Wonderla Holidays: On the cusp of next growth phase

Wonderla Holidays

Initiating Coverage | Sector: Entertainment

Wonderla Holidays

BSE Sensex

27,275

S&P CNX

8,235

CMP: INR314

TP: INR410

Upside: 30%

Buy

Wonderla Holidays

(WONH) is one of the largest operators of amusement parks in India,

which owns and operates two parks under the brand name “Wonderla”, situated at

Kochi and Bangalore. In FY14, it had a cumulative annual footfall of 2.3m. WONH raised

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

INR1.8b through an IPO to set up its third park in Hyderabad, which is awaiting the final

WONH IN

56.5

356/125

13/37/-

17.7

0.3

stages of approval. Company has also developed the Wonderla Resort in Bangalore, a

Three Star leisure resort, next to its amusement park, comprising of 84 luxury rooms.

Waving the wand of wonder

On the cusp of next growth phase



India’s amusement park industry stands at USD0.4b, compared to the global

amusement park size of USD25b, thus providing huge growth opportunity.

To be a pan India player, management plans to add two parks in the next four

years, thereby doubling the current parks size.

While globally F&B revenue forms 33-34% of total revenue, it forms ~6% of

WONH’s revenue, thus providing a huge opportunity for growth.

Given its strong industry positioning, multiple growth opportunities and high

entry barrier, we value WONH at 26x FY17E EPS, with a target price of INR410. We

initiate coverage with a Buy rating.

Financial Snapshot (INR Million)

Y/E Mar

2015E 2016E 2017E

Net Sales

1,818 2,126 3,241

EBITDA

Adj PAT

EPS (INR)

Growth (%)

BV/Share (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

882 1,074 1,540

515

9.1

-4.0

63.1

20.4

29.4

34.4

5.0

635

11.2

23.2

71.4

16.7

24.9

27.9

4.4

886

15.7

39.5

83.6

20.2

30.2

20.0

3.8



Amusement park – huge opportunity in offing

India has ~140 parks of which only 10% are large parks (more than 40 acres in

size and ~INR700m of investments). The size of Indian amusement park industry

stands at USD0.4b, compared to the global amusement park size of USD25b,

thus providing huge growth opportunity. However, with an improvement in per

capita income, we expect the amusement park culture to pick up dramatically in

India over the next 10 years, making it a strong alternative source of

entertainment. Globally, most amusement parks continue to report losses due

to high capex, high employee, operating and maintenance costs. Hence, we

believe that India with a lower employee cost, operating and maintenance cost

will make the amusement park model more profitable compared to global

peers.

Shareholding pattern (%)

Sep-14 Jun-14

Promoter 71.0

DII

FII

4.1

6.9

71.0

8.3

2.1

Sep-13

Others

18.0

18.6

FII Includes depository receipts

Stock Performance (1-year)

Wonderla Holiday

Sensex - Rebased

WONH enjoys strong early-mover advantage

After launching the first park in 2000 in Kochi and the second one in Bangalore

in 2005, company has created strong brands in the amusement park segment in

South India. WONH has the first-mover advantage in Kochi and Bangalore where

there are only few medium and small parks. Wonderla being the largest and

most profitable park in India highlights management’s operational ability, strong

brand and capability to attract sustained footfalls over the years.

400

300

200

100

8 January 2015

Wonderla Holidays

Aims to be a pan India player in next 10 years

To capitalize on the early-mover advantage, WONH plans to open a 49-acre park in

Hyderabad, which is expected to be operational in 4QFY16. To be a Pan India player,

management plans to add two parks in the next four years, thus doubling the

current parks size. It is scouting for land in Chennai, post which has plans to enter

non-south markets such as Goa and Mumbai. We expect Hyderabad to record

footfalls of 0.8m, with average ticket pricing of INR873 and margins of 35% in FY17E.

Strong pricing power amid growing footfalls

WONH has been successful in increasing the footfalls at 7% CAGR from 1.61m to

2.29m over FY10-14. Average ticket realization per visitor has increased from

INR370 to INR539 over FY10-14, marking 10% CAGR. We expect footfalls growth of

14% CAGR (6% from existing parks) over FY14-17E and realization growth of 11%

(10% from existing parks) over FY14-17E, which should lead to 25% CAGR in sales

(16% from existing parks) over FY14-17E. Around 60-62% of Kochi customers and

70% of Bangalore customers are walk-in and rest are either through group bookings

or institutional visitors. 80% of the parks’ revenue come from entry fees and hence

company has developed Wonderla Privilege Card to attract repeat visits from

teenagers/students, which form 30% of total footfalls. Around 10% of revenue

comes from privilege cards and is instrumental to drive footfall growth over the long

run.

Strong F&B revenue growth to drive margin expansion

Unlike most parks in India and globally which charge 50-60% premium over

maximum retail price (MRP), Wonderla sells F&B and packaged food inside the park

at MRP which adds to visitors’ value-for-money experience. While globally F&B

revenue forms 33-34% of total revenue, it only forms ~6% for Wonderla as

management intends an increase in ticket prices over F&B price increase. Company

has entered into 25% revenue sharing agreement with six restaurants operating in

the park, and operates a restaurant on its own. Average F&B realization per footfall

has posted 28% CAGR from INR14 to INR37 over FY10-14 and we expect it to clock

46% CAGR over FY14-17E primarily on addition of Hyderabad park and sustained

footfall growth in existing parks.

Valuation and view

We expect WONH’s revenue to clock 25% CAGR to INR3.2b over FY14-17E and PAT

CAGR of 27.1% to INR886m over FY14-17E. In our view, over the next 10 years,

amusement parks will emerge as a strong avenue for entertainment as penetration

improves substantially. We believe the company is on track to be a pan India player

over the long run and will be a major beneficiary of amusement park industry’s

development. The stock trades at 28x FY16E and 20x FY17E earnings and we value

WONH at 26x FY17E EPS, with a target price of INR410, given its strong industry

positioning, multiple growth opportunities and high entry barrier. We initiate

coverage with a

Buy

rating.

8 January 2015

Wonderla Holidays

Company description

Wonderla Holidays is one of the largest operators of amusement parks in India

which currently owns and operates two parks under the brand name “Wonderla”,

situated at Kochi and Bangalore. Company is in the process of setting up the third

amusement park in Ranga Reddy district of Andhra Pradesh, Wonderla Hyderabad.

It raised INR1.8b from an IPO for the development of Hyderabad Park. It also owns

and operates a resort besides the amusement park in Bangalore under the brand

name ‘Wonderla Resort’, which has been operational since March 2012.

Mr Kochouseph Chittilappill, WONH’s promoter, in 1996 had incorporated V-Guard

Industries Ltd, which is listed on BSE and NSE since 2008. WONH launched its first

amusement park in Kochi in 2000 by the name ‘Veegaland’ and the second park in

Bangalore in 2005 by the name ‘Wonderla’. Pursuant to a scheme of amalgamation,

the erstwhile Veega Holidays and Parks Pvt Ltd which owned and operated

‘Veegaland’, merged with Wonderla with effect from April 1, 2008 and consequently

both the parks are being operated under the name ‘Wonderla’.

Amusement parks offer a wide range of water and land-based attractions catering to

all age groups. Company has 22 water-based attractions and 33 land-based

attractions at Wonderla Kochi, situated on 93.17 acres of land and 20 water-based

attractions and 35 land-based attractions at Wonderla Bangalore, situated on 81.75

acres. Company recorded total footfalls of 2.34m in FY13 and 2.29m in FY14 across

the two amusement parks in Kochi and Bangalore.

WONH recently developed “Wonderla Resort” in Bangalore which is a ‘Three Star’

leisure resort located beside its amusement park comprising of 84 luxury rooms,

with amenities including banquet halls, a board room, conference rooms, a multi-

cuisine restaurant, a solar heated swimming pool, recreation area, kids’ activity

center and a well-equipped gym. Company has also acquired 49.57 acres of land for

setting up the Hyderabad amusement park in Ranga Reddy district of Andhra

Pradesh.

