CD Equisearch Pvt Ltd Feb 26, 2015
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Wonderla Holidays Ltd. (WHL)
No. of shares (crore) 5.65
Mkt cap (Rs crs) 1584
Current price (25/02/15) 280
Price target (Rs) 342
52 week H/L (Rs.) 355/156
Book Value (Rs.) 64
P/BV (FY15e/16e) 4.4/3.8
P/E (FY15e /16e) 29.1/24.6
BSE Code 538268
NSE Code WONDERLA
Bloomberg WONH IN
Daily volume (avg. weekly) 121858
Shareholding pattern % Promoters 70.98
MFs / Banks / FIs 2.10
Foreign 8.61
Govt. Holding 0.00
Non-Promoter Corp. 4.67
Total Public 13.64
Total 100.00
As on Dec 31, 2014
Recommendation
BUY
Analyst
VIPUL SANGHANI
Phone: + 91 (33) 4488 0055
E- mail: [email protected]
Figures in Rs crs FY12 FY13 FY14 FY15e FY16e
Income from operations 113.13 137.85 153.63 185.32 222.39
Other income 1.39 1.52 2.38 9.48 6.64
EBITDA (other income included) 57.14 64.34 73.03 98.11 113.05
Adjusted net profit 30.04 33.58 39.91 54.49 64.41
EPS- Diluted 5.32 5.94 7.06 9.64 11.40
EPS growth (%) 1.0 11.7 18.9 36.6 18.2
Company Brief Wonderla Holidays Ltd. (WHL) is one of the largest operators of
amusement parks in India. It owns and operates two amusement parks
under the brand name "Wonderla", situated at Kochi and Bengaluru. It
has also developed a Wonderla resort in Bengaluru, a three star leisure
resort next to its amusement park which has been operational since
March 2012.
Key Highlights � The Indian Amusement Park Industry is still at a nascent stage of
growth and is highly under penetrated. The country’s amusement
parks industry, with 150 players, generated revenues of over Rs1800
cr in FY13. As per IAAPI estimates this will more than double to Rs
4000 cr by 2020. The main growth drivers would be rising
discretionary spend on account of increasing per capita income,
favorable demographic structure, lack of entertainment options and
government thrust on tourism sector.
� The company's competitive strength lies in its in-house
manufacturing facility at Wonderla Kochi to manufacture/construct
amusement rides and attractions, apart from amusement rides
procured from manufacturers within and outside India. As of Jan 31
2014, WHL constructed/manufactured 42 rides/ attractions. This has
helped the company to reduce capex incurred on the rides; as per
the management, the cost of a ride manufactured in-house is one-
third of the cost of procuring the ride externally.
� WHL’s net sales has grown at an impressive CAGR of 20% over the
last 5 years, while its net profit has grown at more than 29% CAGR
over the same period. We expect company’s net sales to grow by
20.6% in FY15e and by 20% in FY16e on account of increasing per
capita income and rising discretionary spending.
� The stock is currently trading at 29.1x FY15e of Rs 9.64 and 24.6x
FY16e of Rs 11.40. However, looking at the earnings growth, strong
balance sheet and the expansion plan, we assign a buy on the stock
with a target price of Rs 342, based on 30x FY16e, over a period of 9-
12 months.
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Company Profile Wonderla Holidays Ltd. (WHL) is one of the largest operators of amusement parks in India. It owns and operates
two parks under the brand name "Wonderla", situated at Kochi and Bengaluru. The company's amusement parks
offer a wide range of water and land based attractions catering to all age groups. The rides are a mix of imported,
domestically procured and in-house manufactured. It has also developed a Wonderla resort in Bengaluru, three
star leisure resort next to its amusement park which has been operational since March 2012. In FY14, it had an
annual cumulative footfall 22.9 lakhs. The company had raised Rs 181.25 cr via IPO in CY14 to set up its third park
in Hyderabad.
Wonderla’s amusement park revenues are seasonal with maximum footfalls on weekends and during school
vacations. The April to June (summer vacations) and October to December (holiday season) quarters are typically
the peak quarters. Revenue streams for the amusement parks are ticket sales, sale of products (mainly
merchandise and packaged food) and revenue share from restaurants located inside the park. Ticket sales
accounted for 87% of amusement park revenues in FY13. The company sells all packaged food at MRP. It controls
the menu, quality and pricing at the restaurants present in the premises of the park, and also has a team for overall
supervision of operations.
WHL's promoter Mr. Kochouseph Chittilappilly in the year 1996 had incorporated V-Guard Industries Ltd. which
is a group company of WHL and is listed on BSE and NSE since 2008. Company's promoters launched first
amusement park in Kochi in 2000, by the name 'Veegaland' and second amusement park in Bengaluru in 2005, by
the name 'Wonderla'. Pursuant to a scheme of amalgamation the erstwhile 'Veega Holidays and Parks Private Ltd'
which owned and operated 'Veegaland', merged with the company with effect from 1st April 2008 and
consequently both amusement parks are being operated under the name 'Wonderla'.
