,900 sq. ft. with a capacity to hold 800 guests and a well equipped board room, suitable for hosting wedding receptions, parties and other corporate events and meetings.
  • FY 2018 had been a mixed bag. Revenue went up marginally – approximately 3% over previous year to Rs.270 cr. This subdued growth was primarily due to the decline in number of visitors by 6.5 % compared to last year. One of the major factor for this decline was increased ticket price in the first two quarters of the year while switching over from service tax to GST. During the 4th quarter we could stabilize the price factor and I hope we will have an improved flow of visitors in the coming quarters.
  • Our margins expanded as a result of our cost control initiatives such as reduced power consumption, rationalisation of manpower and increased merchandise options like dress code. Our EBIDTA margins witnessed a growth of 23% from 791 million over the previous year to 969 million this fiscal.
  • Also implemented a better inventory model in our parks and changed our restaurants from franchise model to Wonderla managed.
  • A strong 23% rise in average, non-ticket revenue is also encouraging signs of our increasing engagement of visitors in our parks.
  • In 2017, we invested Rs 34.06 crore and launched Mission Interstellar - India’s first space flying experience ride, developed in collaboration with leading US and European theme park design companies. It also boasts a 3,500 sq. ft. parabolic screen, with a 4K resolution laser projector, which makes it the largest screen in India.
  • We are proud of our in-house rides design team and manufacturing capability. A third of our rides are built internally, resulting in significant savings in the overall cost
  • Land available for future development: Bangalore 42.55 acres, Kochi 64.42 acres and Hyderabad 22.5 acres. Total 129.47 acres.
  • Land additions during the year Rs. 75.14 cr.
  • Other Current Assets increased YOY from Rs. 11.86 cr to Rs. 27.29 cr in FY18. This is mainly due to Rs. 14 cr. Service Tax deposited by the company under protest. If company loses the case then this expense may have to be charged in Profit and Loss statement in the future.
  • The sector is estimated to grow at a CAGR of 19% over the next 5 years to Rs 69.8 bn by end of 2021. According to the Indian Association of Amusement Parks and Industries, “The Indian amusement and theme park industry has been growing at a compounded annual growth rate of more than 17.5% with an annual revenue of around Rs 17 billion. This is estimated to grow to at least Rs 40 billion (Rs 4,000 crore) by 2020.”
  • Wonderla parks in Bangalore, Kochi and Hyderabad were ranked at 1, 4 and 8 respectively in India by Tripadvisor in 2017 Wonderla Bangalore ranked 6th Best and Wonderla Kochi ranked 13th Best in Asia.
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Few near negatives I see: Its monsoon season and its flooding in Kochi, so ideally people will not be interested in going to a theme park, the MD of the company has taken leave for 9 months - so no new initiatives expected, more capex planned.

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Promoter buying

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