8 January 2015

Wonderla Holidays

Amusement park – a huge opportunity in the offing

Indian amusement park on cusp of growth



Global parks industry is expected to reach USD32b by 2017 from the current industry

size of USD25b, marking a CAGR of 9%.

There are more than 800 parks around the world, with annual attendance of ~600m

visitors per year.

The US market alone caters to 50% of the global market both in terms of number of

parks and total annual visitors, with 400 parks and 330m visitors.

Since North American and European markets are highly saturated, the next leg of

growth is expected from Asian markets due to increase in population, higher

infrastructural investment and increasing tourism.

There are ~140 amusement parks in India of which only ~10% are large format parks.

Management believes that amusement park is not a price sensitive market, and lack of

large format parks in India will enable it to take a price rise of 10% every year.

Globally amusement parks have weathered recessions in last 5 years

Globally, amusement parks have demonstrated a recession-proof model. There are

more than 800 parks around the world, with annual attendance of ~600m visitors

per year. The US market alone caters to 50% of the global market, both in terms of

number of parks and total annual visitors, with 400 parks and 330m visitors. Despite

the economic slowdown, attendance in the 25 largest theme park across the world

has increased from 187m in 2007 to 205m in 2012. Global park industry is expected

to reach USD32b by 2017 from the current industry size of USD25b, marking a CAGR

of 9%. North American and European markets are highly saturated, while Asian

markets are expected to be the biggest over the next 15 years due to increasing

population, higher investment in infrastructure and increased tourism. In Asia, Japan

and South Korea are showing signs of maturity and saturation, while markets in

India, Thailand, Singapore, Malaysia and Indonesia are still experiencing fast growth.

We believe that the Indian amusement park market is at a nascent stage and huge

potential exists for the industry to grow.

India adopts larger park culture

Disney’s Animal Kingdom is the most widespread park which is developed over 400

acres of land followed by Epcot with over 300 acres. Every year, amusement parks

try to add new rides to drive the footfall growth and size of the park keeps

increasing. Wonderla’s all three parks have ample space for further expansion.

Adlabs Imagica is one of the biggest parks in India which is developed/proposed

over 114 acres of land. We believe that as the scale grows higher, these Indian parks

will have ample space for expansion and meet global standards.

8 January 2015

Wonderla Holidays

Exhibit 1:

Comparison of parks size globally

403

300

176

Area Developed/Proposed (acres)

135

126

115

105

114

Source: Company, MOSL

Indian parks have huge potential to grow in size

India has ~140 parks of which only ~10% are large format parks which require high

investments and attract large visitors. The size of Indian amusement park industry

stands at USD0.4b, compared to global size of USD25b, thus providing huge

opportunity for growth. The industry is divided into three categories:

1. Large parks (investment >INR700m),

2. Medium parks (investment of INR300-700m),

3. Small parks (investment <INR300m).

Wonderla is one of the large amusement parks, and there are no other large parks

in the near vicinity of both its parks which provides huge competitive advantage.

However, few small and medium-sized parks exist in Kochi and Bangalore

respectively but they cannot compete with Wonderla due to the size of operations.

Management believes that an amusement park is not a price sensitive market and

has been taking 10% price hike every year for the last five years, signifying the brand

equity. The upcoming park in Hyderabad may face competition from the already

existing large players like Ramoji Studio. However, as Ramoji is a film city, it caters to

a different set of visitors and thus is not a direct competitor to amusement parks.

We believe the lack of many alternatives provides pricing power to Wonderla, which

will be structural in nature.

Indian parks more profitable compared to global peers

Globally, most amusement parks continue to report losses due to high capex, high

employee and huge operating and maintenance cost. We believe India with a lower

employee cost and lower operating and maintenance cost will make amusement

park model more profitable compared to global peers. However, with an

improvement in per capita income, we expect the amusement park culture to pick

up dramatically in India over the next 10 years, making it a strong alternative source

of entertainment.

8 January 2015

Wonderla Holidays

Exhibit 2:

Industry segmentation

Parameters/Classification

Capex (INR)

Area Covered

Average Ticket price (INR)

Footfalls

Location

Large parks

>700m

>40 acres

>400

>0.5m

Metros and

outskirts

Small parks

<300m

<10 acres

~250

<0.3m

Tier II cities, small towns,

Outskirts of Metros,

outskirts of metro and

Tier I cities

Medium parks

300-700m

10-40 acres

250-400

0.3-0.5m

Few Players

Essel World (Mumbai),

Nicco

GRS Fantasy Park

Park (Kolkata),

(Mysore), Ocean Park

Wonderla (Kochi

(Hyderabad)

& Bangalore), Kishikinta

(Chennai)

16-18

40-45

Fun N Food Kingdom

(Dehradun)

Number of Parks

85-95

Source: Company, MOSL

Exhibit 3:

Competitive landscape of amusement parks in India

Parks

Essel World & Water

Kingdom

Location

Size in

acres

Rides

(Dry)

Rides

(Wet)

Pricing Strategy

Entry rate

Annual Average

footfalls (m)

1.8

Mumbai

INR590-690

(For either of

Separate entry fees for

amusement park and water park amusement park

or water park)

Dry Park Package

Separate entry fees for

- 340 Water Park

amusement park and water park

Package - 290

Single entry fees

Separate entry fees for water

park, snow park

Single entry fees

Single entry fees as well as pay-as-

you-go

Single entry fees

Single entry as well as pay-as-you-

Single entry fees

Pay as you go

Single entry fees

INR460 - 600

INR590 - 790

INR300

INR600

INR500

INR450

INR350

INR200

INR500

INR395

INR360

INR500

INR450

Approx. INR30

per ride

INR300

Nicco Park

Wonder La

Ocean Park

Ramoji Film City

Adventure Island & Metro

Walk

Entertainment City

Kishkinta

Queensland

VGP Universal

MGM Dizzee World

GRS Fantasy Park

Mount Opera

Athisayam

Black Thunder

Appu Ghar

Fun N Food Village

Kolkata

Kochi

Bangalore

Hyderabad

Rohini

Noida

Chennai

Mysore

Hyderabad ad

Madurai

Mettupalayam

Pune

New Delhi

1,666

120

N.A.

1.7

1.2

1.1

N.A.

1.5

N.A.

0.5

N.A.

0.5

Source: DRHP, MOSL

8 January 2015

Wonderla Holidays

Plethora of growth opportunities

Huge growth potential ahead



WONH has steadily and consistently been able to drive footfalls in both parks and in

the past five years, footfalls have posted 9% CAGR to 2.29m visitors in FY14. We

believe a matured park will continue to attract ~7% growth, going forward.

While most of the large amusement parks in India charge 50-60% premium over the

MRP of packaged food sold inside the park, WONH sells it at MRP, which adds to

customers’ value-for-money experience.

WONH is one of the few parks in India which is profitable due to its operational

efficiencies, in-house ride manufacturing capability and relatively less capex

requirement for expansion.

It follows differentiated pricing to attract footfalls on non-peak days and hence its

weekend rates are at 25% premium than weekday prices, and festive season prices are

at 8-10% premium than regular weekend rates.

Company has developed an in-house manufacturing facility in Kochi to

manufacture/construct amusement rides and attractions, apart from the rides

procured from manufacturers within and outside India. This results in cost saving to an

extent of 50-60% for imported rides and 30-35% for domestic rides.

With the development of Bangalore resort, Wonderla Bangalore has become the first

“destination” amusement park in India.

Company has introduced an innovative marketing strategy, “Wonderla Privilege Card”,

to attract repeat visitors which offer 10-20% discount on repeat visits.

Management believes that an amusement park is not a price sensitive market and it

has been taking 10% price hike every year for the last five years, signifying the brand

equity.

Footfall growth — the primary driver

WONH has steadily and consistently been able to drive footfalls in both parks.