The company's business operations can be broadly classified as follows:
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Source: Company, CD Research
Wonderla Kochi The Kochi Park was started way back in the year
2000. It has 22 water based attractions and 33 land
based attractions, which has continuously
attracted footfalls. Kochi Park has achieved a
stable footfall growth of 4% CAGR over the last 5
years from FY 2009-14. The number of footfalls
has increased from 9 lakhs in FY09 to 11 lakhs in
FY14. Of the total visitors, Kochi Park has 56% of
walk in customers, while the balance is
institutional. Of the total available freehold land
of 93 acres of land in Kochi, only 29 acres are
developed. The balance is available for future
expansion of new
rides. During FY14, Wonderla Kochi added three
attractions. "Rokin Tug" a land ride which can
accommodate up to 24 riders, "Fire Brigade" a
revolutionary family ride combines the best of
classic circular car rides with a high tech,
interactive water gun race game which can
accommodate 12 riders and another kids ride
called "Magic Plane" features six colorful, hang
glider themed vehicles for a total of 12 per cycle.
Wonderla Kochi bagged "Best Tourism
Destination award" for the FY 2012-13. The
festivals like Ramzan, Onam and Christmas were
celebrated inside the park. Special events like
shingari melam, stage shows, mobile fun games,
fireworks etc. were organized for the guests. The
park has been recognized as a tourism destination
by the Kerala government Trip Adviser has rated
the park ranked as 13th in Asia.
Source: Company, CD Research
Source: Company, CD Research
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Wonderla Bengaluru The Bengaluru Park was started in 2005. It has 20
water based attractions and 35 land based
attractions, situated on 81.75 acres of freehold land.
Bengaluru Park, being a comparatively new park has
grown at a CAGR of more than 13% over the last 5
years from FY 2009-14. The number of footfalls has
increased from 6.3 lakhs in FY 09 to 11.9 lakhs in
FY14. Of the total visitors, Bengaluru Park has 61%
of walk in customers, while rests are institutional
and group booking visitors. During FY14, Wonderla
Bengaluru added two attractions. "XDMAS", a land
ride having a capacity to accommodate 176 visitors,
with high definition 4D video, 7.1 surround sounds,
simulated seats and other environmental effects,
takes people to a virtual world. Another land ride
named "Mini Coco Cups" is a kiddie's ride which
resembles a set of cup and saucer. This ride
accommodates 16 kids and covers an area of 8 meter
diameter. During FY14, Wonderla Bengaluru
announced its grand celebration titled "Facebook
Friday" to celebrate one lakh members on its official
facebook fan page. Dasera, Diwali and Christmas
were celebrated inside the park. Trip Adviser has
rated the park ranked as 8th in Asia.
Source: Company, CD Research
Details of Wonderla's existing parks
Wonderla Kochi Wonderla Bengaluru
Year of commissioning 2000 2005
Area (acres) 93.17 81.75
Distance from centre of city (kms) 15 28
Capex incurred (Rs mn) 650 900
Attractions
Land based rides 33 35
Water based rides 22 20
No of employees 274 309
No of restaurants 7 7
Yearly footfalls (FY14) (in lakhs) 11 11.9
Yearly revenues (FY 14) (in cr) 62.64 85.71
Source: Company, CD Research
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Wonderla Resort WHL has developed a unique resort at its
Bengaluru Park comprising of 84 luxury rooms,
with amenities including banquet halls, a board
room, conference rooms, multi-cuisine
restaurant, a solar heated swimming pool,
recreation area, kids' activity centre and a well
equipped gym. The rooms at Wonderla Resort
have other amenities such as, 24 hours in-room
dining facility, LCD television, tea/coffee maker
and Wi-Fi connectivity. The resort has four
banquet/ conference halls totaling 8,900 sq. ft.,
with a capacity to accommodate up to 800
guests and also a well equipped board room,
making it suitable to host wedding receptions,
parties and other corporate events and
meetings. The company has recorded an
average occupancy rate of 30% at Wonderla
Resort in fiscal year 2014.
