Wonderla Holidays Limited

Transcription

1 IPO Note Rating matrix Rating : Unrated Issue Details Issue opens 21-Apr-13 Issue closes 23-Apr-13 Issue size ( cro re) No of share s on offer (crore) 1.45 Fresh Issue 1.45 Employee Reservation NA QIB 50% Non-institutio nal 15% Retail 35% Minimum lot size NA Objects of the Issue To set up an amusement park, Wonderla Hyderabad Shareholding Pattern Pre Issue Post Issue Promoter and Promoter group Others Public Valuation Parameters crore FY FY11 FY12 FY13 9MFY14 Total Income EBITDA EBITDA Margin (%) Depreciation Interest PAT Analyst s name Rashesh Shah rashes.shah@icicisecurities.com Darpan Thakkar darpan.thakkar@icicisecurities.com April 16, 14 Wonderla Holidays Limited Price band Wonderla Holidays Limited (Wonderla) is one of the leading amusement park operators in India. The company commissioned its first amusement park in Kochi in 00 and the second amusement park in Bengaluru in 05. Company also started resort at its Bengaluru amusement park in March 12. As part of expansion plan, company is planning to open one more park at Hyderabad which is the objective of this IPO. Investment rationale A well established player with early mover advantage Wonderla has been present in the industry since past 13 years with two amusement parks. Company s cost of establishment is lower than the establishment costs in today s market which gives the company flexibility of keeping competitive entry fees. In-house manufacturing to help in decreasing capex and maintenance cost The company has developed an in-house manufacturing facility in Kochi to construct rides used in its amusement park. According to the company, the cost in-house manufacturing a ride is almost one third to that of buying it from outside. Manufacturing capability has also helped the company to build its in-house maintenance capabilities thereby reducing the cost of maintenance and down-time for a ride. Healthy operating cashflow with strong balance sheet The company has been able to generate operating cash flow at CAGR of ~22% over the period of FY09-13 due to strong footfall growth and healthy EBITDA margin. Further, the business is a negative working capital business as most of the payments are received upfront. Company has D/E ratio of 0.15 as on FY13 which make stronger balance sheet. Concerns On going litigations on land in Hyderabad Competition from existing and new players Risk of accidents or mishaps at any of the parks Slowdown in overall economic environment Priced at FY13 PE multiple of 19x on lower band and x on higher band At the IPO price band of , the stock is available at multiple of 19x-21x FY13E PE (post dilution). Exhibit 1: Key Financials crore FY09 FY FY11 FY12 FY13 9MFY14 Total Income Growth YoY (%) NA NA EBITDA EBITDA Margin (%) Depreciation Interest PAT PAT Margin (%) EPS ( ) Post issue diluted EPS ( ) Source: RHP, ICICIdirect.com Research

2 Company Background Wonderla Holidays Ltd (Wonderla), founded in 02, is one of the largest amusement park operators in India. It currently operates two amusement parks situated in Kochi and Bengaluru under the brand name Wonderla and a resort in Bengaluru under the name Wonderla Resorts. The company is promoted by Mr Kochouseph Chittilappilly (promoter of V- Guard Industries) and Mr Arun Kochouseph Chittilappilly. Promoters and the promoter group hold 95.48% stake in the company while the remaining 4.52% stake is held by employees of the company and group companies. The company commissioned its first amusement park in Kochi in 00 under the name Veegaland and the second amusement park in Bengaluru in 05 under the name Wonderla. Veega Holidays and Parks Pvt. Ltd, which owned and operated Veegaland, was merged with Wonderla with effect from April 1, 08 and both the parks now operate under the name Wonderla. Wonderla Resort started operations in March 12. With continuous addition of new attractions, entry charges at affordable rates and by maintaining high standards of safety and hygiene, the company has been able to generate repeat footfalls and attract organised visits from schools, colleges and corporate. Driven by these factors, the company s revenues have grown at 22% CAGR and footfalls have grown at.4% CAGR during FY However, in 9MFY14, revenue growth slowed down to 9.9% y-o-y as footfalls declined by 3.5% over the same period; the reason being footfalls in Kochi declined by 11% in 9MFY14 due to early onset of monsoons and excess rainfall - even though footfalls in Bengaluru grew by 4.6%. Page 2

3 Exhibit 2: Revenue CAGR of 22% during FY09-13 Exhibit 3: Footfalls CAGR growth of 13.2% during FY Crore in Lakhs FY09 FY FY11 FY12 FY13 9MFY14 5 Total Income 0 FY FY11 FY12 FY13 9MFY14 Footfalls Exhibit 4: Trends in margins Exhibit 5: Return ratios (%) FY09 FY FY11 FY12 FY13 (%) (%) FY09 FY FY11 FY12 FY (%) PAT Margin EBITDA Margin ROCE (RHS) ROE (LHS) Exhibit 6: Revenue break-up FY12 21% 2% 77% Entry Fees Resort and other Rentals Food and Beverages + Merchandising Source: RHP, ICICIdirect.com Research Page 3

