just dont go with what promoter is doing …remember few months back Kitex promoter was acquiring more and the stock had a free fall …wonderla is one of the highly priced and interestingly the footfall is falling down …so one can for sure buy at a lower rate when the market corrects …
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Dear Bheesma,
Thanks for bringing in a contrarian approach to invest in Wonderla with a margin of safety through its deep value in land bank. I did an estimation of land value as follows :
Bangalore - 81.75 acres
Kochi - 93.17 acres
Hyderabad - 49.5 acres
Chennai - 63 acres
Total land = 288 acres.
How did u get 350.49 acres as total land ?
If i convert acre to feet, 288 X 43560 = 12545280 sq ft (1.25 Crore sq.ft).
As per your opinion, the entire land value is worth at least 2000 Cr which means 2000/1.25 = 1600 Rs/sq.ft.
Do you think land price is Rs 1600 / sq.ft in these city outskirts area ?
Being a Bangalorean, i know it may be worth around 1500 Rs/Sq.ft in Bidadi. But in other cities like Kochi and Hyderabad, don’t u think it may be as low as 800 ?
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The land value is estimated to be 1400 Cr
| City | Locality | Acres | Sq.Feet | Price/Sq.ft | Value | |
|---|---|---|---|---|---|---|
| Bangalore | Bidadi | 81.75 | 3561030 | 1500 | 5341545000 | |
| Kochi | Pallikara | 93.17 | 4058485.2 | 900 | 3652636680 | |
| Hyderabad | Adibatla | 49.5 | 2156220 | 1100 | 2371842000 | |
| Chennai | old Mahabalipuram road | 63 | 2744280 | 1000 | 2744280000 | |
| Total Land Bank | 287.42 | 12520015.2 | 14110303680 | |||
| 1411 | Cr |
so we are getting the business that earned 38 cr in FY18 and is expected to reach 60 Cr in FY20 (due to revenue growth + improving margins) by paying 500 Cr.
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Some acres in hyderabad park was consumed in building the interstellar mission ride. Overall it has significant unused land bank as you have calculated - the value of which offers additional valuation safety. Land rates depend upon the highest and best use of land and vary.
Not sure if we can value the business in that way. Wonderla can either have the land to dispose or have the amusement park business. It will not be able to generate any revenue without the land hence once cannot add the value of land assign a 500 crore value to the business.
I think a better way to look at it is that the land bank provides a great margin of safety on the valuation of Wonderla at approx 1900 crores. However, one always needs to be mindful of the fact that it is not easy to monetize such parcels of land away from the city center.
Only my humble opinion.
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As per text book definition of capital employed, u r absolutely right that this land is employed in the business unlike cash on book but land value play a major role while calculating the terminal value. unlike other business where their assets in the book are ever depreciating, this land asset of 1400 CR that forms 70% of mkt cap, always appreciate over long term. The balance sheet of this business is unique, more like agriculture and mining where asset remains an asset forever.
One should keep in mind that out of 1900 cr, 1400 cr is invested in land that grows constantly with RoI of 10% and remaining 500 cr is invested in amusement business that currently earns 38 cr in FY18 at 8% RoI (worst margin in a decade) but has potential to give 12% RoI in the near future and also can be between 10-25% in the next 10 yrs. Hence I think it can be valued this way.
Since wonderla is located 28 km from Bangalore city centre, I have given 1500 Rs/sqft. I know on bangalore-mysore NH, plots are valued at 2500 but since it is 2 km off NH, I assumed 1500.
In all cities, it is located in a reasonably good location on NH, SH and outer ring road.
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Is any one have the details for how much land has been used vs initialised land to total land details for all the 3 parks… Thanks
| Item | Q1-19 | Q1-18 | 2018 | Growth |
|---|---|---|---|---|
| Revenue | 10611.26 | 10542.66 | 27834.06 | 0.7% |
| Operating Expenses | 4639.21 | 5866.69 | 18138.71 | . |
| Operating Profit | 5972.05 | 4675.97 | 9695.35 | 27.7% |
| OPM | 56% | 44% | 35% | . |
| Finance | 36.44 | 37.19 | 120.68 | . |
| Depreciation | 989.33 | 799.94 | 3650.51 | . |
| PBT | 4946.28 | 3838.84 | 5924.16 | . |
| PAT | 3297.22 | 2595.55 | 3850.39 | 27.0% |
| Net Margin | 31% | 25% | 14% | . |
Good margin expansion driven by cost efficiencies. Operating margin at 56%. The June Qtr accounts for almost half of the operating profit for the yr. Estimated operating margin for Fy19 given its revenue and operating profit distribution seems to be 38% - 40% and seems to be inching towards its historic 45% levels.
Growth in footfalls in Hyderabad is 22%. Overall footfall growth of 6%.