Data of Bengaluru Park
Source: Company, CD Research
Source: Company, CD Research
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Wonderla Hyderabad WHL has raised Rs 181.25 cr in CY14 through an IPO to develop the Hyderabad Park, which will drive future
growth. Its third amusement park is in Ranga Reddy district of Telangana. WHL has acquired 49 acres of land
for the proposed park and is in final stages of approval. The park is approximately 27 kms from central
Hyderabad , 33 kms from Secunderabad railway station and 12 kms from Hyderabad airport The company will
start developing the park from fourth quarter of FY15 and is expected to be operational from last quarter of
FY16 or beginning of FY17.The company intends to develop 27 acres with 24 dry rides and 18 wet rides, of
which 10 land rides will be imported, 14 land rides will be sourced indigenously and 18 water rides will be
sourced indigenously either through in-house manufacturing or from local manufacturers. The company is
estimating a footfall of 700000 in the first year with operating margin of roughly 30%. However, as per
management at a PAT level in the first year Hyderabad will show a loss because of high depreciation cost and
the company expects that it will turn PAT positive from year three onwards.
Detailed cost of Hyderabad Park
Sl
No Particulars
Cost
(Rs cr)
Amount deployed
as on March 5,2014
(Rs cr)
Balance to be
funded through
debt and net
proceeds (Rs cr)
1 Land, land development and civil construction 99.38 25.48 73.91
2 Amusement rides 106.67 9.7 96.97
3 Machinery and equipments 26.14 0.09 26.05
4 Furnishing and vehicles 11.4 0.15 11.25
5 Consultants fees 2.36 0.4 1.95
6 pre-operative expenses 6.25 1.93 4.32
7 Contingencies 3.78 - 3.78
Grand Total 255.98 37.75 218.23 Source: Company, CD Research
Particulars
Amt
(Rs cr)
Gross Proceeds 181.25
Less: Issue Related Exp 10.97
Net Proceeds 170.28 Source: Company, CD Research
Revenue Mix over the Years
IPO Proceeds
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Source: Company, CD Research
Investment Rationale India's Amusement Park Industry Set to
Witness Multiple Benefits Amusement Park is a generic term for a collection of
rides and other entertainment attractions, assembled
for the purpose of entertaining a large group of
people. An amusement park stands out from a simple
city park as it is more elaborate and provides
attractions meant to cater to adults, teenagers and
kids. Amusement Parks evolved from European fairs
and pleasure gardens, which were created for
recreation purpose. In India amusement park
industry has witnessed a gradual and successful
journey. From just one Appu Ghar in 1984 to over 150
amusement parks in 2013 spread across India. The
country’s amusement parks industry, with 150
players, generated revenues of over Rs1800 cr in
FY13. As per IAAPI estimates this will more than
double to Rs 4000 cr by 2020.In India, within-city
entertainment options are mostly limited to malls and
movie theatres. Hence, there is a lack of full-day
entertainment avenues. Amusement parks are
equipped to plug this gap. Further, amusement parks
keep crowds engaged for a full day at a cost of Rs
800-1,000 per person (including entry ticket and food
and beverages) compared with Rs 200-250 (in tier I
cities) paid for a two-three-hour movie and, hence,
are cost effective too.
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Industry Segmentation
Classification Large Parks Medium Parks Small Parks
Capex > Rs 700 million Rs 300-700 million < Rs 300 million
Area covered > 40 acres 10-40 acres < 10 acres
Average ticket price > Rs 400 Rs 250-400 approx Rs 250
No of visitors / Year > 0.5 million 0.3-0.5 million < 0.3 million
Location Metros and outskirts Outskirts of Metros, Tier
I cities
Tier II cities, small
towns, outskirts of
Metros and Tier I
cities
Examples Essel world (Mumbai), Nicco
Park (Kolkata), Wonderla
(Kochi & Bengaluru),
Kishikinta (Chennai)
GRS Fantasy Park
(Mysore), Ocean park
(Hyderabad)
Fun N food
Kingdom
(Dehradun)
No of parks 16-18 40-45 85-95 Note: Capex does not include cost of land
Source: Company, CD Research
Source: CRISIL, Economic Times, CD Research
Rising discretionary spend and favorable
demographic structure
India’s discretionary expenditure is increasing at a
rapid pace and is expected to rise further in
coming years on account of higher per capita
income and large young population. More than
65% of India’s population is below the age of 35
years, which augurs well for amusement park
industry. India is one of the youngest countries in
the world with the median age of 26.5 years,
compared to 37.1 years in US, 45.4 years in Japan
and 35.9 years in China. According to CARE
Report, among all the age groups, children below
15 years of age have greatest attraction for
amusement parks- though the overall footfall of
adults is higher; kids drive their families to
amusement parks. In India, around 28.50% of the
population lies in the age group of 0-15 years,
63.40% in 15-59 years and 8.10% in 60 years and
above, respectively. This will lead to higher
spending on leisure and entertainment activities
such as amusement parks, vacations, visits to
multiplexes, restaurants etc.
Source: PWC, Ficci Wellness Report, CD Research
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India's per capita income at current prices has grown
at a CAGR of 16% over FY 2008-14. This increase in
per capita income has built a thriving middle-class
society with rising disposable incomes. This has had a
significant investment multiplier effect on the
economy leading to increasing consumerism and
wealth creation thus positively impacting savings.
