Wonderla holidays IPO

Stock Opportunities Untested - but worth a good look
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Wonderla Holidays is entering the primary market on Monday 21stApril2014 through a fresh issue of 1.45 crore equity shares of Rs.10 each, priced in the band of Rs. 115 to Rs. 125 per share. The issue represents 25.66% of the post issue paid-up capital and will raise Rs. 167 crore and Rs. 181 crore at the lower and upper price band, respectively. To be listed on NSE and BSE, the issue closes on Wednesday 23rdApril.

Part of the Kochi based V-Guard group, Wonderla Holidays owns and operates 2 amusement parks in Kochi and Bangalore, spread over 93 & 82 acres since 2000 and 2005 respectively. It also owns and operates a â3 starâ 84 key resort beside the Bangalore amusement park, since March 2012, which accounts for Rs 6 crore or 4% of annual revenue.

With footfalls of 23.4 lakh in FY13 at the two parks, company clocked total income of Rs. 139 crore, of which income from services was Rs. 125 crore while sale of products accounted for Rs. 13 crore. While footfalls were higher only by 4% YoY, revenue rose 22% in FY13 on back of 19% growth in services income (mainly ticket sales) and 54% jump in sale of products such as food, beverages, mementoes etc.

For FY13, it earned EBITDA of Rs. 64 crore and net profit of Rs. 33.5 crore, resulting in EBITDA margin and net margin of a handsome 46% and 24% respectively. EPS for FY13 stood at Rs. 7.97, on equity of Rs. 42 crore. Promoter holding is currently at 95.48% and will decline to 70.97%, post IPO. Balance pre-IPO stake is held by employees.

During 9 months ended 31stDecember 2013, total income rose to Rs. 122 crore, with EBITDA of Rs. 58 crore and net profit of Rs. 31 crore, leading to expansion in net margin to 25.5% from 24.1% in FY13. EPS for 9mFY13 stood at Rs. 7.38 vis–vis Rs. 7.97 for FY13. As of 31stDecember 2013, companyâs networth stood at Rs. 152 crore, resulting in BVPS of Rs. 36.3. Company has debt of Rs. 18 crore and liquid investments of Rs. 15 crore, making it nearly debt-free.

It is setting up a 3rd amusement park in Ranga Reddy District near Hyderabad (to be part of Telangana), for which 49.57 acres of land have been acquired for Rs. 25 crore. Total cost of new park is estimated at Rs. 256 crore, of which Rs. 173 crore will be funded via IPO proceeds, Rs 50 crore via debt (tied-up from State Bank of Travencore) and balance Rs 33 crore from internal accruals. Rs. 38 crore has already been spent on the Hyderabad park, till date, mainly towards land purchase and placing order for the new rides.

Since footfalls and hence revenue is seasonal in nature, Q1 and Q3 are better performing than Q2 and Q4. FY14 PAT is estimated at Rs. 38 crore resulting in EPS of Rs. 9.2. At the lower and upper band of Rs. 115 and Rs. 125, shares are being issued at EV/EBITDA multiple of 9x and 9.8x, based on FY14E earnings, respectively, and on PE multiple of 12.5x and 13.6x, respectively, which is quite attractive, given the growth rates, high profitability and planned expansion. At Rs. 125, companyâs market cap will be Rs. 706 crore. Adding debt for Hyderabad park, the resultant enterprise value is close to Rs.750 crore â which is equivalent for 3 parks (Kochi, Bangalore and under-construction in Hyderabad).

The company has an established presence in South, which will be expanded further in the same region (plans to enter Chennai after Hyderabad). Besides near debt-free status and high profitability levels, companyâs parks enjoy good customer reviews. Once Hyderabad park gets operational in FY17, both revenues and net profit will be augmented.

Although competition, especially in Bangalore and Chennai, may be challenging, so also expansion to parts of North which face severe winters unfavourble to its model of water-cum-dry rides in the same park. Another concern is on the corporate governance. Group company V Guard Industries raised Rs. 66 crore via IPO in 2008. One of the objects of issue included setting up of an enameled copper wire factory for Rs. 9 crore. Post IPO, based on an**internal**R&D report, company changed this object and diverted funds for general corporate purposes. Also, going by the past performance in share price of V Guard, operator play is not ruled out in this counter as well.

Fundamentally, based on the valuation multiples (EV/EBITDA and PE), the issue looks attractively priced. One can apply in the issue. However, be prepared for strong operator play!

*Source-https://www.sptulsian.com/article/79450

Few Negatives -

1-Seasonality of the business .

2.Low growth in foot falls.

3.Pricing power limited .

4.Threat of new entrants

5.Few people visit more than once or twice in an year

Disc-Planning to subscribe for the ipo

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There are two litigations pertaining to 14.70 acres of land acquired inconnection with Wonderla Hyderabad.

Source -http://www.sebi.gov.in/cms/sebi_data/attachdocs/1397209020907.pdf

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Two types of people have bought this one

1)Short term with gain of RS 25 per share.

2)People with 4 to 5 years horizon with a potential 3 bagger.

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The concept can grow bigger with addition of resorts,multiplexes (on the lines of santosa,singapore).I believe this can be a three bagger in three years.

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Few noteworthy points - from Interview with MD, Arun Chittilappilly at http://www.seasonalmagazine.com/2014/04/how-unique-is-wonderla-and-its-ipo.html

Although, no entry barriers but considering capital intensive nature of the business, Wonderla fares better due to its capability in developingrides in-house, as against costly procurement from abroad.

Wonderlaâs growth strategies of multi-city / multi-park model rather than the single-location / large-park model followed by almost all theircompetitors has unique advantage. Apart from the steady growth in footfalls at existing parks, growth could be higher whenever a new park in anew city is commissioned. Hyderabad park is planned to commission within 2 yrs and next city of interest is Chennai.

