Shareholding Q4 2016 - 2017.pdf (29.2 KB)
Attached Q4 FY17 SHP
Wonderla has announced Q4’17 earnings.
Q4 sales up 37.5% yoy, which is a pleasant surprise given anticipated suppressed footfalls after DeMo. Expenses shot up 59% largely driven by high Depreciation and other expenses. The jump in other expenses is mainly due to increase in tax dispute provisions. As a result PAT was down a good 55%.
Any thoughts on the tax dispute charges please?
At the segmental level, Amusement parks profits were down 90% yoy.
Press release :
ecc0c14f-cf62-4ddd-b0f0-37e7f299e212.pdf (161.4 KB)
wonderla will be impacted by an additional tax of approximately 10% , once GST is rolled out
ICICI Direct has given a target of Rs. 460/-
IDirect_Wonderla_Q4FY17.pdf (295.7 KB)
I track Wonderla closely. Currently earnings are quite suppressed due to 1) Depreciation of Hyderabad park 2) Tax Disputes 3) Higher A&P. So obviously PE looks expensive but it may actually not be so expensive if the horizon is more than 3+ Years.
My bigger worry though is continued footfall shrinkage in Bangalore park which is their main cash cow. If they get their Bangalore strategy right then over next 3 - 4 years this can be a great story.
I feel the footfalls for the matured parks will be stagnant. If you see the footfalls for Bangalore,it has remained more or less around 1.1 to 1.2 milliion over the last few years. In matured parks, top line increase is happening due to ticket price hike and increase in non-ticket revenue
Next leg of growth needs to come from new parks and the existing parks will provide good cash flows
Disc: Biased as I am invested.
I am not familiar with how gst will affect wonderla . Can anyone tracking the company provide some insights ?
There was some discussion about gst rates being in the range of 28 percent due it being considered a luxury item.
Will the company need to absorb the higher tax to maintain footfalls or will it pass it on promptly to customers
Is there really an effect on the individual ticket prices due to gst - what is the difference between current tax rates and gst rates ?
Management has mentioned that they are planning to pass on the increase in tax rates to end users. They already increased the ticket rates to 8-10% this year (Hyderabad park they increased at a higher level due to discount being given in first year it’s 950 on average compared to 650 last year). They are currently figuring out how GST impacts and are planning to increase the rate. We will be getting more details in next concall.
Impact is that there will be flat or less footfall in Bangalore, flat in Kochi. Hyderabad will see more growth in footfalls as it’s new park and more people are interested to come.
Depreciation of Hyderabad park means ?
Means Depreciation expense of assets in Hyderabad park. Being a new park
the depreciation charge is high.
Wonderla looking to set up adventure parks in Karnataka
My two cents on Why Wonderla is facing a “Perfect Storm”
Perfect “storm” facing Wonderla
Evolving Customer tastes with greater expectations from a “park” experience due to:
Increased global travel among Indians with trips to Disneyland, Sentosa Singapore etc. Rising avg. income and cheaper travels make trips to world class amusement parks in Dubai, Sentosa Singapore, Disneyland Hong Kong affordable / aspirational to the rising middle class
Parks getting old: Kochi > 15 years; Bangalore > 10 years; only incremental growth likely.
Falling footfalls due to:
Subdued discretionary spending due to uncertainty in IT sector
Increased ticket / non-ticket prices due to GST
political agitations , Cauvery water protests on the Bangalore- Mysore highway
No Novelty factor for repeat customers. Long Gestation period for introducing new rides. Approx.
time: 1 new ride per year.
Capital intensive business with rising cost of setting up new parks- Bangalore Park cost @ 5 crores in
2005; Hyderabad cost 82 crores 10 years later (for land & civil works).
Challenges in acquiring large land parcels in new cities for future growth & expansion:
Unavailability of land parcels within City perimeters
Land available only in outskirts (poor infrastructure and connectivity)
Poor “Park” experience (personal)
Extremely crowded during weekends and vacations leading to long queues and fatigue
Increased waiting times also due to poor “queue” management as members of large group repeat
rides, jump queues etc.