With sizeable population in this age bracket, interest
in amusement park is expected to rise. Visiting
amusement parks is a part of discretionary spending
and is perceived to be a leisure activity
The share of discretionary spending in overall
spending has increased from 30% in FY 2001-02 to 40%
in 2009-10 and is expected to increase to 50% by 2019-
20. Thus, rising discretionary expenditure along with
strong demographic dividend pans out good for the
company, which is a niche player in amusement park
industry. The rise in per capita income of the growing
middle class is also contributing to urbanization of the
country. By 2020, the urban population of India is
expected to increase to 35 % of the total population.
Due to this, the demand for entertainment options will
remain strong and instead of having to travel long
distances or even overseas to enjoy amusement rides,
people today chose to spend their earnings nearer
home.
Consolidated Footfall Break up of Visitors
Underpenetrated market and lack of entertainment options
WHL has been present in this business for the past 13 years. In India, within city entertainment options are
mostly limited to malls and movie theatres. There is considerable lack of full day entertainment avenues.
WHL is well equipped and positioned to plug this play and further penetrate the amusement park industry
which is hugely under penetrated in India as compared to other countries of the world. Over the last 5 years,
the Indian leisure industry is estimated to have increased its overall revenue by 20-25%. Malls are primarily
entertainment destinations in Indian cities. Parks in India are well positioned to attract demand from
customer segment. As per CARE Report, the amusement parks industry in India is estimated to be worth Rs
26 billion. As the Indian economy grows and industry models in America and Europe is replicated, Parks will
be able to market themselves as weekend getaways. Parks in India are still in the early stages of development.
Parks in Europe and America generate significant revenue from hotels, as trips to parks tend to be considered
as weekend getaways or holiday destinations. In India, the concept of a park vacation is still not popular.
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Source: Company, CD Research
Emphasis on tourism sector to boost leisure industry
Travel and tourism contributed INR 2,178.1 Billion to the country’s GDP in 2013. This is expected to rise by
7.5% to INR 2,341.45 Billion in 2014. The number of domestic tourist visits in India during 2012 was 1036.3
million as compared to 864.53 million in 2011, recording a growth rate of 19.9%. Tourism sector is the third
largest foreign exchange earner after gems, jewellery and readymade garments. In 2013, foreign exchange
earnings from tourism were USD 18.13 billion as compared to USD 17.74 Billion in 2012, registering a growth
of 2.2%. It is a big employment generator – every USD 1 Million invested in tourism creates 78 jobs. A
growing recognition of tourism's contribution to employment and economic growth. The availability of visa
on arrival facility significantly influences tourists travel plans to any country. During 2013 a total number of
Comparison of Parks size globally
20294 Visas on Arrival were issued, which amounts to
growth of 26%. The launch of several branding and
marketing initiatives by the Government of India such as
Incredible India! and Athiti Devo Bhava provides a focused
impetus to growth. All these factors augur well for the
company, which is a niche player in amusement park
industry. Local residents form majority of footfall (84%)
followed by domestic tourist (15%) and foreign tourist
consist of only 1%. With rising economic activity, domestic
tourism is expected to increase attracting more footfalls in
the major cities of India. CARE Research expects the
domestic tourism industry to grow at lower double digits in
terms of tourist arrivals. Source: E &Y Report, MOSL, CD Research
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Competitive Landscape of Major Parks in India
Rides Pricing
Parks Location
Size
in
acres
Dry Wet Pricing strategy Entry rate for adults
(Rs per person)
Avg
annual
footfall
(mn)
Essel World & water
kingdom Mumbai 64 Y Y
Separate entry fees
for amusement
park and water
park
Rs 560-690 (for either
amusement park or
water park)
1.8
Nicco Park Kolkata 40 Y Y
Separate entry fees
for amusement
park and water
park
Dry park package- Rs
340 Water charge
package-290
1.7
Wonder La Kochi 93 Y Y Single entry fees Rs 460-600 1.2
Wonder La Bengaluru 83 Y Y Single entry fees Rs 590-790 1.1
Ocean Park Hyderabad 20 Y* Y
Separate entry fees
for water park and
snow park
Rs 300 NA
Ramoji Film City** Hyderabad 1666 - - Single entry fees Rs 600 1.5
Adventure Island &
Metro Walk Rohini 62 Y Y Single entry fees Rs 500 NA
Entertainment City
( including
amusement park-
worlds of wonder)
Noida 44## Y Y
Single entry as well
as pay as you go
option available
Rs 450 NA
Kishkinta Chennai 120 Y Y Single entry fees Rs 450 NA
Queensland Chennai 70 Y Y Single entry fees Rs 350 NA
VGP Universal Chennai NA Y Y Single entry fees Rs 200 NA
MGM Dizzee World Chennai 27 Y Y Single entry fees Rs 500 NA
GRS Fantasy Park Mysore 30 Y Y Single entry fees Rs 395 NA
Mount Opera Hyderabad 55 Y Y
Single entry as well
as pay as you go
option available
Rs 360 NA
Athisayam Madurai 40 Y* Y Single entry fees Rs 500 NA
Black Thunder Mettupalayam 65 Y* Y Single entry fees Rs 450 NA
Appu Ghar Pune NA Y - Pay as you go Approx Rs 30 per ride NA
Fun N Food village* New Delhi 10 Y Y Single entry fees Rs 300 0.5
** Ramoji Film City is a theme park
* Ocean park, Black Thunder, Athisayam and Fun N Food Village are primarily water parks with a few dry rides.
