Wonderla Holidays


(Bheeshma Sanghani) #23

@drgrudge yes people will not go again after they visit the park AND complete all the rides ( from my personal experience). if you like a particular restaurant very much and you have visited only once, the probability of you going there again and trying out something different will be vastly different ( and much more) from the probability of someone who has gone there multiple times and tried everything from the menu.

The Bangalore park has a mammoth 62 rides with an average waiting time of 30 mins between rides [ a rational assumption). Assuming 10 mins per ride means that you would require 41 hours ( 62 * 40 mins) to complete all the rides [ i am not even considering time to eat food, have fun etc ]. Further assuming that park remains open for 8 hours means that you need at least 5 visits to finish all the rides.

And if you’ve had a lot of fun the first time you are almost sure to go there again and try a different ride the next time.

In fact, more the rides more the waiting time more the possibility that you wont be able to complete all the rides even with 5 visits. with an additional ride ( 63) and an increase in waiting time from 40 mins to 1 hour the number of visits required to complete all rides goes up to 7.88 ( by almost 60%)!


(Growth_without Debt) #24

This forum become too optimistic on good news and too pessimistic on bad news. ( recent news on granuals, repco) Even if good bussiness shall be bought at correct price which give margin of safety. I don’t think current price has that. Single accident resulting fatality can spoil name and impact crowd pull. This fact must be considered in margin of safety


(Kumar Saurabh) #25

Some of the points being discussed have been answered by mgmt if one goes through last 2 years of conference calls (read competition, repeat customer behavior etc.). May give a better perspective


(Kiran K) #26

@hnk_so The question regarding the safety was asked in the last AGM. Management clarified that utmost care has been taken care to implement safety nroms. Not even a single incident in the last 10 years (Bangalore park) has been reported in Bangalore shows how serious the management with respect to safety. Having said that, risk cannot be completely eliminated and the same risk is there for other players in this industry


(Bheeshma Sanghani) #27

The base rate of investing in amusement parks is something one should also look at. A good starting point is Cedar Fair and Six Flags ( publicly listed in the US). These are great businesses even with all the risks factored in. Of course Disney and Universal are there but they are diversified businesses and amusement parks is one of their businesses ( albeit a very important one).


#28

http://www.bseindia.com/corporates/shpPublicShareholder.aspx?scripcd=538268&qtrid=91.00&QtrName=September%202016

Valuequest india moat fund took up 1.64% stake in wonder la as per recent shareholding disclosure

Disc: not invested, under watch, feeling valuation is bit high


(Growth_without Debt) #30

Four people were killed at Australia’s largest theme park Tuesday when a ride malfunctioned. Such event is possible at every theme park. hence, risk must be considered in price of the stock while buying it!


(Kiran K) #31

FY17 Q2 Results: https://nseindia.com/corporate/FR_27102016185835.zip

FY17 Q2 Updates: https://nseindia.com/corporate/PressRelease_27102016190830_025.zip


(Yogesh Sane) #32

Read the entire thread. I was looking for some discussion on affordability of theme parks in India as intuitively I feel theme parks in India are somewhat expensive compared to other forms of entertainment and general level of income. Average per capita spend at Wonderla is about Rs 1000 so a family of 4 will spend Rs 4000 for an 6-8 hr visit. How does this compare to average household income in the area? Also how does this compare with other competing entertainment options?

Theme parks IMO are maintenance intensive and capex intensive. Rides needs to be refurbished regularly to keep the innovative factor else a small price increase will see a drop in foot fall. I read up the thread, that Wonderla raised the prices some 25% and footfall dropped 12%. I am not sure if that’s a prudent strategy unless their parks were already overcrowded.

Do they have licencing agreement with owners popular children’s characters and movie houses? I have visited Disney parks several times and one of the main factor that draws people even adults is ability to see their favorite character in reality and see the movie sets recreated.

Overall, I think theme park business will thrive in India but’s as an investment it is still too early.


(S Khan) #33

A trip to multiplex costs about 2k-3k if you add F&B plus ticket prices for a family of four . Wonderla as a full day outing would appear very compelling compared to that at around 4k-5k. Besides that not many full day quality,family friendly entertainment options are available to middle class families with some disposable incomes in indian urban centres like bangalore .

Not sure what you mean by investment being “too early”, wonderla bangalore has been around for 11 years now and runs close to full capacity in peak summer holiday seasons and most weekends/public holidays. Ticket prices have been hiked every year since it opened by about 10% , it didn’t impact footfall so far . Last year , the amusement parks were included in service tax ambit which led to around 25% hike in ticket prices . hopefully , people will get used to bigger than normal hike and footfalls should start trending up . Ticket price was 250 when Wonderla bangalore opened in 2005 , its up four fold now and footfall had grown Y-O-Y up until last year .

Wonderla has been clocking operating margins upwards of 40% and a ROCE of 40%+ , even a more expensive and newer imagica is around 25% ebidta margin this year and they guide it to reach 40% as footfalls ramp up in next 2-3 years .So numbers would suggest that these businesses are already thriving .

Licensing disney characters is expensive so players like wonderla & imagica try to come up with their own characters/mascots . Besides merchandising is still not that big for these guys . Ticket to non ticket revenue ratio is 78% - 22% for wonderla . This is low compared to over 50% from non ticketing for international players like Six Flags. Focus is currently on hiking F&B contribution to revenue which has been growing in high 20s for last couple of years. There is lot of room for F&B to grow.

Additionally , Wonderla is more of a “amusement” park not theme park . Imagica would be india’s first big scale theme park , it is more on the lines of Disneyland with themed rides , character parades etc .They have licensed characters from mr.india and have a ride based on the movie.