Footfall growth is one of the biggest growth drivers for the industry. It has been

successfully driving footfalls at 9% CAGR over the last five years, from 1.61m visitors

in FY10 to 2.29m in FY14 (both parks combined). The types of visitors are

categorized as: 1) Educational Institutions, 2) Corporate houses/Group bookings and

3) General walk-in customers. On a consolidated basis, 59% of the visitors are walk-

in, while balance 41% is institutional/group booking visitors; going forward, we

believe walk-in customers will form majority of the total visitors.

Exhibit 4:

Total footfall trend

Total footfalls (m)

26%

1.44 1.53

1.61

2.03

11%

2.26 2.34

-2%

YoY growth

37%

2.29

2.41

2.53

3.46

64%

66%

60%

67%

61%

59%

36%

34%

40%

33%

39%

41%

Exhibit 5:

Consolidated footfall break-up on types of visitors

% Walk-in Visitors

% Institutional Visitors

FY09

Source: Company, MOSL

FY10

FY11

FY12

FY13

FY14

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Kochi park

: The park was started in 2000 and currently has 55 rides (dry +

wet) running, which have consistently attracted footfalls. Kochi, being a

more matured park, achieved a stable footfall growth of ~4% over the past

five years from 0.9m in FY09 to 1.1m in FY14. Of the total visitors, Kochi has

56% of walk-in customers, while the balance is institutional. Of the total

available land of 93 acres in Kochi, only 29 acres are developed. The balance

is available for future expansion of new rides. We believe that a matured

park like Kochi will continue to grow footfalls at ~4% on a sustainable basis.

Exhibit 6:

Kochi park footfall trend

Kochi Park Footfalls (m)

24%

10%

-1%

-9%

0.82 0.90 0.89 1.11 1.18 1.21 1.10 1.14 1.18 1.23

Institutiona

l/Group

booking

44%

YoY growth

Exhibit 7:

Kochi park - types of visitors

General

walk-in

56%

Source: Company, MOSL

Bangalore park

: It was started in 2005 and similar to the Kochi park has 55

rides (dry + wet). Bangalore, being the new park, has been able to grow the

footfalls at 13% CAGR over five years, from 0.6m in FY09 to 1.19m in FY14.

Walk-in visitors are slightly higher at 61%, with the balance being

institutional and group booking visitors. We believe that such high growth

rates are difficult to sustain on a long term basis and hence expect the park

to mature by FY17 and deliver more sustained footfall of 5%, going forward.

Exhibit 8:

Bangalore park footfall trend

Bangalore Park Footfalls (m)

28% 18%

14%

0.62 0.63 0.72

0.92

Institutional

/Group

booking

39%

General

walk-in

61%

YoY growth

Exhibit 9:

Bangalore park - types of visitors

1.08 1.13 1.19 1.27 1.35 1.43

Source: Company, MOSL

Largest profitable park in India

WONH is one of the few parks in India which is profitable due to its operational

efficiencies, in-house ride manufacturing capability and relatively less capex

requirement for expansion. It has positioned as a “value” park which allowed it to

grow with lower capex. Globally, big amusement parks even after reaching scale are

not profitable due to the huge capex per ride. This can be compared from the fact

8 January 2015

Wonderla Holidays

that Wonderla Hyderabad park is being developed at a cost of INR2.3b, while Adlabs

Imagica is being developed at INR16.5b. We believe WONH’s management has been

successful in keeping the cost efficient and simultaneously provide a memorable

experience to visitors, which kept the park profitable.

Exhibit 10:

Comparison of Wonderla and Adlabs Imagica

Particulars

Year of commencement

Area Available (in acres)

Area Developed (in acres)

Footfalls (in m) - FY14

Cost of the project (INR m)

Number of Rides

No of rooms in Hotel

Average total realization (INR)

Average ticket price - Adult (Weekday) (INR)

Fast track rates - Adult (Weekday) (INR)

Average ticket price - Adult (Weekend) (INR)

Fast track rates - Adult (Weekend) (INR)

Total Revenue - FY14 (INR m)

EBITDA - FY14 (INR m)

EBITDA margin (%)

PAT - FY14 (INR m)

** from Apr-Dec 13 (9 months)

Wonderla

Kochi

2000

1.1

567

580

1,460

800

1,600

626

297

47%

251

Wonderla

Bangalore

2005

1.19

731

700

1,400

870

1,740

934

427

46%

352

Adlabs

Imagica

2013

138

114

0.81

16,504

287

~1650

1,500

2,200

1,900

3,000

645**

69**

11%

(22)**

Source: Company, MOSL

Differentiated pricing allows sustained footfalls on non-peak days

Amusement parks generally attract higher footfalls on weekends and on public

holidays. And to ensure sustained footfalls even during weekdays, WONH has

adopted a flexi-pricing policy based on seasons/weekdays and weekends etc.

Weekend rates are at 25% premium compared to weekday prices, while festive

season prices are at 8-10% premium than regular weekend rates. Festive seasons for

Bangalore are Onam, Dussherra, Christmas and New Year’s eve, while for Kochi they

are Onam, Ramzan, Christmas and New Year’s eve. “Fast track” tickets command

100% premium over regular tickets and WONH sells ~250 tickets per park per day

(8% of total footfalls) under this category. It also offers discounts ranging from 10-

30% for group bookings and corporate bookings. It books revenue “net of discounts”

and “net of taxes”, thus reflecting prudent accounting. We believe that this flexible

pricing allows WONH to attract footfalls even on non-peak days.

Exhibit 11:

Fast track ticket sales form ~8% of total sales

Particulars

Footfall (nos)

Fast track tickets (nos)

% of fast track tickets

Wonderla (Kochi+Bangalore)

2,290,000

182,500

~8%

Adlabs Imagica

756,940

58,037

~8%

Source: Company, Imagica DRHP, MOSL

8 January 2015

Wonderla Holidays

Exhibit 12:

General ticket prices (INR)

Day

Weekdays

Saturday/Sunday & Public Holidays

Peak Seasons Weekends

Peak Seasons Weekdays

Timings

11:00AM -

06:00PM

11:00AM -

07:00PM

11:00AM -

07:00PM

11:00AM -

07:00PM

Adult

Bangalore

700

870

940

770

Adult

Kochi

580

730

800

650

Child

Bangalore

540

640

710

620

Child

Kochi

470

590

650

530

Source: Company, MOSL

Exhibit 13:

Fast track ticket prices (INR)

Day

Weekdays

Saturday/Sunday & Public Holidays

Peak Seasons Weekends

Peak Seasons Weekdays

Timings

11:00AM -

06:00PM

11:00AM -

07:00PM

11:00AM -

07:00PM

11:00AM -

07:00PM

Adult

Bangalore

1,400

1,740

1,880

1,540

Adult

Kochi

1,160

1,460

1,600

1,300

Child

Bangalore

1,080

1,280

1,420

1,240

Child

Kochi

940

1,180

1,300

1,060

Source: Company, MOSL

Exhibit 14:

Average ticket realization in Kochi park

Average Ticket Realisation Kochi (INR)

YoY Growth

14%

10%

298

327

383

336

423

477

522

574

633

10%

Exhibit 15:

Average ticket realization in Bangalore park

Average Ticket Realisation Bangalore (INR)

YoY Growth

13%

10%

437

-3%

423

440

11%

10%

489

545

598

655

720

793

FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Source: Company, MOSL

Exhibit 16:

Consolidated ticket realization trend

Total Ticket Realisation (INR)

YoY Growth

16%

11%

482

12%

539

10%

592

10%

652

755

13%

356

FY09

370

FY10

383

FY11

434

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Revenue sharing from restaurants to drive profitability

At both the parks, WONH has seven operational restaurants which offer various

cuisines -- South Indian, North Indian, Chinese and Continental etc. Of the seven

restaurants each in Kochi and Bangalore, company has taken over the operation of

one, Waves Restaurant at Bangalore and Kochi Park, since November 2012 and April

2013 respectively. For the six restaurants, WONH has entered into a revenue sharing

agreement to receive 25% of the revenue as its share, which directly improves

earnings. We believe the growth in restaurants business will directly improve

profitability, without incurring an additional cost.