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Attended the concall yesterday. The mgt guided for a topline growth of 10-12% and pat margin of 16-18%. While that would improve earnings growth, the valuations seem to be well incorporated and more. In my view and one can be wrong on this one - a massive growth in topline is required to justify the valuations. Margins will revert to the earlier levels and they seem to be doing that but currently there doesnt seem to be suppport on the topline growth front.
The sense i got is that pricing is an issue and while the co is trying to get more footfalls by giving packaged offers, the path taken by the mgt is concentrating on driving footfalls and thereby increasing non ticketing revenue.
In q3 - the mgt seemed confident that footfalls will increase in kochi park as group bookings will increase. Hyderabad is doing well and bangalore which has the highest prices and contributes to the max revenue is also expected to end with a footfall growth of 8%.
However, it is clear that there is pressure on revenue growth and its is being felt by the mgt. The other thing that the mgt stated was that ROIC for old parks is 25% while for newer parks its between 10-15% which is on the lower side and indicates that going forward the business may need to be revalued downwards in line with what returns are in it.
Best
Bheeshma
14 Likes
Though, this quarter is not major contributor as Q4, but Kochi getting affected due to flood in Kerala will have its impact overall on the footfall. Hope the park site has not been affected. Can anyone confirm please?
I believe this quater anyway no much traction happens as its rainy season across south india…
May be any locals in Kochi can confirm this…
In Bangalore I could see for last 1 to 2 months its been so cold and cloudy …No one really dare to venture out to Wonddella atleast in this climate…
Can Experiance Member correct if Iam going wrong:
I was evaluating whether my Investments in Wondrella is worth or not… Again its purly my perspective which I may wrong also.
My rational to invest in Wondrella it would be Classic Compounder of 20 to 25 % over foreseable period of time for that happen following the risks and opportunities I have:
Price growth of 24%,
Slaes growth : Aprox 12%, 7 to 8 % through price growth, 4-5 volums growth.
Pat Growth: say 20% year on year…
Dividend Yield: 0.45%
These all are best case scenerios nad just my thought nothing logic I used here.
Riska Iam taking:
Accidents in the parks
Telangana like situatations for Hyderbadad park
Kaveri like situation for Bangalore
Floods like for Cochi
Land issues like Chennai park
Aprt from all general issues like MD going for sabatical
Prolonged rainy seasons, Prolonged Winter seasions etc etc…
Software crowrds
Trafics etc etc…
Benefits:
Negetive working capital
Good Management
Proven teack record - v guard
Large addressable market size
Aspirational middle class
Lack of competetation
Moats like early birds
Cheap land prices. Etc etc
I happend to read Monish Pabrai one of the interview it says Among others In investments you will not paid extra if you take extra risk.
With this logic Iam seriously evaluating is this still worth Investment
Its just my small thoughts …as I just started my Investment Journey and wanted to here from all other respectable members…
Will this company’s worries end anytime soon 
on a lighter note no offence.
- Bangalore traffic is an issue
- Kaveri protest is an issue
- Farmers protesting outside their campus is an issue
- Kerala flood an issue
- More rains an issue, seasonality an issue
- Demonitization an issue.
- GST an issue.
- Counting …
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Wonderla is trying to have pan India presence.It has 3 parks , with annual cash flow of 80-85 cr (including depreciation). Opening of a new park requires 350-400 cr capex. It requires large land acquisition and current goverment policy like LBT is the biggest headache for this company. Company is trying hard to negotiate with chennai govt over LBT issue. So huge capex , land aquisition and GST rate are the real problem for the company to open new park in every 2-3 years. Capex issue would be resolved once cash flow reaches to 120-130 cr (yearly) , that will happen once 4th park (chennai park) becomes operational. So there is pain for 3-4-5 years but after that journey is going to be very smooth.
In a present time where technology can disrupt most of the business, I see huge moat in this business , and I would like to sit patiently for next 10-15-20 years and see how story unfolds.I would be much interested to see wonderla’s new park expansion rather than thinking too much about muted/slow growth of older park because opportunity size is so huge , Wonderla can have presence in all the major city, with first mover advantage in many cities. No one will able to compete with wonderla in terms of quality at reasonable price.
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I completly agree all your points about moat and other advantages …About my only worry here the margin of error so thin that even small issues which is beyond their control is able to create disruption which leads price stagnation of 2 to 3 years like now…
There was a news item in The Hindu yesterday that Wonderla is planning to quit Chennai if LBT is not removed.
They may shift to Sri City, Andhra Pradesh (about 1.5 hours drive from Chennai, also connected by rail including EMUs to Chennai 
) I’m from Chennai and IMHO this is a great move. In one stroke, they can open a park catering to Chennai and surrounding AP even Tirupati.
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What about time and expenses they have incurred so far… Iam not sure of magnitude but Iam sure it would substantial vis vis to their net profits…
