Wonderla Holidays Ltd. Is it Worth Investing?

Wonderla Holiday - Worth Investing

Business Introduction:

Wonderla Holidays operates in 3 major cities, Bangalore, Hyderabad, and Kochi. Wonderla is one of India’s leading amusement park operators, having entered the market in the year 2000.

The money generated by the amusement parks is seasonal, with peak attendance occurring during weekends and school vacations. Typically, the months of April to June quarter. The summer vacation days and the festive season of October to December quarter. Which put together contributes to over 60% of the park’s revenue.

Fundamental Analysis:

Financially speaking, the past 2 years was dreadful for not just the company but the entire industry. This in fact is clearly visible in the company’s valuation. 

Companies operating income has declined by over 85% in FY 2021. And, negative EPS is shown for the past many quarters, since the beginning of the Pandemic. We may expect betterment of earnings given the fact that lockdown is eased around Karnataka & Andrapradesh.

Wonderalla is posting less than a 6th of its actual revenue and thus, efforts have been made to curtail some of its operating expenses. The company was posting over 40% in Operating margin. It was doing good until now. 

Total liability which includes Provisions & Deferred Tax Liability comes up to just over Rs. 90 crores. Liquidity and Cash position is quite favorable at over again Rs. 90 crores. The company will be able to cover operating losses for several months until some drastic actions need to be taken. Which, btw is not necessary. 

At present, the company can be valued at Rs.140-150 per share and is available at over Rs.200 per share, The valuation may be justifiable if the company resumes its operation as usual, as soon as possible.

Technical Analysis:

Technically speaking, the company’s stock has been in a bearish trend since its 2018 peak! We can expect the share price to go up only after some clear direction in regards to the Pandemic is noted. For now, it’s more like catching a falling knife. 

Stock is trading in a mild bearish trend. There’s no volume picking up. And, if the stock breaches 225 levels and higher, then we can expect it to go as high as the 300 range.

SWOT – Risk Analysis:

Opportunity & Strength 

High Entry Barrier

The business comes with high entry barriers. So, Wonderlla has very less competitors. 

Cash Position

Wonderla has been cautious about its cash & debt position. So, their balance sheet is clean in this regard.

New Establishments

Wonderlla Chennai Park is said to begin in the year 2024 and that brings a good add-on to the already established portfolio.

Weakness & Threat

Seasonal Business

Wonderlla’s business is seasonal. Miss 1 quarter and the company’s financials are thrown out all around. 

Inflection Point

Seems as if the company has seen its maturity stage and thus, footfalls are low and dropping. There’s nothing new in Wonderlla. It seems so dull and old.

Must Diversify!

The company cannot carry on the way it is going with the Pandemic on its shoulder. I mean, this situation truly showed how sensitive the business is. They need to diversify their income stream.

Conclusion:

I’m someone who holds high hopes for the Indian Tourism industry. Especially hereon. Now that we are coming out of the pandemic slowly and going to a new norm. 

Businesses such as Amusement Park, Resorts, Theater, Hotel chains, and Tours and travel has been hit hard these 2 odd years. And, the strongest of all survived with very little damage to their financials. One such is Wonderla. But, they really need to give something different. Something that could make people’s eyes shine. Until then, I would keep the company on my watchlist.

I give a rating of 6/10 for the management’s efforts in handling these difficult times and keeping the company up and going.

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