## In phase 144 acres have been developed out of planned 147 acres.
Source: Company, CD Research
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Huge investment lined up
As discussed earlier, the rise of tourism sector augurs well for amusement park industry. A total of Rs 175
billion of investments pertaining to the 12 major projects are lined up over the next 3-4 years. The
amusement park in Surat is contributing around Rs 95-100 billion of this amount. Some of these large
projects may avail viability gap funding from the State governments. Most projects are expected to come up
in tier II and tier III cities due to difficulties faced in land acquisition. A total addition of 4500 acres of
capacity in the next 3-4 years will be one of the major drivers for the industry. As per CARE Report, 10-15%
of footfall growth is expected to be achieved over the next couple of years, which will drive the footfalls to
78-80 million.
Non Ticketing Revenue Share Also Set to Drive Growth Almost 75-80% of the total revenue of WHL comes from sale of tickets. Share of food & beverages is 15-20%,
which is significantly lower than global peers. International parks typically generate around 50% of revenue
from admission tickets. Total contribution from accommodation related revenues currently form only 2%,
which is expected to increase as amusement becomes more of a destination tourism than a single day
entertainment. The concept of integrated resorts which includes park, retail, hospitality and cultural
facilities etc. are increasingly becoming popular in India. Due to increase in disposable income, improving
life style and an increase in nuclear families, the in-park spending is expected to increase in the short to
medium term. Globally the share of non ticketing revenue is quite higher in amusement park as compared
to India. We believe the above factors will add up to the non ticketing revenue of Indian Parks.
Source: Company, CD Research
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Age wise distribution India (2011) Visitors age profile
Source: Company, CD Research
Source: Company, CD Research
Footfalls of Top 25 Amusement parks Globally
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In- House Manufacturing to Boost Profitability Innovation is an important factor for generating increase in footfalls at amusement parks. WHL regularly
develops and introduces new rides and attractions. The company conducts market surveys relating to
customer preferences and benchmarks against amusement parks in other parts of the world, before
implementation, including concept testing with visitors, in house testing of rides and attractions by
company's research and development team. There are not many parks in India which is profitable; WHL is
one of the few parks which is profitable due to its operational efficiencies, in- house ride manufacturing
capability, experienced promoters and relatively less capex requirements. The company's management has
been successful in keeping the cost efficiency, while at the same time providing a memorable experience to
the visitors. The company's competitive strength lies in its in-house manufacturing facility at Wonderla Kochi
to manufacture/construct amusement rides and attractions, apart from amusement rides procured from
manufacturers within and outside India. WHL's experience in running amusement parks and understanding
customer preferences enables the company to conceptualize and develop innovative rides. This results in cost
saving to an extent of 50-60% for imported rides and approx 30% for domestic rides. The company also sends
key managerial staff to amusement parks across the world to learn more about the prevalent market trends.
As of Jan 31 2014, WHL constructed/manufactured 42 rides/ attractions. This has also helped the company to
build its in-house maintenance capabilities, thereby reducing the cost of maintenance and down-time for a
ride. Wonderla Kochi and Bengaluru have 10 and 18 rides imported respectively. Balance is either in-house or
domestically sourced. (Please refer to chart in pg no 3)
Early Mover Advantage WHL has a first-mover advantage at its existing locations, Kochi and Bengaluru. Since it set up operations
more than 14 years ago in Kochi and more than 9 years ago in Bengaluru, the company’s cost of establishment
is considerably lower than that of new entrants, which would enable it to competitively price its entry tickets.
Even at the new proposed locations such as Hyderabad, the company is likely to have an edge over any new
entrant in the industry due to its vast experience in running amusement parks. Also, the in-house ride
manufacturing and maintenance capabilities as discussed earlier are expected to keep Wonderla’s costs lower
than that of competitors. WHL's management is highly experienced in operating amusement park which we
believe is one of the key requirements to succeed in this industry.