4 Exhibit 7: Operational data Particulars Fiscal 11 Fiscal 12 Fiscal 13 9MFY14 Footfalls (in lakhs) Kochi Bangalore Total Revenue ( in crore) Kochi Bangalore Wonderla Resort Total Attractions Land based attractions Kochi Bangalore Water based attractions Kochi Bangalore Area (in acres) Kochi Bangalore Employees Kochi 270 Bangalore 4 Hyderabad 5 Restaurants Kochi 7 Bangalore 7 Objects of issue The company aims to utilise the proceeds from the issue, after deduction of the issue related expenses, to set up an amusement park at Hyderabad and remaining amount raised through IPO will be used for general corporate purposes. Exhibit 8: Object of issue Balance estimated cost as on estimated to be financed Amount which will be financed from Particulars Total estimated cost Amounts deployed as on February, 14 February, 14 through debt net proceeds of the issue To set up an amusement park, Wonderla Hyderabad General corporate purposes * * * * Total * * * * * To be finalized upon determination of the issue price Estimated Net proceeds utilization during fiscal Page 4

5 Investment Rationale A well established player with early mover advantage Wonderla has been present in the industry since past 13 years with two amusement parks, one each in Kochi and Bengaluru, as of now. The Kochi Park was set up in 00 and Bengaluru was set up in 05. Both parks get visitors from their respective states as well as neighbouring states. Other than this, company s cost of establishment is lower than the establishment costs in today s market which gives the company flexibility of keeping competitive entry fees. Company s vast experience in managing amusement parks will help it in setting up new amusement park at Hyderabad. In-house manufacturing to help in decreasing capex and maintenance cost The company has developed an in-house manufacturing facility in Kochi to construct rides used in its amusement park. According to the company, the cost in-house manufacturing a ride is almost one third to that of buying it from outside. Manufacturing capability has also helped the company to build its in-house maintenance capabilities thereby reducing the cost of maintenance and down-time for a ride. The company has been able to generate healthy CFO with strong balance sheet The company has been able to generate operating cash flow at CAGR of ~22% over the period of FY09-13 due to strong footfall growth and healthy EBITDA margin. Further, the business is a negative working capital business as most of the payments are received upfront. Company has D/E ratio of 0.15 as on FY13 which make stronger balance sheet. Demographic advantages India is one of the youngest countries in the world with median age of 26.5 years compared to 37.1 years in US, 45.4 years in Japan and 35.9 years in China. The GDP growth of the country has also helped in increasing GDP per capita for the nation. With increasing per capita income, there has been a steady growth in domestic spending on tourism and leisure activities as well as increase in urbanization. More urbanisation means more population in the catchment area of an amusement park. This advantageous demography is expected to fuel further demand for more leisure activities like amusement parks. Page 5

6 Key concerns On going litigations on acquiring land in Hyderabad may constraint ability for future expansion The company is currently involved in two litigations pertaining to acres of land acquired in Hyderabad to set up the park. Following these litigations, the date of commissioning of the park has been postponed to September 15 from April 15 as execution of the project has been delayed. The management has indicated that initially the park will be set up across 27 acres which excludes the land under litigations. Hence, no further delay is expected in setting up the park but any adverse result of litigation might result in limited expansion of the park in future resulting in lower than expected revenue. Competition from the existing and new players India s amusement park industry is estimated to be worth 7000 crore and it has grown at ~17% CAGR over the past few years. With such a huge potential in sight, there are several players which are expected to enter the industry in different parts of India which will create competition for the company. Some of the major projects in pipeline are Theme park in Surat with size of 30 acres, Adlabs Imagica in Khopoli, Maharashtra (completed), Theme park in Nagpur, Maharashtra etc. Other than this, existing entertainment parks in Hyderabad namely Ramoji Film City and Ocean Park may also pose a challenge even though they are different in terms of their attractions. Risk of accidents or mishaps at any amusement parks exposes the company to possible financial liabilities and legal proceedings Ensuring the safety of visitors on the rides is critical for the smooth operation of an amusement park. Even though Wonderla has stringent checks in place for safety and hygiene standards, since majority of company s current revenue is coming from operations of two amusement parks, any accident/incident at any one of them may result in the temporary closure of the park for some time thereby affecting revenues of the company and gathering adverse publicity. A slowdown in economic growth in India could cause business to suffer Performance and the growth of the business are dependent on the health of the overall Indian economy. As a result, any slowdown in the Indian economy could adversely affect the business, results of operations, financial conditions and prospects. Page 6

7 Valuations At the IPO price band of , the stock is available at multiple of 19x-21x FY13E PE (post dilution). Exhibit 9: Profit & Loss Crore FY09 FY FY11 FY12 FY13 9MFY14 Income Income from services Sale of products Other Income Total Income Expenditure Direct operating expenses Purchase of stock in trade Change in inventory of stock in tra (0.0) (0.1) 0.1 (0.1) (0.1) (0.3) Employee benefits Other expenses Total Expenditure EBITDA Financial charges Depreciation/amortisation PBT Extraordinary items.8 Taxation (1.7) PAT Adjusted PAT Exhibit : Balance Sheet Crore FY09 FY FY11 FY12 FY13 9MFY14 Equity Share Capital Share capital suspense account Reserves & Surplus Total Shareholders Funds Long term borrowings Deferred tax liability (net) Long term provisions Total Non-current liabilities Short term borrowings Trade Payables Other current liabilities Short term provisions Total current liabilities Total Liabilities Fixed Assets Tangible assets Intangible assets Capital work-in-progress Long term loans & advances Other non-current assets Total non-current assets Current investment Inventories Trade receivables Cash and bank balances Short-term loans and advances Other current assets Total Current assets Total Assets Page 7

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