Exhibit 17:

Restaurants in each park

No.

Wonderla Kochi

Waves Restaurant (company-owned)

Vintage Chimney Restaurant

Spice Garden Restaurant

Wood House Restaurant

Vintage Kitchen Restaurant

Valley View Restaurant

Park View Restaurant

Wonderla Bangalore

Waves Restaurant (company-owned)

Chilies Restaurant

Greens Restaurant

Courtyard Restaurant

Parkview Restaurant

Wonder Chick

Pizza Corner

Source: Company, MOSL

Selling packaged food at MRP adds to visitors’ value-for-money feel

Food and beverages contribute only 6-7% of the total revenue, which includes

WONH’s share in restaurants’ revenue, revenue from owned restaurant and

revenue from sale of packaged food. A key differentiator that the company offers to

visitors is that all packaged food inside the park are sold at MRP and not at marked

up price. Most parks in India charge higher for packaged foods sold inside the park

at 50-60% mark-up over MRP. As external food is prohibited in the park, selling food

at MRP sends a positive signal among visitors. Globally, F&B and merchandise

revenue contribute ~33-34% of the total revenue. We believe WONH intends to

keep its F&B prices nominal and thus do not expect the F&B revenue to contribute

substantially, going forward. Though this will improve visitors’ satisfaction level, F&B

will remain in the range of 6-7% of total revenue.

Exhibit 18:

Kochi park F&B realization per visitor

F&B Realization Kochi (INR)

55%

33%

23%

25%

YoY Growth

Exhibit 19:

Bangalore park F&B realization per visitor

F&B Realization Bangalore (INR)

44%

37%

YoY Growth

30%

27%

25%

21%

13%

27%

25%

FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Exhibit 20:

Hyderabad park F&B realization per visitor

F&B Realization Hyderabad (INR)

30%

23%

20%

163

17%

191

219

15%

YoY Growth

Exhibit 21:

Total F&B revenue trend

Total F&B Revenue (INR m)

41%

37%

22%

15%

FY12

FY13

115

153

39%

269

YoY Growth

43%

37%

33%

FY17E

111

FY18E

136

FY10

FY11

FY19E

FY20E

FY21E

FY22E

FY09

FY14 FY15E FY16E FY17E

Source: Company, MOSL

Innovative marketing strategy to allure repeat visits

Company has launched the Wonderla Privilege Card as one of its innovative

marketing schemes to ensure repeat visits. 80% of the park’s revenue comes from

entry fees and hence such innovative schemes are needed to ensure regular

footfalls. 30-40% of WONH’s visitors are either teenagers/student. The privilege

membership card comes free with a minimum purchase of four tickets at full rate

without any discounts. On the next visit, a visitor enjoys a discount ranging from 10-

20% of the ticket price. Currently, 10% of the company’s ticket revenue comes from

the privilege card. A card holder is eligible for four discounted tickets per day, and a

purchase of 12 tickets through the card entitles him to a free visit to the park. Such

schemes will continue to attract repeat visits, which will derive long term benefits.

Exhibit 22:

Benefits for Wonderla Privilege Card holder

Seasons

Peak Season

Offseason

Period

1st April – 15th June; 16th September – 31st January

16th June -15th September; 1st February – 31st March

Discount

10%

20%

Source: Company, MOSL

Huge capacity to absorb future footfall growth

WONH’s both parks have excess capacity to absorb additional footfall growth.

Current capacity for both parks is 12,000 visitors per day, and on an average 23-27%

of the capacity is being utilized per day. Company also has excess land which can

cater to the next growth phase. A new ride addition can be done on the vacant land,

thereby adding to capacity. Thus, we believe that at the current levels there is

enough cushion to meet an immediate spurt in demand and avoid overcrowding in a

particular park.

8 January 2015

Wonderla Holidays

Exhibit 23:

Calculation of excess capacity in each park

Particulars

Total Footfall - FY14 (nos)

Average footfall per day (nos)

Capacity (nos)

Average current capacity utilization

Balance capacity available

Kochi

1,000,000

2,740

12,000

23%

77%

Bangalore

1,190,000

3,260

12,000

27%

73%

Source: Company, MOSL

Exhibit 24:

Excess capacity available in both parks

Average current capacity utilization

Balance capacity avaialable

77%

73%

23%

Kochi

27%

Bangalore

Source: Company, MOSL

First destination theme park in India

Globally, theme parks are popular as destination parks whereby hotels are set up

inside and visitors spend more than a day to experience the entire park. This

concept is not yet fully developed in India. However, WONH has developed an

unique resort at its Bangalore park comprising of 84 luxury rooms, making it the first

destination park in India. This concept allows a visitor to enjoy a weekend, with a

devoted day for dry rides and another for water rides. The resort has four banquets

spread across 8,900sqft, which can accommodate 800 guests and also has a board

room. Thus, it can host multiple events like weddings, corporate meetings, parties

etc. The resort has 40% occupancy, which we believe can be scaled up to 60-65%,

going forward. Adlabs Imagica is another park in India which is planning to construct

a 287-room hotel at its park in Mumbai. WONH’s management indicated that if the

footfall growth is substantial, then it may develop a resort in other parks. We

believe developing a resort gives synergy to WONH’s amusement park operations

and this will drive higher footfalls, going forward.

8 January 2015

Wonderla Holidays

Exhibit 25:

Occupancy in resort expected to increase

Number of rooms

Occupancy (%)

50%

34%

40%

32%

55%

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 26:

Wonderla Resort - Bangalore

Source: Company, MOSL

In-house manufacturing brings cost efficiency

WONH has developed an in-house manufacturing facility in Kochi to

manufacture/construct amusement rides and attractions, apart from those being

procured from manufacturers within and outside India. The in-house manufacturing

facility enables the company to implement innovative ideas and concepts. As of Jan

31, 2014, company manufactured/constructed 42 rides/attractions. Of the total 55

attractions, Wonderla Kochi and Bangalore have 10 and 18 rides imported

respectively. Balance is either in-house manufactured or domestically sourced. In-

house manufacturing benefits WONH with certain cost efficiencies such as saving on

import duties and other costs, besides improving the efficiency in rides

maintenance. Management indicated a cost saving of ~30% compared to purchasing

from an outside vendor.

As of Jan 31, 2014,

WONH has

manufactured/constructed

42 rides/attractions

8 January 2015

Wonderla Holidays

Exhibit 27:

In-house manufacturing/imported rides (nos)

Imported rides

Domestically sourced

Kochi

Bangalore

Source: Company, MOSL

1Q and 3Q are seasonally best periods

1Q and 3Q are the best

performing periods for

amusement parks,

contributing ~60% of the

total revenue for WONH

Amusement park is a seasonal business, whereby 1Q and 3Q are the best periods

compared to other two. In south, monsoon sets in June and continues till

September. Thus, footfalls are lower in 2Q, and with most visitors being students or

teenagers, footfalls are affected during the examination season. Thus, even 4Q

witnesses a slowdown in footfalls. 1Q and 3Q together contribute ~60% of the total

revenue for WONH and are seasonally the best periods.

Exhibit 29:

1Q and 3Q are biggest revenue contributors

0.54

Exhibit 28:

Quarterly footfall trend (m)

Footfalls (m)

0.76

-4%

0.41

0.63

0.53

0.70

-8%

-2%

0.40

0.65

YoY Growth

19%

29%

17%

35%

FY07

19%

24%

15%

42%

FY08

20%

29%

17%

35%

FY09

23%

18%

36%

FY10

22%

26%

18%

34%

FY11

20%

26%

19%

35%

FY12

21%

25%

19%

36%

FY13

22%

27%

18%

34%

FY14

Source: Company, MOSL

Long payback period acts as an entry barrier

Setting up an amusement park is a capital intensive process. It requires huge

investment and the payback period too is as high as 8-9 years. Hence, many players

refrain from entering the market and competitive intensity is relatively low. For

developing a park, typically 6-12 months are needed for paper work and obtaining

approvals to begin construction, post conception of the idea. Later, 20-24 months

are needed for construction of rides and the park to be fully operational. The time

required for initial paper work itself can get stretched depending on states’

approvals. For example, Wonderla Hyderabad Park took six to seven months of

initial paper work, and the company started the construction work in 3QFY15.