(Yogesh Sane) #34

Thank you very much for your explanation and analysis. Movies and restaurant are the usual entertainment options that appeal to a wide variety of population. Amusement parks on the other hand appeal to a limited set.

IMO, amusement parks need to be big with plenty of rides as no one likes everything. That’s the reason I said it’s too early as an investment as I see several years of heavy capex ahead for Wonderla before they reach a steady level. Heavy capex results in a high level of operating leverage as compared to a movie theater or a restaurant.
As an investor, we like price increases but for any discretionary consumer item, low price is always better. If wonderla needs to increase the price to cover their expenses, I would say it’s actually negative for investors. I am also assuming that Wonderla needs to raise quality standards at the parks just to maintain ratings and need to spend a lot for that.

May be I am using Disneyland Resorts as my frame of reference (since I worked there for several years) and that’s a David to Goliath comparison. IMO, a 2000 Rs admission price is needed to provide a decent experience to the patron but I don’t think there will enough demand at that price point. That’s another reason I said it’s too early as an investment as this business model is still evolving and there will be many hiccups along the way.


(Kumar Saurabh) #35

Once you go through last 5 years of annual reports and last 8 quarters of con call transcripts,if not all, lot of questions will get addressed. Will try to answer these questions soon when I have time to best of my capacity


(Saji John) #36

Looks like Chennai project is a nonstarter http://www.thehindu.com/news/cities/chennai/order-on-wetlands-hits-amusement-park-plan/article9286720.ece


(csteja) #37

I don’t see stagnant footfall as a risk. Nothing can be done about that considering park capacity being constant. The counter to that is increase in realizations. Not all business makes profits with improved volumes (footfalls here) eg: Bata, Lubrizol.

Disc: Not Invested.


(csteja) #38

Painted a rosy picture. Too optimistic. The cash that they generate is not real cash. It goes back to investment in kochi, bangalore (old parks for new rides) or for building new parks (hyd, chennai) to improve sales. Where is free cash ?? It is capital intensive business. You may profit short/medium term but I believe not attractive enough to hold for long.


(Dhwanil Desai) #39

@csteja,

I admit that like all investors, I too am prone to biases! :slight_smile: So, may be you are right, my investment rationale does highlight positive aspects of Wonderla…like everybody else who makes an investment have positive points to share about their investment thesis.

However, I am not too sure about the authenticity of your point on the cash generated is not real cash. First of all while calculating FCF, we shall take into account only maintenance capex and not growth capex. So, any investment made on new park, should be kept out of the FCF calculation.

However, I agree that capex incurred for maintenance and new rides shall be factored in while calculating FCF, as it is essential for maintaining the current foot falls in existing park. What I find interesting though is that even after factoring in this maintenance capex, they generate significant FCF. Here are the numbers taken from Screener.

  • From 2008 to 2016, they generated 375 odd Crore of operating free cash flow. while the addition in net block over that period is 80 odd crore (even after considering some capitalization of Hyd park cost in 2016). Thus cash generated from operations, outstrips the maintenance capex incurred during these years.

In terms of business attractiveness, it is a call that every investor has to take on their own. I respect your judgement on the same. The only point that I want to put forward is that just being capital intensive does not make a business less attractive. In fact, if you find businesses that can deploy large amount of capital for long periods and can generate good returns on incremental capital consistently, you can make serious money out of it. (Look at Divi’s Lab…how they have been deploying capital year after year and generating excellent returns…and the resultant wealth creation is for everybody to see).

Hope this clarifies my position.


(Kumar Saurabh) #40

You should check 1. amount of cash generated over 10 years 2. amount of cash deployed in existing parks as maintenance capex.
Regarding cash invested in new parks, that is how growth comes. They have plan to expand 1 park post chennai every 3-4 years based on internal accrual.
Let us assume after 10-15 years, with 7 parks, they feel they do not have much potential to grow (let us call it product line growth, volume and price based growth can still be intact, in price - direct sella and cross-sell avenues still intact), then , as per current calculations, 30% of CFO is sufficient for maintenance capex.

This is just regarding capex. I had similar and many such doubts which got clear to soem extent with further research. I believe until and unless one does not go through last 5 years of annual reports and 2 years of concall transcripts which at least has answers to all these questions, it would be difficult to build conviction.

The new rides you see in Kochi is happening after 15 years when mgmt has realized that footfalls have decreased due to being too old. I think, every 5-10 years, as per current pricing , there can be a approx 30 crore capex to introduce new rides.
A quantitative analysis of all such numbers with reasonable assumptions post last 8-10 concall transcripts to get some sense of assumptions would give a better picture.

Personally, i felt it is to some extent costly at current price, almost 20-25% (without factoring in any future utilization of additional land.
Will share my excel working . Need to to search it

Disc : Invested and intend to accumulate with 20-30% correction. This is not a stock recommendation and one must do their own research. Views might be biased


(CommonMan) #41

@desaidhwanil @suru27

I am trying to calculate FCF for another company. Can you please shed light on how maintenance capex is calculated ? Can I take depreciation as proxy for maintenance capex?


(sandeepldesai1) #42

Can anybody put some light on question by @CommonMan


(Dhwanil Desai) #43

@CommonMan

Unfortunately, there is no single way/method of calculating maintenance capex as that number is peculiar to the industry/business. Some businesses require regular upgradation in technology/equipment just to maintain their current competitive position while others (the lucky ones!) can maintain their current position without much capex. Even though, there is a view to use depreciation as proxy to maintenance capex, my limited experience is that this number may deviate largely from depreciation on both sides (positive and negative) hence I prefer to take it on case to case basis and work out maintenance capex based on the industry dynamics.