Strong Marketing Strategy WHL derives approximately 80% of its revenues from entry fees and thus strong marketing skills are
necessary to attract footfalls on a sustainable basis and also to attract repeat visitors. Marketing and sales
promotions are done through direct and indirect modes. Under the direct mode of marketing, Wonderla’s in-
house marketing team reaches out to the potential customer base directly by conducting activities such as
personal sales, college activation plans, kiosk activity plans at college festivals, etc. The company uses the
indirect mode to widen its reach beyond the regions of its presence. It has engaged sales promotion agents
and tour operators across southern India on a revenue sharing basis. The company also has a separate
marketing team to target schools and colleges which report bulk footfalls; according to the management, 800
out of 1,000 schools located in Bengaluru visit Wonderla regularly. Also, a number of corporates conduct their
events such as annual picnic and off-sites at Wonderla’s parks.
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WHL has come up with innovative marketing strategy by launching privilege card to ensure repeat visits. The
privilege membership card comes free with a minimum purchase of four tickets at full rate without any
discounts. On the next visit, a visitor enjoys a discount ranging from 10-20% of the ticket price. Currently, 10%
of the company’s ticket revenue comes from the privilege card.
Reserved Capacity to Absorb Future Footfalls The company has excess capacity available at both the parks to absorb future footfall growth in coming years.
Current capacity for both parks is 12000 visitors per day. Company has excess land which can cater to the next
growth phase. A new ride addition or additional food stall can be successfully added on the vacant land
without incurring extra expenditure. Thus, we believe there is enough head room for the company to grow and
expand to meet the increasing demand and increasing the revenue and profitability.
Land available for future expansion
Park No of Rides
Approx Available
Land (acres)
Approx Developed
Land (acres)
Balance
Available
(acres)
Wonderla Kochi 55 93 29 64
Wonderla Bengaluru 55 82 39 43
Wonderla Hyderabad 42 50 27 23
Source: Company,MOSL, CD Research
Strong Financials & Healthy Revenue
Visibility Going Ahead WHL net sales has grown at an impressive CAGR of
20% over the last 5 years, while its net profit has
grown at more than 29% CAGR over the same
period.. We expect WHL's net sales to grow by 20.6%
in FY15e and by 20% in FY16e as the company is well
poised to take advantage of uptick in discretionary
spend and lowering inflation. Two important factors
contributing the company’s revenue are footfalls and
entry fees. Kochi Park footfalls have grown at a CAGR
of 4%, while Bengaluru Park footfalls have grown at
more than 13% CAGR over the last 5 years.
The entry fee has been increasing at a CAGR of 10.5% over FY 2010-14 and the management is confident of
growing the same at around 10%. In addition to Hyderabad Park the company is also looking for suitable
land in Chennai to open its fourth park. The company has a strong balance sheet with debt-equity ratio of
only 0.04x at the end of H1FY15.
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Source: Company, CD Research
Source: Company, CD Research
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Source: Company, CD Research
Risks & Concerns High Investment Business Amusement parks call for high investment and involve long gestation periods. WHL's business requires a
significant amount of capital expenditure for setting up an amusement park and also during expansion of
existing parks, to add new rides periodically to retain the repeat visitors and also towards shut down
maintenance and civil works.
Accidental Risks Any occurrence of accidents or mishaps at amusement park may expose the company to financial liabilities and
legal proceedings which may result in adverse publicity and could affect company's expansion plans, financial
conditions and results of operations.
Dependency on Southern India The company's amusement parks are situated in southern India and it primarily caters to visitors from southern
Indian cities. If southern India experiences an event negatively affecting its economy, such as a local economic
downturn, a natural disaster, a contagious disease outbreak or a terrorist attack, or if the local authorities adopt
regulations that place additional restrictions or burdens on this industry in general, the company's overall
business may weaken.
Revenue Loss A major portion of company's revenue is derived from sale of entry tickets as compared to income from sale of
merchandise and food and beverages. If the company is faced with competition from other amusement parks
and are forced to lower the prices of entry tickets, it may adversely affect company's revenue.
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Changes in Consumer Preferences The company is sensitive to changing consumer preferences including changes in consumer taste and
acceptance of amusement park concept as it is a part of discretionary spending. Any change in consumer
preferences that may decrease demand for offerings or the acceptance of amusement park concept could cause
decrease in the number of footfalls to parks.
Failure to maintain Brand Value The company has invested significantly and will continue to invest in marketing and advertising programs to
preserve and enhance their brand. If the company is unable to successfully and cost effectively promote their
brand then the goodwill of the company and ability to compete and increase the number of visitors at the
theme park will be adversely affected.
Foreign Exchange Fluctuations The company purchases rides and equipments from a number of foreign suppliers in foreign currency. The
company does not hedge against currency rate fluctuations on account of duration of purchase contract.
