Wonderla
By Geetanjali Kedia
Wonderla Holidays is entering the primary market on Monday 21st April 2014 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 23rd April.
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 ‘3 star’ 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 31st December 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-à-vis Rs. 7.97 for FY13. As of 31st December 2013, company’s 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, company’s market cap will be Rs. 706 crore. Adding debt for Hyderabad park, the resultant enterprise value is close to Rs.750 crore – 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, company’s 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!