Hence, not many players enter this market and it remains a fairly uncompetitive

space.

Post the initial paper work,

20-24 months are needed

for construction and the

park to be fully operational

8 January 2015

Wonderla Holidays

Clean and hygienic environment ensures visitors satisfaction

The parks clean and hygienic environment ensures high customer satisfaction and

repeat visits. WONH’s management has kept hygiene and safety a top priority to

enrich the experience of visitors. Company has set up extensive water filtering

facilities at Wonderla Bangalore and Kochi and recycling systems for each pool and a

quality control laboratory to carry out quality checks on samples of water collected

at regular intervals. It has also installed lightning arrestors as a precautionary

measure against lightning hazards. Apart from this, to ensure continuous supply of

power, company has generators with a combined capacity of 4.9mva. Thus, these

facilities together ensure an enriched experience for visitors.

No pending litigation — testimony of high safety standards

WONH works on “safety first” criteria for visitors. It has developed a strong technical

team which ensures high safety standards along with regular maintenance. Since

commencement, it saw only seven fatal accidents but not due to mechanical error

of rides — five were due to cardiac arrest, one due to “dry drowning” and one on

visitor error. There is only one case of pending litigation where the visitor has

claimed INR1.7m for paralysis attack. Thus, high safety standards maintain visitors’

confidence and ensure sustainability of growth.

8 January 2015

Wonderla Holidays

First-mover advantage with rich operating experience

WONH has created strong brand for both parks



Acquisition of land is the biggest entry barrier of the industry due to its high

investment requirement and fragmented ownership. WONH has already addressed

the same by acquiring 49 acres of land for its Hyderabad park.

WONH’s promoters have 14 years of rich experience in successful running parks, which

is the key requirement of the industry.

All three parks are ~28kms away from the main city which make commutation easier

and attract higher footfalls. As most amusement parks are one-day attraction,

measured proximity to the city ensures sustainable footfall growth.

Investment in land and availability — strong entry barriers

Land cost forms a huge chunk in the total cost for development of an amusement

park. The costs are high and availability of vast land area becomes extremely

difficult due to fragmented ownership and different laws attached to it. Land cost

and its related clearances are the strongest entry barrier in the development of an

amusement park. Closer the land is to a city, costlier it will be. Hence, a park’s

management needs to balance between the proximity and cost. Wonderla’s Kochi

park is situated on 93 acres of land which was acquired in bits and pieces due to

fragmented ownership. The Bangalore park is situated on 82 acres of land, which

was acquired from the Karnataka Industrial Development Corp. Hyderabad park’s

land too is being acquired from 22 sellers in small fragments. In our view, this is one

of the biggest entry barriers for the industry, which WONH has addressed.

Exhibit 30:

Land availability for future expansion

Park

Kochi

Bangalore

Hyderabad

Available Land

(acres)

93.17

81.75

49.50

Developed Land Balance for future expansion Wet and Dry Rides

(acres)

(nos.)

28.75

39.20

27.00

64.42

42.55

22.50

Source: Company, MOSL

Exhibit 31:

WONH has ample land for expansion in all 3 parks

Land available for future expansion (acres)

Available land (acres)

138

Kochi park

Bangalore park

Hyderabad park

114

Adlabs Imagica

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Rich experience in managing the park, a big positive

WONH’s management has rich operating experience in operating the park, which is

the key requirement for success in this industry. The first park was opened in Kochi

in 2000 and the next one in Bangalore in 2005. Thus, promoters have over 14 years

of rich and successful experience in park operations. Amusement parks operate for

365 days from 11am-7pm and alcohol-based beverages are not allowed inside.

Kochi park snippet

Exhibit 32:

Kochi park

Source: Company, MOSL

Exhibit 33:

Snapshot of few attractions in Kochi - 1

Exhibit 34:

Snapshot of few attractions in Kochi - 2

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Exhibit 35:

Snapshot of few attractions in Kochi - 3

Exhibit 36:

Snapshot of few attractions in Kochi - 4

Source: Company, MOSL

Exhibit 37:

Wonderla Kochi - 28km from Cochin International Airport

Source: Company, MOSL

Bangalore park snippet

Exhibit 38:

Bangalore Park

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Exhibit 39:

Snapshot of few attractions in Bangalore - 1

Exhibit 40:

Snapshot of few attractions in Bangalore - 2

Source: Company, MOSL

Exhibit 41:

Snapshot of few attractions in Bangalore - 3

Exhibit 42:

Snapshot of few attractions in Bangalore - 4

Source: Company, MOSL

All parks are ~28km away from main city

Attractive location and its proximity to a city ensure footfalls addition. WONH’s all

three parks — Kochi, Bangalore and Hyderabad -- are situated in the proximity of

main city. Wonderla Kochi is located in Pallikkara, 15km from central Kochi and

28kms from Kochi Airport, while Wonderla Bangalore is located off the Bangalore-

Mysore highway, 28km from central Bangalore. Wonderla Hyderabad is in the Ranga

Reddy District, Andhra Pradesh, ~27km from central Hyderabad, 33km from

Secunderabad Railway Station and 12km from Hyderabad Airport. Most of the

amusement parks in India are one-day attraction and thus parks closer to cities

attract higher footfalls. Both the existing and new parks are in close vicinity of the

city, which will drive footfall growth.

Exhibit 43:

Wonderla Bangalore – 28km from Bangalore Railway Station

Source: Google maps, MOSL

8 January 2015

Wonderla Holidays

Hyderabad park: sustainable long term trigger

Wonderla Hyderabad and Chennai set to maintain growth momentum



Company has raised INR1.8b through an IPO to develop the Hyderabad park. It is in

the final stages of getting approval for construction, which is expected by 3QFY15.

Management indicated that construction has begun in Hyderabad and it is expected to

be operational from 4QFY16.

The park is expected to drive footfalls of ~0.8m visitors in the first year, with an

average ATP of INR873 and margins of 35%.

Addition of Hyderabad park to drive growth

Company has raised INR1.8b through an IPO for the development of a new park in

Hyderabad, which will drive future growth. It has already acquired 49 acres of land

for the proposed park and is in the final stage of getting approvals. Management

indicated that final approvals from the respective authorities will be received by

3QFY15. WONH will start developing the park from 4QFY15 and it is expected to be

operational from 4QFY16. Its third amusement park is in Ranga Reddy District of

Hyderabad, which is ~27kms from central Hyderabad, 33kms from Secunderabad

Railway Station and 12kms from Hyderabad Airport. Company intends to develop 27

acres with 24 dry rides and 18 wet rides, of which 10 land rides will be imported, 14

land rides will be sourced indigenously and 18 water rides will be sourced

indigenously either through in-house manufacturing or from local manufacturers.

We believe WONH is well geared for the next growth phase with its new park, which

will also drive long term growth.

Exhibit 44:

Detailed cost of Hyderabad Park

No.

Particulars

Land, land development and civil

construction

Amusement rides

Machinery and equipments

Furnishing and vehicles

Consultants fees

Pre-operative expenses

Contingencies

Total

Cost

(INR m)

994

1,067

261

114

2,560

Amount already

deployed (INR m)

255

377

Balance funded through

IPO and debt (INR m)

739

970

261

113

2,183

Source: Company, MOSL

Hyderabad park’s footfall expected to be robust

Initial years of an amusement park are the phase of high excitement and gaining

popularity which attract visitors. Kochi and Bangalore witnessed a high footfall

growth in the initial five years, with Kochi posting 7.7% CAGR from 0.51m footfalls to

0.74m, while Bangalore clocked 22.1% CAGR, from 0.34m footfalls to 0.94m.

