Wonderla Holiday- Stock Analysis

Created on 18 May 2019

Wraps up in 3 Min

Read by 4.9k people

Updated on 16 Oct 2020

Wonderla Holidays Limited is engaged in the business of amusement parks and resorts. They own and operate three amusement parks under the brand name wonderla situated at Kochi, Bangalore and Hyderabad and a resort at Bangalore. The company is planning to open its fourth amusement park in Chennai. The Company has acquired 61.87 acres of land for the new Amusement Park project in Kelambakkam in Chennai. The project work will commence immediately after we receive necessary approval from Government of Tamil Nadu.

What’s Good?

Wonderla believes in delivering affordable ‘value for money’ experience for its visitors. They prefer to keep affordable pricing targeting the middle-class segment and prefer economies of scale over premium pricing.

In-house ride manufacturing facility gives Wonderla an advantage over its competitors who have acquired substantial amount of debt to fund their rides and attractions which are imported. Wonderla has developed in-house manufacturing facility in Kochi to construct rides for their amusement parks, this leads to lower capex and maintenance cost to leverage the operational experience in the amusement park industry.

 Industry Analysis-

  • The Indian amusement park sector which is valued at ₹ 25 billion and is at a very nascent stage as compared to the ₹ 1,675 billion global amusement park segment, according to a KPMG report. The sector presently is on a verge of transition in India, with various large investments proposed in the theme park sector both on Public Private Partnership (PPP) basis and by private players. 
  • Water shortage is an ever-increasing threat which can prevent this section of the industry from functioning. 
  • The industry is also highly regulated as before opening any park licenses needs to be and regulatory procedures need to be fulfilled. 

Business Analysis- 

  • The parks generate revenue from every individual where differentials pricing is offered for different age groups categories. The meals are add-on and cab services are also provided. Most of the restaurants are company managed and it helps them generate a fair share of non-ticket revenue from food & beverages.
  • The company also gives a fast track variant of tickets which allow visitors to skip the queue for rides, which can be considered as premium service.
  • The amusement park business is highly capital intensive and a lot of money goes into acquiring the land and installing expensive rides. However,the company has the in-house manufacturing facility at Kochi which gives them ability to add additional rides and open new parks at one third the cost compared to importing them. This has also allowed the company to setup new parks frequently and the company plans to open new parks every three years without raising more debt. 

Management Analysis- 

  • Management has operational experience in the amusement park industry for over a decade.
  • The management is effectively utilizing cash flow and sustainably funding its new project.

Valuation Analysis-

The company does not have comparable peers, so we have considered historical P/E to come up with future valuation. The last three years data is taken since the Hyderabad park has been operational since the last three year, hence, to get a complete estimation of the future valuation we are considering only the three parks of Wonderla.

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Disclaimer- The article is for educational purpose only. Nothing in this article should be interpreted as investing advice.
Disclosure- We might have recommended this stock to our advisory clients.
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