Company Background and current status of business
- Wonderla Holidays Limited operates three largest amusement parks in Kochi, Bangalore and Hyderabad; and the Wonderla resort in Bangalore under the brand name Wonderla.
- Wonderla has recently repositioned its brand as a complete family entertainment destination with the tag line ‘Wonderla the place where you get closer and closer'.
- Overall footfalls were flat at the Kochi Park, an increase of 5% mainly due to park revamp and introduction of new rides and new marketing campaigns.
- The Bengaluru Park at the same time saw a slight decline by about 3% mainly due to higher ticket price set for Bengaluru.
- The Hyderabad park footfalls declined by 4.9% YoY and the main reason for this is there was a pre-launch offer at a very low price ~INR 676 per ticket last year and this year, standard higher price ~ INR 970 per ticket was charged, but adjusting for this price hike, footfalls have grown by 11% YoY in Hyderabad as well. Seasonality in Hyderabad park is similar to the Bangalore and Kochi park, with Q1 & Q3 being the prime quarter
- The company has maintained its target of accomplishing 8 lakhs footfalls in entire FY 2018.
- There has been a fall in group footfall in Hyderabad, Bangalore and Kochi. Company attributes the reason for this fall mainly to Pricing and to certain other factors such as macroeconomic conditions, school calendars.
- The company has completed acquisition of 57 acres of property in Chennai for a new amusement park in a place called Thiruporur roughly about 40 km from Chennai. This park is expected to be operational by FY2020.
- The company has kept a track on NPS (net promoter score), and net promoter score across all three parks are above 70 and above 80 for Bengaluru Park
- NPS indicates whether people are recommending the product or services to their friends, relatives etc. This high NPS surely implies that notwithstanding increase in ticket and non-ticket expenses, customers do find value for money spend for their experience at Wonderla.
- Revenue from operations grew by about 18.3% YoY to INR 102.3crore in Q1, FY 2018 as compared to Q1, FY 2017.
- EBITDA increased by 17.2% YoY to INR 43.6 crore in Q1, FY 2018.
- EBITDA margin marginally declined from 43.1% to 42.7%.
- The company's operating cost remained under check for this quarter.
- PAT has increased by 15.5% YoY to INR 25.9 crore in Q1, FY 2018 as compared to Q1, FY 2017.
- PAT margin marginally decreased from 26% in Q1, FY 2017 to 25.4% in Q1, FY 2018. Company generated a higher Cash PAT which increased by 14.6% YoY to INR 33.9 crore as company continued its focus on maintaining healthy operating cash flows.
- Other expenses increased from INR 16.85 crores in Q1, FY 2017 to INR 23.61 crores in Q1, FY 2018. It primarily increased due to provisioning for disputed tax liabilities, which increased from INR 4 crores to INR 10 crores for Q1, FY2018
- Company has been very aggressive on pricing because it has anticipated that the GST would come in at 18%. Hence, Company already factored this into their pricing while increasing prices which is normally done once in a year
- On April 1, 2017, Company has increased RPV (Revenue per visitor) by 19% in Bengaluru Park. For Kochi Park, It has been increased by 18% and for Hyderabad Park by 27%. This revenue per visitor includes all the expenses by visitors i.e. Ticket and non-ticket i.e. F&B and it is also net of taxes
- The company's ad spend for Q1, FY 2018 stood at ~INR 8 crores. Company would continue to have higher as spend for 2 more quarters i.e. Q2 and Q3 as Hyderabad park is still to pick up and thus company would continue to spend in its branding
- The non-ticket revenue as a percentage of total revenue continues to do well by introduction of newer F&B and merchandise sales. This growth is despite company having flat or declining footfalls. It certainly is a great positive sign that consumer is spending much on F&B and merchandise once he enters the park
- On customer level, price would increase by this increase and extra GST. Prices were hiked on a normal basis and assuming GST to be at 18%. But with GST at 28%, extra tax incidence will have to be passed on to customers. Thus post GST; prices have increased by a marginal INR 10-12 per ticket for Hyderabad. In case of Bangalore, Post GST, price hike has been hardly ~INR 20 per ticket. But for Kochi, It is another 6% hike
- From Q2FY18 onwards, the company expects RPV to be around 10%, 12% for parks and that would go into taxes
- The ticket prices on peak days in Kochi were INR 1100, Bengaluru was INR 1300 and Hyderabad was INR1100. These prices are inclusive of GST starting from July 1, 2017
- The GST for company is at 28%. Input tax credit is very minimal at 5%-6%.
Capacity addition & CAPEX
- The total CAPEX for Chennai facility stands at ~INR 350 crores. Out of which INR 65 crores has already been spent in this fiscal year and ~ INR 10-15 crores would be spent in the rest of FY 2018. Most of the CAPEX would take place in next two fiscal years i.e. FY 2019 & FY 2020
- The company would be financing its Chennai center by cash through internal accruals and Debt. Acquisition of 57 acres at Chennai has been funded by internal accruals
- The company estimates that it would have to take a Debt of ~INR 150 crores to fund Chennai facility
- Chennai central park development area would be slightly bigger than that of Hyderabad Park which has 27 acres development area in 50 acres of land. It could be close to 31 acres
- The company has been creating provisions for tax in previous quarters but with GST coming in, Wonderla will not need to have provision for taxes from Q2, FY 2018 onwards
- After Chennai facility, Company has plans of coming up with a new park every 2-3 years. Company has plans for a new park in west side which could be Gujarat, Maharashtra or Goa
- As of now, the free cash flow for company is around ~INR 75 crores
- It is estimated that after Chennai plant, the debt requirement for newer projects would be minimum as Cash flows from the Chennai facility would bolster overall free cash flow.
Growth Prospects & Future Outlook
- Wonderla expects that footfall will be flat or even marginally decline on account of price hike and it would try to find out ways to compensate for them through groups or business development channels.
- The company is bullish on Q2 as Dussehra holidays are going to start from September 22 this time which normally falls in October.
- Quarter 3 mainly and even to some extent Quarter 2 are good quarters for business for Wonderla as many festivals fall in this period and there are so many holidays falling in this period
- The company is expecting the EBITDA margins to increase by 4%-5% IN FY 2018 as compared to FY 2017. However, it may change depending upon the impact of GST on footfalls as company has passed on the entire price hike for GST to customers
- The company expects Bengaluru Park to be under a bit of a pressure as the company has taken a 17% price increase and the macroeconomic conditions in Bengaluru are not veryfavorable. However, company expects performance of Bangalore Park to improve once these situations improve as company has put in new rides and the investments have already been done in
- From marketing footprints perspective, the company so far had been focusing only on Hyderabad and now it would be expanding its geographical reach across 200 km radius which is its normal area of cash net for any of the parks.
- Warangal and Karimnagar aare planned for this year's marketing expansion and it will be done by the business development team, which will bring in more people.