Management indicated that the Hyderabad park is expected to deliver a footfall of

~0.8m in the first year, with an average ATP of INR873 and margins of 35%. In our

view, the park’s launch will aid WONH’s next growth phase, which can lead to the

stock’s re-rating.

8 January 2015

Wonderla Holidays

Exhibit 45:

Expected footfall growth of Hyderabad park

Footfalls (m)

10%

Yoy Growth

10%

0.80

0.88

0.97

1.06

1.17

1.29

FY17E

FY18E

FY19E

FY20E

FY21E

FY22E

Source: Company, MOSL

Exhibit 46:

Expected F&B realization of Hyderabad park

Average F&B realisation (INR)

30%

23%

20%

163

17%

191

219

Yoy Growth

Exhibit 47:

Expected ATP of Hyderabad park

Average ticket realisation (INR)

10%

Yoy Growth

10%

15%

873

960

1,056

1,162

1,278

1,406

FY17E

111

FY18E

136

FY19E

FY20E

FY21E

FY22E

FY17E

FY18E

FY19E

FY20E

FY21E

FY22E

Source: Company, MOSL

Aims to be pan India player

Focusing on the growing stage, WONH intends to expand its business operations

and develop the brand ‘Wonderla’ by setting up new parks across India and thereby

cater to a wider customer base. To capitalize on the early-mover advantage, it plans

to open a 49-acre park in Hyderabad and is expected to be operational in 4QFY16.

Management plans to add two parks in the next four years, thus doubling the

current parks size. It is scouting for land in Chennai, post which plans to enter non-

south markets such as Goa and Mumbai.

8 January 2015

Wonderla Holidays

Rain harvesting: sustainable way of water sourcing

Helps reduce cost of water by 30%



Company has adopted two water harvesting systems to source water -- rain water

harvesting and roof water collection.

Each park requires ~6-7 litres of water/guest per day, which translates to 15m liters of

water per year for the two parks together.

In the Kochi park, water is partly sourced from local panchayat’s sources and partly

from rain water harvesting. For Bangalore, it has a capacity of 15m litres of storage

facility.



WONH collects ~50-60m liters of water per annum based on availability of rain using

its collection tanks.

In roof collection, water is tapped from a total roof area of 2 lakh sqft and is conveyed

through closed pipes to tanks with 5 lakh litre and 7 lakh litre capacities. This system

aids in reducing ground water exploitation to 55-60% and reduces 20-30% of operating

cost.



Rain water harvesting to ensure ample availability at lower cost

In an agriculture depended economy like India, availability of water poses a big

challenge. Thus, it is vital to have a sustained way of sourcing water for big parks. Of

the 55 rides, ~40% in Kochi and Bangalore each are water-based and the balance are

land-based. Each park requires ~6-7 litres of water/guest per day, which translates

to 15m liters of water per year for both parks together. To save water, the

management has been practicing rain water harvesting which not only helps to use

water in a better way but also cut cost. Water in the Bangalore park is sourced from

rain water harvesting extensively. In Kochi park, water is partly sourced from local

panchayat’s sources and partly from rain water harvesting. WONH has a capacity of

15m litres of water storage facility in Bangalore. The water which is released after a

year is classified under the Green category, zero pollution water, and can be used

for irrigation purposes. Company has adopted two harvesting systems:

Rain water harvesting system:

At least two acres of land have been utilized for

green initiatives with the park being home to 2,000 plants of 150 varieties.

WONH started operations Bangalore in 2005 and in 2006 installed its rain water

harvesting system. It collects ~50-60m liters of water per annum based on

availability of rain using its collection tanks. The rate at which water can be

collected from rain harvesting system is dependent on the plan area of the

system, its efficiency and intensity of rainfall (annual precipitation (mm per

annum) x square meter of catchment area = litres per annum yield). Water

collected through the tank is used for its rides, gardening and allied facilities

(used only after stringent reverse osmosis treatment at the park, the same

technology used by leading packaged drinking water manufacturers).

Roof water collection:

Rain water is also harvested from roof tops of various

buildings and structures. The water is tapped from a total roof area of 2 lakh

sqft and is conveyed through closed pipes to tanks with 5 lakh litre and 7 lakh

litre capacities. This water is treated by reverse osmosis process and used for

drinking too. WONH collects and uses ~15-20m litre of water per annum

8 January 2015

Wonderla Holidays

through this process. The design of its buildings has been modified to

accommodate this process. This system helps to reduce ground water

exploitation to 55-60% and reduces 20-30% of operating cost.

Exhibit 48:

Rain water harvesting system - Bangalore

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Valuation and view



We expect WONH’s revenue to clock 25% CAGR to INR3.2b over FY14-17E and PAT

CAGR of 27.1% to INR886m over FY14-17E.

In our view, over the next 10 years, amusement parks will emerge as a strong avenue

for entertainment as penetration improves substantially.

Globally, the average RoE of amusement parks are 15.5%, 16.9% and 14.8%

respectively. We estimate WONH’s RoE at 20.3%, 16.7% and 20.2% & ROCE 29.4%

24.9% and 30.2% for FY15E, FY16E and FY17E respectively, which justifies the higher

multiple.



Average P/E of global companies has been 22.2x, 19.2x and 18.1x for FY15E, FY16E and

FY17E respectively, while WONH trades at 34x, 28x, 20x for FY15E, FY16E and FY17E

respectively earnings.



We believe the company is on track to be a pan India player over the long run and will

be a major beneficiary of amusement park industry’s development.

Given its strong industry positioning, multiple growth opportunities and high entry

barrier, we value WONH at 26x FY17E EPS, with a target price of INR410. We initiate

coverage with a Buy rating.



We value WONH at 26x FY17E EPS justified by:



Company is one of the largest and most profitable parks in India. With the new

park opening in Hyderabad in FY17, we believe it has huge potential to grow.



There are ~140 amusement parks in India, of which only ~10% are of large

formats. Thus, the competition intensity is very low.



Development of an amusement park requires huge capex and operational

expertise to be successful. Hence, it is a huge entry barrier for new entrants.



Lack of any large amusement park in the vicinity of Bangalore and Kochi gives a

huge advantage.



Globally, most large amusement parks are loss-making and are trading at 22.2x,

19.2x and 18.1x FY15E, FY16E and FY17E PE. We believe that a target multiple of

26x to WONH is justified given its profitable operations, experienced

management and significant opportunity for amusement parks’ growth in India.

We believe the following factors can pose risks to our estimates:



Any occurrence of accidents or mishaps at amusement parks exposes the

company to possible financial liabilities and legal proceedings, resulting in

adverse publicity.



Lower-than-expected footfall growth for Hyderabad park and a decline in

footfall growth for existing matured parks such as Bangalore and Kochi can

significantly affect company’s earnings.



Any delay in completion of construction of Hyderabad park can delay our

earnings estimates.



Company is currently focused only on South markets. Any political instability,

natural calamity or epidemic breakout in the Southern region may result in

significant lowering of our earnings estimates.



Environmental risk like floods, heavy rainfalls etc can significantly affect the

footfall growth. Kochi saw a de-growth in footfall due to heavy rainfalls.

