Yes, Wonderla is part of my portfolio. You have already covered some of the points in investment rationale but few additional important points in my thesis are
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World over, even for mature parks (Disney, Six Flags, Sea World etc), the foofall have seen growth of 4-6%. As compared to that, Indian market is still at early stage of the maturity cycle and hence getting 4-6% increase is doable.
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If we look at past track record, they have been able to increase ticket price above inflation rate. Typically at 10%+ CAGR. Now a decent part of their P&L cost does not increase (fixed asset depreciation), but on that cost too, they get 10% higher realization. So, margin improvement or at least margin maintenance on steady state basis looks reasonably certain for existing park.
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So if we combine above two points (And connect them with few below), it is reasonable to assume 15-16% growth from existing parks on normalized basis. Then the additional kicker will come from new parks which means 20-25% growth is achievable in medium term on steady state basis.
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The most likable feature to me- they increased prices last year by whopping 25%, and the retail foot fall only marginally declined. You don’t need any other proof for pricing power! This to me is a clear reflection of price in elasticity of demand - or in other words pricing power. When you can increase prices without affecting demand substantially, you have found true pricing power.
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They generate super cash flows and Return on Capital employed. Though the current return ratios look higher due to depreciated asset base, even on new asset they will generate 25% ROIC. And to top it due to expansion they can keep on deploying this capital and generate such decent returns on additional capital. It is not easy to find such business models where businesses can deploy large capital at high rate of return.
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One of the ignored part of the story is their own manufacturing capacity for rides which brings down the Capex and Opex both for them. Consider a Hyderabad park that is set up 2 years after Adlabs set up Imagica with almost similar number of rides. Wonderla spent 300 odd crores on Hyderabad park while Adlabs was set up with 1200 Crore + Capex two years ago. Though the scale may be bigger for Adlabs Imagica- the cost differential is disproportionate. More importantly, it is not coming at the expense of customer experience- as is amply evident from the Tripadvisor ratings. Just imagine the headway wonderla as company has over peers where they have 30-40-50% cost advantage in one of their biggest cost items
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By nature, large amusement park is a natural monopoly business- because it involves assets that are inflationary. So, it is extremely difficult for new player to enter the same market and compete. Let’s say Adlabs wants to enter Bangalore market today, it will have to spend almost 3-4 times the capital that Wonderla spent 10 years ago. And to top it, they will have to spend large sum of money on advertising/promotion to snatch away customers from Wonderla. Now, even if we assume they can take away 50% of the visitors from Wonderla, the economics will just not work for them because of higher fixed cost and higher operating cost structure. Thus, any company that enters a market first, has a big headway. Here, wonderla has an edge because they have carved out a business model that is replicable- and is expanding rapidly. So in next 10 years if they become 7-8 location company and corner some of the choicest markets, they have a substantial competitive advantage and pricing power!
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To top these all, this business is run by a management of high integrity and competence.
Disclaimer: I am not a research analyst of Investment advisor and this post should not be taken as buy/sell recommendation. Please do your own due diligence or consult your investment adviser before making an investment decision.