MacVisit:Wonderla Holidays Multiplying wonders :: Macquarie

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MacVisit:Wonderla Holidays
Multiplying wonders
We met with Wonderla Holidays Ltd (Wonderla), one of the largest operators of
amusement parks in India. India’s amusement park industry has bright prospects
with rising disposable income, a young population (30% below 14 years of age –
the main visitor age group) and lack of full-day entertainment venues within
cities.
Established player, proven execution record
 Wonderla has more than a decade of operational experience in the
amusement park Industry. It currently operates two parks – one in Kochi
(Kerala, started in 2000) and another in Bangalore (Karnataka, started in
2005).
 With continuous addition of new attractions/rides and affordable entry
charges, Wonderla has been able to register a footfall CAGR of 9% over
FY09-14 with an average 10% annual price hike.
 While setting-up of a park involves high upfront capex (approx. INR2.5-3b),
Wonderla operates on negative working capital and has low incremental
capex.
 Over FY09-14, Wonderla registered revenue/EBITDA/PAT CAGRs of
20%/21%/29% with a 5-year average RoCE/RoE of 39%/33% respectively.
Cost-effective in-house ride manufacturing capability– key differentiator
Wonderla has set-up in-house capabilities in Kochi to design, develop and
manufacture rides/attractions. This reduces capex, maintenance costs and the
down-time for a ride. Management claims to manufacture rides at 1/3rd of the
cost of procuring externally. Around 1/3rd of rides are manufactured in-house.
Management guides cash from operations of about INR400-450m annually
With addition of new rides/attractions and a relatively low ticket price base,
management expects 5-7% and 8-10% growth in footfall and ticket price
respectively over the medium term at existing parks. From existing parks,
management guides operational cash flow of about INR400-450 pa.
With similar elements of strategy, exploring various growth dimensions
With experience, Wonderla has evolved a matured set of elements of strategy.
With the core elements of its strategy remaining the same, Wonderla plans to
explore new dimensions of growth through a) Upgrading existing parks, b)
increasing non-ticket revenues, and c) opening new parks.
To replicate similar model to Hyderabad, Chennai and other cities
Wonderla is setting up its 3
rd park in Hyderabad (spread across 50 acres,
expected to be operational in 1QFY17) with a capex of INR2.5b (to be part
funded through IPO proceeds of INR1.8b). Wonderla also plans to set up a park
in Chennai and is currently looking for suitable land. Management plans to open
more parks every 3-4 years in other tier-1 cities as well.
Near term return ratios to decline, to move up as assets depreciate
Setting up a park requires high upfront capex and thus margins and return ratios
would be under pressure in the initial years of commencement of Hyderabad
park, after which management expects improvement once the assets reasonably
depreciate and asset turnover picks up. Management guides the new park to be
cash/PAT break-even in the 1
st/3rd year, with full payback in 8-9 years