8 January 2015

Wonderla Holidays

Exhibit 49:

Revenue mix over the years

Ticket Sales

11%

86%

11%

85%

11%

85%

F&B sales

11%

86%

Mechandise/other sales

11%

81%

11%

79%

Bangalore resort

10%

79%

10%

78%

80%

FY09

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 50:

Global peer comparison

Company Name

Six Flags Entertainment Corp

Haichang Holdings Ltd

Walt Disney Co

Average

Wonderla

Currency

USD

CNY

USD

Market

Cap (M)

3,852

5,720

152,902

FY15E

1,213

1,876

51,765

Sales

FY16E

1,285

2,129

55,885

FY17E

1,381

2,342

59,532

EBITDA Margin (%)

RoE (%)

P/E (x)

FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

38.8 39.7 39.9 22.9 23.0 23.0 28.9 25.8 25.2

42.6 42.8 42.8

6.1

6.2

6.2 24.2 20.1 18.0

29.1 29.9 30.3 17.7 21.9 16.9 19.3 16.7 14.3

36.8 37.5 37.6 15.5 17.1 15.4 24.2 20.9 19.2

48.5 50.5 47.5 20.4 16.7 20.2 34.4 27.9 20.0

Source: Company, MOSL

1,818 2,126 3,241

Exhibit 51:

Key assumptions

Particulars

Kochi Footfalls (In m)

Bangalore Footfalls (In m)

Hyderabad Footfalls (in m)

Total Footfalls

Kochi Ticket realization (INR)

Bangalore Ticket realization (INR)

Hyderabad Ticket realization (INR)

Kochi F&B spend per head (INR)

Bangalore F&B spend per head (INR)

Hyderabad F&B spend per head (INR)

Bangalore (no of rooms)

Occupancy rate (%)

Particulars

Footfall growth

Kochi

Bangalore

Total Footfalls

Ticket realization growth

Kochi

Bangalore

F&B spend per head growth

Kochi

Bangalore

FY10

-1%

14%

10%

-3%

23%

FY11

24%

28%

26%

21%

FY12

18%

11%

14%

11%

33%

13%

FY10

0.89

0.72

1.61

327

423

FY11

1.11

0.92

2.03

336

440

FY12

1.18

1.08

2.26

383

489

FY13

1.21

1.13

2.34

423

545

FY14

1.10

1.19

2.29

477

598

FY15E FY16E FY17E

1.14

1.18

1.23

1.27

1.35

1.43

0.80

2.41

2.53

3.46

522

574

633

655

720

793

873

55%

FY17E

35%

10%

25%

28%

34%

FY13

10%

11%

25%

44%

32%

FY14

-9%

-2%

13%

10%

55%

37%

40%

FY15E

10%

30%

50%

FY16E

10%

27%

8 January 2015

Wonderla Holidays

Financial outlook

Expect 25% Revenue CAGR over FY14-17E

Revenue expected to clock 25% CAGR over FY14-17E

We expect WONH’s revenue to post 25% CAGR, from INR1.5b in FY14 to INR3.2b in

FY17E, driven by 19% growth from existing parks and balance driven by the

commencement of Hyderabad park.

Exhibit 52:

Sales growth trend (INR m)

Sales (INR m)

YoY Growth

52%

22%

1,131

1,378

11%

1,536

18%

1,818

17%

2,126

3,241

Source: Company, MOSL

PAT to post 27% CAGR over FY14-17E

We expect EBITDA to clock 26.5% CAGR over FY14-17E to reach INR1.5b. With the

addition of Hyderabad park, margins are initially expected to decline in FY17E to

47.5% from 51.5% in FY16E. However, as scale comes to business over the period,

operating leverage will drive margins, going forward. Hence, we expect PAT to post

30% CAGR from INR399m in FY14 to INR886m in FY17E.

Exhibit 53:

EBITDA trend (INR m)

EBITDA (INR m)

49.3%

45.4%

558

625

45.8%

703

1,540

312

336

48.5%

YoY Growth

50.5%

47.5%

19%

1,074

399

515

29%

23%

635

886

Exhibit 54:

PAT growth trend (INR m)

PAT (INR m)

YoY Growth

40%

882

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Return ratios to improve going forward

RoCE and RoE are expected to remain at 30% and 20% respectively for FY17E,

despite the latest commencement of Hyderabad park, which holds potential in our

view. However, once the park ramps up, we expect return ratios to bounce back to

35% over the long term.

Exhibit 55:

RoCE trend

RoCE (%)

44.8

37.8

40.7

37.8

29.4

24.9

30.2

31.4

29.6

20.3

16.7

20.2

Exhibit 56:

RoE trend

RoE (%)

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

8 January 2015

Wonderla Holidays

Key management team

Experienced board

Mr George Joseph, Chairman, Non-Executive Director (Independent):

Mr George Joseph was appointed as an additional Director of the company on June

27, 2011 and as Director and Chairman on September 12, 2011. He holds a

bachelor’s degree in commerce from Kerala University. He is a Certified Associate of

the Indian Institute of Bankers and an Associate of the Institute of Bankers, London.

Prior to being appointed on board, he acted as chairman and managing director of

Syndicate Bank and worked in Canara Bank for over 37 years in various capacities

from 1969 to 2006. He is also the non-executive independent director of Muthoot

Finance Ltd.

Mr Kochouseph Chittilappilly, Non-Executive Director:

Mr Kochouseph Chittilappilly

is one of the promoters and has been a Director since incorporation. He holds a post

graduate degree in physics from Calicut University. He has 15 years of experience in

the amusement park industry. He expanded the amusement park business by

establishing Wonderla in Bangalore in 2002. He is also the chairman of V-Guard

Industries Ltd and director on the board of several other companies.

Mr. Kochouseph Chittilappilly

Mr Arun Kochouseph Chittilappilly, Managing Director:

Mr Arun Kochouseph was

appointed as the Director on December 22, 2003. He has been the Managing

Director since April 1, 2012. He holds a masters degree in industrial engineering

from Swinburne University of Technology, Victoria, Australia. He has been actively

involved in the day-to-day operations and management of the company since 2003.

He has over 11 years of experience in the amusement park industry.

Mr Ramachandran Panjan Moothedath, Non-executive Independent Director:

Ramachandran Panjan Moothedath was appointed as the Director on August 9,

2012. He holds a diploma in financial management from University of Mumbai. He

had set up Jyothy Laboratories in 1983 as a sole proprietorship firm and is currently

the chairman and managing director of Jyothy Laboratories Ltd, the managing

director of Jyothy Fabricare Services Ltd and director on the board of four other

companies. He has over 31 years of experience.

Ms Priya Sarah Cheeran Joseph, Whole-time Director:

Ms Priya Sarah Cheeran

Joseph was appointed Director on December 22, 2003. She was appointed as a non-

executive director of the company from March 1, 2013. She holds a post graduate

degree in public health from University of Melbourne, Australia. She has been

involved in the operations of food and beverages and human resource departments

of the company since 2005, when it started commercial operation. She is also

actively involved with the corporate social responsibility related initiatives of the

company. She has over 11 years of experience in the amusement park industry.

Mr. George Joseph

Mr. Arun Chittilappilly

8 January 2015

Wonderla Holidays

Key risks

Accidental risk:

Any occurrence of accidents or mishaps at amusement parks

exposes the company to possible financial liabilities and legal proceedings resulting

in adverse publicity for the company. These developments include legal proceedings

and third party claims etc. However, as per our interaction with the management, so

far only six to seven casualties have happened, of which five were due to cardiac

arrest. Only one case is pending disposal.

Concentrated revenue stream:

WONH generated 85% and 83% of income through

entry fees in FY13 and FY14 respectively. Thus, a large portion of the revenue is

dependent on the income generated from the sale of entry tickets as opposed to the

sale of merchandise, food and beverages. Any competition which forces the

company to reduce ticket prices will have an adverse impact on financials.

Reduction in consumer discretionary spending:

Visiting amusement parks is a part

of discretionary spending and is perceived to be a leisure activity. Thus, its business

is dependent on factors influencing the discretionary spending. Any adverse change

in economic condition which leads to decrease in discretionary spending can affect

the business substantially.

Inability to find locations to open and operate amusement parks:

Future

growth

the company resides in opening of amusement park in different locations. However,

inability to find locations to open and operate amusement parks on commercially

viable terms and successfully acquire the requisite land could adversely affect the

business model.

Dependence on South India cities:

Company generates revenue primarily from the

southern Indian city visitors as its amusement parks are situated in South India. If

southern India experiences an event negatively affecting its economy, such as a local

economic downturn, a natural disaster, a contagious disease outbreak or a terrorist

attack etc, company’s business will be significantly affected.

