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Recommendations India

Wonderla Holidays IPO Note

April 21, 2014, Monday, 08:50 GMT | 04:50 EST | 13:20 IST | 15:50 SGT
Contributed by Nirmal Bang

Wonderla Holidays is an operator of amusement parks in India. They currently own and operate two amusement parks under the brand name ‘Wonderla’, situated at Kochi and Bangalore and are in the process of setting up their third amusement park in Hyderabad. The Company also own and operate a ‘3 star’ leisure resort beside their amusement park in Bangalore under the brand name ‘Wonderla Resort’ which has been operational since March 2012.

Objects of the Issue

The issue consists of fresh issue by Wonderla Holidays and the net proceeds from the fresh issue (Rs 167-181 crs) would be utilized for (a) Setting up an amusement park in Hyderabad (~ Rs.173 crore) (b) General corporate expenses.

Rational to Subscribe

Established Brand and decade of experience Revenue per footfall has grown at a CAGR of 12% during FY11-13 and we believe there is further room for growth. Post listing, stock would trade at a P/E of 17.8-19.3x its FY14E earnings at lower and upper price band respectively vis-à-vis its global peers which are trading at 19-21.4x for the same period. The discount of 8-11% is fair.

Valuation and Recommendation

WHL started its first park in Kochi in 2005 and thus has gained a decade of experience in the amusement park industry. The brand ‘Wonderla’ has been established well in the industry with the company maintaining high standards of safety and no accidents so far. Company’s footfalls have grown at a CAGR of 7.4% during FY11-FY13 on the back of good growth seen in the B’lore footfalls. Due to extended rainfalls, Kochi has seen a dip in footfalls in the current year. It is noteworthy that though the footfalls (particularly in Kochi) have seen slow growth, overall revenue per footfall has grown at a CAGR of 12% during the same period since the company has taken ticket price increase of 8-10% every year. We believe this has further scope of improvement given the fact that the average F&B per footfall is only Rs.100 currently.

At the given price band of Rs.115-Rs.125, on a post equity basis the issue is 17.8x & 19.3x respectively for FY14E EPS of Rs 6.5. The stock would trade at discount by 8-11% against its Global peers at lower and upper price band respectively which we believe is fair. In India there are no other listed players in this industry. We recommend Subscribing the issue.