Deteriorating ratios / numbers over the last 3 years: (Source: Value research)
ROCE % = 22.76% (2016) < 27.55% (2015) < 38.02% (2014)
RONW% = 15.75% (2016) < 20% (2015) < 29.56% (2014)
PS: First post here. Please excuse if any forum guidelines have not been followed in this post.
Thanks for the post.
I feel we can’t compare Universal or Disneyland to Wonderla. It is like comparing Hollywood and Bollywood movies or Japanese bullet train and our Rajdhani, etc. It is not an apple to apple comparison, IMHO. Also please note that an average ticket costs at:
Universal Singapore: Rs 3572 (4.5 rating-Google)
Disneyland HK: Rs 4859 (4.5 rating)
Wild Wadi, Dubai: Rs 4976 (4.4 rating
Wonderla: Rs 900-1300 (4.5 rating for Bangalore)
It would be nice to know if Wonderla has improved on their offerings and how they have evolved over the years.
Parks getting old
The ROIIC from these parks would be good compared to the capex involved. Footfalls may stagnate or wouldn’t grow but the non ticket revenue (even higher margins) is increasing every year. We should also factor in the unutilized land and where we can add a resort or more rides at a later date.
You are right and management has also indicated these risks and most likely to affect the footfalls. Even adverse weather conditions are also a risk. I feel these are all short term in nature and may not alter the long term business dynamics.
No Novelty factor for repeat customers.
Repeat customers right now at Kochi and Bangalore park is 40-50%. They generally add a couple of new rides a year to keep it interesting.
Challenges in acquiring large land parcels in new cities
They signed up MOU with TN Govt for acquiring land in Chennai. Yes, it is a challenge and also have to spend more to set up new parks than before.
Poor “Park” experience
I have couple of times seen the management indicate that they are trying hard. Like they don’t charge for parking, no advertisement hoardings, cashless system (wet rides advantages), etc. It would be nice to hear more personal reviews.
Deteriorating ratios / numbers over the last 3 years:
It is due to depreciation and other costs during Hyderabad park roll out and now some tax related provisioning. However we need to monitor the sustainability of the return ratios over long term.
I own Wonderla and maybe my views are biased though I tried to be neutral and not veto any of your points which can be very valid. I invite other members too share views so that we can learn more about the business or see in a different angle.
Great points. The objective of my earlier post was to take a critical / skeptical view of the business and in no way a suggestion that it is not a worthy investment idea. Few follow up points on your reply:
By evolving tastes i meant that as a set of customers our expectations are progressively increasing over time with exposure to world class products. E.g. All of us have used Amazon / Apple / Google products and are awed by their intuitive user experience. When we use other sites (say our clunky net banking portals) we consciously or otherwise compare the user experiences. The point is, for today’s well traveled folks, comparison with these international standard amusement parks are but natural. Personally i have visited 2 of the 3 resorts you have referenced and believe me there is a gulf in “park” experience. This may impact brand advocacy / repeat business.
conversion of park fees to INR may not be a good metric to compare. 1 SGD = 47 inr today which translates to 75 SGD approx. This looks relatively cheaper in comparison to the general per capita income levels. From the figures you shared i feel wonderla is no way cheap (+ charm of a foreign vacation)
I am not sure if we can get data on their discount strategy. I know some of friends who wait for getting discount coupons / vouchers and only then plan a trip leading lower realization per ticket. Which also implies increase in footfalls will not lead to proportionate increase in ticket revenues
Falling footfalls as you have mentioned may be short term in nature. But run away growth in footfalls in the existing old parks may also not materialize. Personally as a Bangalore resident of more than 10 years, i have visited only once. If you have been there once then you would have covered 70% of the rides. The 1 odd new ride may not be motivating enough is my personal opinion.
The bigger risk which i detailed in my earlier post is “Mishap Risk”. Hope it never happens ever but in such an eventuality the brand gets huge negative publicity leading to reduced footfalls ( risk of losing school picnic market etc.). Some business are more prone to this risk than others. E.g Fortis Hospital Bangalore today is in news for all the wrong reasons on accusations of a botched up surgery leading to death of patient. Reading this news my friend is now thinking twice to go to that hospital for an already scheduled appointment
Not withstanding the above, there are many many wonderful things going favorably for the company and multitude of reasons to invest. But my initial objective was to articulate only the skeptical views. If need be, I will post my positive observations in a separate post.