Therefore the company may face a degree of foreign exchange risk which may have a material effect on cash
flows, revenues and profitability.
Seasonal Business
It must be kept in mind that amusement park business is a seasonal business, where Q1 and Q3 are the best
periods for the company and generates maximum revenue compared to the other 2 quarters. Footfalls are
lower in Q2 and Q4 owing to monsoon and examination season. Q1 and Q3 on an average contribute more
than 60% to the overall top line of the company.
Source: Company, CD Research
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Financials
Quarterly Results Figures in Rs cr
Q3FY15 Q3FY14 % chg. 9MFY15 9MFY14 % chg.
Revenue from Operations 47.36 41.02 15.4 145.41 119.69 21.5
Other Income 2.12 0.55 286.5 7.36 1.86 296.1
Total Income 49.47 41.57 19.0 152.77 121.55 25.7
Total Expenditure 26.47 21.80 21.4 75.05 63.53 18.1
PBIDT 23.01 19.77 16.4 77.72 58.02 34.0
Interest 0.45 0.38 18.0 1.25 1.20 4.4
Depreciation 4.04 3.98 1.5 12.11 10.12 19.7
PBT 18.52 15.40 20.2 64.36 46.70 37.8
Tax 5.75 3.01 91.3 20.31 13.96 45.5
Reported PAT 12.77 12.39 3.0 44.04 32.74 34.5
Extraordinary Item - - - - - -
Adjusted Net Profit 12.77 12.39 3.0 44.04 32.74 34.5 EPS- Basic (F.V. 10) 2.26 2.95 -23.4 7.80 7.80 0.0
EPS- Diluted (F.V.10) 2.26 2.19 3.0 7.80 5.79 34.5
Income Statement Figures in Rs cr
FY12 FY13 FY14 FY15e FY16e
Revenue from Operations 113.13 137.85 153.63 185.32 222.39
Growth (%) 26.2 21.9 11.4 20.6 20.0
Other Income 1.39 1.52 2.38 9.48 6.64
Total Income 114.52 139.37 156.01 194.80 229.02
Total Expenditure 57.38 75.03 82.98 96.70 115.97
EBITDA 57.14 64.34 73.03 98.11 113.05
Interest 1.13 2.46 1.92 1.67 1.30
PBDT 56.01 61.88 71.11 96.44 111.75
Depreciation 11.56 11.84 13.20 16.80 18.90
Tax 14.41 16.45 18.02 25.14 28.44
Reported PAT 30.04 33.59 39.89 54.49 64.41
Extraordinary Item - 0.01 -0.02 - -
Adjusted Net Profit 30.04 33.58 39.91 54.49 64.41
EPS (Rs.)- Basic 7.15 8.00 9.50 9.64 11.40
EPS(Rs)- Diluted 5.32 5.94 7.06 9.64 11.40
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Balance Sheet Figures in Rs cr
FY12 FY13 FY14 FY15e FY16e
SOURCES OF FUNDS
Share Capital 42.00 42.00 42.00 56.50 56.50
Reserves 51.76 77.95 107.93 300.36 364.13
Total Shareholders Funds 93.76 119.95 149.93 356.86 420.63
Long term debt 16.10 12.43 19.43 11.60 9.28
Total Liabilities 109.86 132.38 169.36 368.46 429.91
APPLICATION OF FUNDS
Gross Block 207.80 242.03 255.33 375.33 510.33
Less: Accumulated Depreciation 86.78 98.08 109.88 126.68 145.58
Net Block 121.02 143.95 145.45 248.65 364.75
Capital Work in Progress 4.37 5.72 20.07 5.50 4.50
Investments - - - - -
Current Assets
Inventory 1.82 2.81 3.34 4.80 5.20
Sundry Debtors 0.20 0.49 0.34 0.47 0.56
Cash and Bank 2.48 2.87 20.04 139.26 86.09
Loans and Advances 1.45 2.57 4.27 2.16 2.16
Total CA & LA 5.95 8.74 27.99 146.69 94.01
Current liabilities 16.21 17.13 13.47 17.53 18.50
Provisions 9.60 11.23 12.47 12.86 12.86
Total Current Liabilities 25.81 28.36 25.94 30.39 31.36
Net Current Assets -19.86 -19.62 2.05 116.30 62.65
Net Deferred Tax -3.57 -3.70 -3.35 -3.35 -3.35
Other Assets (Net Of Liabilities) 7.90 6.03 5.14 1.36 1.36
Total Assets 109.86 132.38 169.36 368.46 429.91
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*18 months results due to change in fiscal year (Oct 12 – Mar 14)
Key Financial Ratios
FY12 FY13 FY14 FY15e FY16e
Growth Ratios
Revenue (%) 26.2 21.9 11.4 20.6 20.0
PBIDT (%) -2.0 12.6 13.5 34.3 15.2
Net Profit (%) 0.9 11.8 18.9 36.5 18.2
EPS (%) - Diluted 1.0 11.7 18.9 36.6 18.2
Margins
Operating Profit Margin (%) 49.3 45.6 46.0 47.8 47.9
Net Profit Margin (%) 26.6 24.4 26.0 29.4 29.0
Return
ROCE (%) 44.2 40.5 37.6 22.2 22.0
RONW (%) 36.5 31.4 29.6 15.3 15.3
Valuations
Market Cap / Sales - - - 8.5 7.1
EV/EBIDTA - - - 15.2 13.6
P/E - - - 29.1 24.6
P / BV - - - 4.4 3.8
Other Ratios
Debt-Equity 0.2 0.2 0.2 0.1 0.1
Current Ratio 0.2 0.3 1.1 4.8 3.0
Interest Coverage 40.3 21.3 31.2 48.7 72.4
Turnover Ratios
Fixed Asset 0.6 0.6 0.6 0.5 0.4
Total Asset 1.1 1.0 1.0 0.5 0.5
Debtors 491.9 399.6 370.2 398.1 398.1
WC Ratios
Debtor Days 1.0 1.0 1.0 1.0 1.0
Inventory Days 5.9 7.4 7.9 7.9 7.9