15% growth rates is expected even without new parks -> footfall growth at 5-7% and ticket rates at 5-7% per annum.

80% is ticket revenue and the remaining 20% as non-ticket income — lot of value-added services like fast-track, ride photography, resortrooms, merchandising etc. should improve the non-ticket income at a faster rate.

My rationale for applying-

IPO priced at PE of around 15, business seems to be sustainable for next 10 years and capable of growing at the rate of at least 15%CAGR.

Disclosure - Applied in the IPO.

1 Like
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Hi All,

Anyone has any idea why there is 50% jump in profits for current Q1 compared to Q1 of FY 2014?

Footfall increase or ticket price increase or both or something else? revenues went up by 20% but expenses haven’t moved, how is this possible?

Thanks

Ashish

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Hi,

Kindly request esteemed members to go through the annual report of wonderla.

https://karisma.karvy.com/images/2015/WHL_Notice_&_AR_2014-15.pdf

I have gone through the same, looks like a quality management .

Currently its a high PE( 28) stock, should we consider to have it in our watch-list ?

Disclosure: added token shares for tracking

Any views/thoughts ?

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Hi all,
This is my first post in this forum

Wonderla holidays ltd. (WHL)

CMP: 379.50 Market cap:-2144

Wonderla holidays is an amusement park firm based in Bangalore, kochi, Hyderabad. It also has a govt approved 3 star resort in Bangalore. Out of 165 parks in India, Bangalore park is ranked number 1 in India while Kochi is number 3. While in ASIA the Bangalore park is 7th while the kochi park is 13th. Kochi park was started in the year 2000 while the Bangalore project was started in 2005. The company is expecting its third project in the year 2016 late April in Hyderabad. The company’s footfall has been over a CAGR of 7.42% while the industry has been growing at a pace of 3%. The company is having In-house manufacturing facilities to create and innovate new rides which leads to lower cost.
Future prospect:
The estimated size of the Indian parks industry is Rs 26 billion in terms of revenue, with an estimated annual footfall of over 58-60 million. The industry has grown between 20% and 25% over the last five years.
Development of integrated parks, which include parks combined with resort, F&B centres, retail centres and merchandise offering within the same development, are in vogue. The concept of integrated park is slowly gaining steam in India
The Revenue dissection is 75-80% from tickets in contrast to international parks it is 50% while the non ticketing revenue is 20% while 50% in international parks.
Domestic tourism registered a growth of 14%.
The share of discretionary spending in India (rent, fuel & power, furniture, medical care, transport & communication, recreation & education) is seen increasing from 59% in 2010 to 67% by 2020. Spending on recreation and leisure activities is also expected to rise significantly. Leisure spending is projected to almost double from Rs 4892 billion in 2014 to Rs 8983.5 billion in 2024- a CAGR of 6.3%.
Company has large land parcels at Bangalore (81.75 acres), Kochi (93.17 acres) and Hyderabad (49.57 acres) within proximity of the heart of city (~28 km). It has 39
acres, 64 acres and 23 acres land for future expansion at Bangalore, Kochi and Hyderabad respectively. Hence, the existing parks can be further expanded by developing peripheral infrastructure to create integrated parks, enhance visitor experience and build more revenue streams.
Company would be opening 2 more amusement parks within 2 years which would accelerate growth.

Risk:

  1. Capital intensive and long gestation period: Development of large amusement parks typically require huge investment involving LAND acquisition, INFRA of rides, Regular Investment in creating new rides.
  2. Maintaining proper Safety Standard: Failure to ensure safety can damage the goodwill and trust substantially and expose the company to a possible Finance liability and legal proceeding.
  3. Maintaining cleanliness and hygiene: outbreak of any epidemic or contagious diseases in the city may actually restrict people from visiting to public place which could further impact footfalls.
  4. Competition and concentrated revenue stream: large revenue from the sale of entry tickets hence any competition which force the company to reduce ticket price will have an adverse impact on its financials.

Long term prospect:

  1. Urbanisation and nuclear family mentality, young age population ageing 27 years in India
  2. The concept of Disney land, Universal studio ( Resort + large amusement park) has started in India. ( Imagica + Wonderla)
  3. 2 day trip for a young family would increase the footfalls.

Financials:

  1. Consolidated revenues, EBITDA and PAT were Rs. 1864.8 mn, 851.7mn and Rs 506.3mn in Fy 15 having grown at CAGR of 19.6%, 15.7% and 12.6% over FY11 – 15.
  2. Both the parks operational in Kochi and Bangalore are generating Cash Flows from Operation.
  3. Robust balance sheet with total D/E 0.03x as of FY15.
  4. Healthy return ratio: FY15 ROCE – 25.7%, FY15 ROE - 20.0%

Management:

  1. One of the largest amusement park operation in India with over 14 years of experience
  2. Promoted by Mr. Kochouseph Chittilappilly and Mr. Arun Chittilappilly – Mr. Kochouseph Chittilappilly has also incorporated V-guard industries Ltd. , publicly listed company since 2008.
  3. The procedure for building a new amusement park with government approvals proves the management’s efficiency. ( In 2011, the Atlanta has planned to build the Asia’s largest amusement park in Surat of around 10K Crore but in 2 years nothing has been started)

Immediate triggers:

  1. The festive season is going to be bumper as this quarter includes Diwali, Christmas and many more holidays.
  2. The Hyderabad project is going to begin in the late April, 2016 which would boost the growth.

Would need help from seniors if possible.
thanks
Samkit

1 Like
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wonder.png1680Ă—1050 144 KB

Wonderla has formed saucer pattern.