Thanks for reading
Thanks for critical analysis… Some agreements / disagreements added below
While it is only one data point but I recently met a family who visited Disneyland at Paris. They were all praise for wonderla after visiting Disneyland, Paris. Again, this is just one data point and need to be taken with a pinch of salt.
If you take per capita income into consideration than Wonderla is even more attractive. Singapore or Dubai resident are not going to come to Wonderla but the issue is with outbound Indian traveller who are earning in Indian Rupees in India.
They are discounting since last many years and current realisation per visitor has already factored in the same.
4)Yes, we cannot expect too much footfall improvement in old parks. Footfall growth to come from new parks plus domestic tourists. Recently I saw a “South Tour” brochure with a Delhi based agent and Wonderla was part of the Itinerary. Also recently my nephew’s school from Bhopal organised a education tour to Bangalore and guess what, Wonderla was part of the tour.
Very encouraging set of results from Wonderla
The big news is the completion of the acquisition of the 56 acre parcel of land in Chennai which was stuck due to land use issues.
A couple of interesting things happened in the past few days. Nicco Parks in the same sector also reported a good quarter. There was a big spike in volume on low volatility in the Wonderla chart a few days ago indicating significant amount of buying and today the volume has been the highest that it has been in the last 6 odd months. This happened around the 62% retracement level - a significant level if you believe in fib ratios.
I have attended AGM at Bengaluru on 09/08/2017 .Below is the notes from AGM (I may have missed /misinterpreted certain points):
*Lanched new brand logo -positioned itself as complete hospitality and entertainment company.
*In india the amusement park is in nascent stage. Most of large cities are underserved with amusement park. Industry is known to face ups and downs. Footfalls are continue to fall in established parks. Expect the non ticket revenue to increase further. Not possible to reach global standard of 60:40 % of ticket/non ticket revnue in India. Amusement parks is not highly profitable business worldwide but wonderla is able to maintain high profitability because of cost effisciency/management of capex.
FY 17 the drop in margins is due provisions for tax disputes/increased staff expenses (related to hyd park)corporate cost. All these things are temporary .Margins wil improve going ahead.
Revenues are driven by new Hyd park which is ramping up. Hyd park will see double digit growth in footfalls for FY18. At the old parks (kochin and Bengaluru)trying to acheive growth by offering better customer experience . significant investemet in IT infrastructure,revamp of website,booking engine in established parks to offer better customer experiance . All the parks will b cashless by next FY.
Timely upgradation is must with new rides/technology in amusement park life cycle to maintain park attraction. Adding roller coster ride at kochin park at the cost of 25 crs which was the cost spent by company to start the park. With this all parks will have roller coster ride.
New project: completed land aquition of 57 acres for chennai park near Tirpur(hope I heard it right) around 40 km from city. preliminary work and planning is going on which will be competed in next 3 to 4 months. park construction expected to complete by fy20. D/E will be comfortable at the end chennai park construction .present networth is…( Icould not note it properly).
MOU with AP govt as mentioned in one of annual report,but its too early to comment about possible new park at AP/no plans at present.
Resort branding : revenue from resort is less compared to overall park revenue. Mr Arun acknowledged that brand positing of wonderla RESORT is not as strong as wonderla PARK. May consider branding it further and improve offerings for resort stay.
Strengthening of in-house R&D is continuous process, but very hard to increase further considering the rapid changes in technology.
No plan or discussion with karnataka govt to start small adventure parks as reported in some news paper.( I have reconfirmed this with Mr. Arun by showing the article( which is there in VP thread).
Weekday/weekend footfall: No need of special offer/theme to attract more visitors during weekdays(as done by adlabs). Infact sometimes no of visitors at wondela is more during weekdays.
Small theme based parks in mall: Its totally different business model with short life span,serving only small portion of the city. It will depend on survival of mall also. WH is not intersted in such business
Aquisition: no such plans or oppurtunities.
Thanks Narendra.,really appreciate your effort
Bseindia shareholding pattern is not showing sanjay bakshi name in list has he sold all his holding