Creditor Days 19.0 19.0 19.0 19.0 19.0
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Recommendation
Wonderla Holidays Ltd. (WHL) is one of the largest operators of amusement parks in India. It owns and operates
two amusement parks under the brand name "Wonderla", situated at Kochi and Bengaluru. It has also developed a
Wonderla resort in Bengaluru, a three star leisure resort next to its amusement park which has been operational
since March 2012. The company's amusement parks offer a wide range of water and land based attractions catering
to all age groups. The rides are a mix of imported, domestically procured and in-house manufactured. In FY14, it
had an annual cumulative footfall 22.9 lakhs. The company had raised Rs 181.25 cr via IPO in CY14 to set up its
third park in Hyderabad. It is expected to be operational from last quarter of FY16 or beginning of FY17. At
Hyderabad Park the company is estimating a footfall of 700000 in the first year with operating margin of roughly
30%.
In India amusement park industry has witnessed a gradual and successful journey. From just one Appu Ghar in
1984 to over 150 amusement parks in 2013 spread across India. The Indian Amusement Park Industry is still at a
nascent stage of growth and is highly under penetrated. The country’s amusement parks industry, with 150
players, generated revenues of over Rs1800 cr in FY13. As per IAAPI estimates revenues will more than double to
Rs 4000 cr by 2020. The main growth drivers would be rising discretionary spend on account of increasing per
capita income, favorable demographic structure, lack of entertainment options and government thrust on tourism
sector. India’s discretionary expenditure is increasing at a rapid pace and is expected to rise further in coming
years on account of higher per capita income and large young population. More than 65% of India’s population is
below the age of 35 years, which augurs well for amusement park industry. India is one of the youngest countries
in the world with the 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 company's competitive strength lies in its in-house manufacturing facility at Wonderla Kochi to
manufacture/construct amusement rides and attractions, apart from amusement rides procured from
manufacturers within and outside India. As of Jan 31 2014, WHL constructed/manufactured 42 rides/ attractions.
This has helped the company to reduce capex incurred on the rides; as per the management, the cost of a ride
manufactured in-house is one-third of the cost of procuring the ride externally.
WHL’s net sales has grown at an impressive CAGR of 20% over the last 5 years, while its net profit has grown at
more than 29% CAGR over the same period. We expect company’s net sales to grow by 20.6% in FY15e and by
20% in FY16e on account of increasing per capita income and rising discretionary spending. Two important factors
contributing to the company’s revenue are footfalls and entry fees. Kochi Park footfalls have grown at a CAGR of
4%, while Bengaluru Park footfalls have grown at more than 13% CAGR over the last 5 years. The entry fee has
been increasing at a CAGR of 10.5% over FY 2010-14 and the management is confident of growing the same at
around 10%. In addition to Hyderabad Park the company is also looking for suitable land in Chennai to open its
fourth park. The company has a strong balance sheet with debt-equity ratio of only 0.04x at the end of H1FY15.
The stock is currently trading at 29.1x FY15e of Rs 9.64 and 24.6x FY16e of Rs 11.40.However, looking at the
earnings growth, strong balance sheet and the expansion plan, we assign a buy on the stock with a target price of
Rs 342, based on 30x FY16e, over a period of 9-12 months.
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Disclaimer
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recipient of this material should rely on their own investigations and take their own professional advice. Opinions expressed are our
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have any questions about this report please get in touch with CD Equisearch Pvt. Ltd.
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