8 January 2015

Wonderla Holidays

Industry overview

Indian amusement park industry yet to reach a peak

Indian amusement park industry still at nascent stage

Indian amusement park

industry is growing in terms

of footfalls though still at a

very nascent stage

compared to global peers. It

witnesses an annual footfall

of ~58-60m

The size of amusement park industry in India is estimated to be ~INR26b with ~140-

160 parks in India. Indian amusement park industry started with Appu Ghar in 1984.

In late 90’s other large players like Essel World and Nicco Park started their

operations in Mumbai and Kolkata respectively. Indian amusement park industry is

growing in terms of footfalls though still at a very nascent stage compared to its

global peers. It witnesses an annual footfall of ~58-60m. The primary drivers to

attract footfalls are size of the park, proximity of location and innovative offerings.

Water parks are more popular in India due to the hot and humid weather. Industry

is segmented into three categories of parks: large parks (>INR70m capex), medium

parks (INR30m-70m capex) and small parks (<INR30m capex). Footfalls depend on

the size of park ranging from >0.5m for large parks to <0.3m for small parks.

Exhibit 57:

Globally top 25 amusement parks footfall

18.6

17.2

16.2

14.1

11.2

10.4 10.2 10.1 10.1

8.5

Visitors in 2013 (in m)

8.1

7.5

7.4

7.3

7.1

6.1

5.8

5.1

4.9

4.5

4.3

4.2

4.1

Source: Company, MOSL

Tourism sector and leisure spend to increase substantially

Domestic tourism industry

posted 13% CAGR in the

past six to seven years.

It is expected to increase

from USD77b in CY11 to

USD89b in CY20

The domestic spend on tourism in India is expected to rise significantly, which is one

of the biggest growth driver for the industry. Domestic tourism industry has clocked

13% CAGR in the past six to seven years. It is expected to increase from USD77b in

CY11 to USD89b in CY20. With rising income levels, Indians are spending more on

tourism related activities. Holidaying, leisure and recreation related tourism

constitutes major part of the domestic tourism. Local residents form majority of the

footfall (84%) followed by domestic tourist, which form 15%. Foreign tourism

constitutes a negligible part, <1%, of total visitors in the park.

8 January 2015

Wonderla Holidays

Exhibit 58:

Domestic spend on tourism to rise significantly

USD (b)

77.1

45.6

52.6

56.2

65.4

89.1

Exhibit 59:

Local residents contribute to larger % of footfalls

Type of Visitor

Domestic

tourist, 15%

Foreign

tourist, 1%

39.6

CY05

CY06

CY07

CY08

CY09

CY10

CY11

CY20E

Local

Residents,

84%

Source: Ministry of Tourism, MOSL

Source: E&Y Report, MOSL

Large flow of investment expected to be deployed in next 3-4 years

A total pile of INR175b

worth of investment is

expected to be deployed in

12 major projects over next

three to four years

With an increase in tourism, amusement park industry is expected to be the large

beneficiary. A total pile of INR175b worth of investment is expected to be deployed

in 12 major projects over the next three to four years. One of the most-awaited

projects is coming up in Surat spread across mammoth ~3,200 acres of land. The

investment in this project is expected to be INR95-100b, making it the biggest

amusement park in India. Some of these large projects may avail viability gap

funding from state governments. Most projects are expected to come up in Tier 2

and 3 cities due to difficulties faced in land acquisition. A total addition of 4,500

acres of capacity in next three to four years will be one of the major drivers for the

industry. As per the report published by CARE, 10-15% of footfall growth is

expected, which will drive footfalls to 78-80m by FY18. Revenue is expected to

grow by 15-18% on account of rising footfalls and increased spend on other items

like food and beverages, spas etc.

8 January 2015

Wonderla Holidays

Exhibit 60:

Huge project pipeline across India

Estimated Project

Location

Promoter/JV

Investment

(INR b)

Year of

Completion

Size

Theme/attraction

(Acres)

Glass-enclosed underwater tunnels having

3,000 kinds of marine animals. Will replicate

the Sea World park in USA. Will have

attractions like dolphins, theme restaurants,

school about animal life lessons, etc.

Theme parks based on concepts like Jurassic

Park, Terminator and Spiderman.

India's first Hollywood theme park.

India's first edutainment theme park. Already

under construction.

A replica of Disneyland, phase I - 21

international standards rides including India's

largest roller coaster and 4D stimulation

rides, phase II and III - water park and a 3-

star hotel. Phase I scheduled to open in the

first half of 2013.

Amusement park combined with a five star

hotel.

Embedded with water park

Come back of India's first amusement park,

will include amusement park, water park,

FEC, themed retail complex,

Sea World

Proposed by GoM,

Singhudurg,

to be undertaken on

Konkan,

PPP basis, parties

Maharashtra

yet to be decided.

Nagpur,

Maharashtra

Lavasa,

Maharashtra

Lavasa,

Maharashtra

Landmark

Entertainment

MGM - Lavasa

Space Investment

Company - Lavasa

5 - 5.1

2015

150

Theme Park

MGM Lavasa

Hollywood Theme

Park

Spaceworld Theme

Park

Early stages of

planning

2014

300

4.5

2013

Adlabs Imagica

Khopoli,

Maharashtra

Adlabs

Entertainment

2013

297

Wonderla

Appu Ghar

Hyderabad,

Wonderla Holidays

Andhra Pradesh

Chennai, Tamil

Wonderla Holidays

Nadu

Gurgaon,

Haryana

Surat, Gujarat

International

Amusement Ltd

Atlanta Ltd

2.3

N.A.

2015

2013

N.A.

Surat Theme Park

95 - 100

2014-2016

One of Asia's largest theme parks and may be

3,200 bigger than Disneyland in California, Paris

and Tokyo.

Will be set up to spread the awareness of

vedic heroes (Ram, Krishna, Hanuman, etc).

Contains two temples, a 4-D theatre, expos,

puppetry workshops, story-telling for

children and costume shows. Already under

construction.

A mega tourism city comprising of themed

retail, golf course, water park, FEC, resorts,

villas, etc. Already under construction.

A recreational cum amusement park having

various amusement and water rides for kids

and adults. Parties yet to be decided.

Krishna Lila Theme

Park

Bangalore,

Karnataka

ISKCON

(International

Society for Krishna

Consciousness)

3.5

2016-17

Jaipur Mega

Tourism City

Jaipur,

Rajasthan

International

Amusement Ltd

Early stages of

planning

300

Naya Raipur

Amusement Park

Proposed by NRDA,

Naya Raipur, to be undertaken on

Chhattisgarh

PPP basis, parties

yet to be decided.

50:50 JV of

International

Amusement Ltd

and Unitech

50:50 JV of

International

Amusement Ltd and

Unitech

0.23

Early stages of

planning

Adventure Island

and Metro Walk

Rohini, Delhi

2-3

Completed

Amusement park spread over 24 acres, retail

mall of 200,000 sq ft

Entertainment City

Phase I

Noida, Delhi

10 - 11

Phase I

completed,

Phase II

expected

completion

147

A mega complex area having amusement

park (Worlds of Wonder), retail space and

health club, small water park, shopping mall

with a 5-star hotel.

Source: DRHP, MOSL

8 January 2015

Wonderla Holidays

Ticket sales contribution to revenue high compared to global peers

Almost 75-85% of the

revenue comes from the

sale of tickets. Share of F&B

is 15-20%, which is lower

than global peers

Ticket sales form the major source of revenue stream for amusement parks in India.

Almost 75-85% of the revenue comes from sale of tickets. Share of F&B is 15-20%,

which is lower than global peers. Resort and rentals revenue currently form

negligible portion of the revenue (~2%), which is expected to increase as visitor

preferences change and amusement parks become more of a destination tourism

than a single day entertainment. Globally, entry fee, food and beverages and resorts

and rentals contribute similar proportion to revenue.

Exhibit 61:

Contribution from various revenue streams

Stream of Revenue

Entry Fees/Ticket Sales

Food & Beverages

Gifts, Souvenirs and other retail items

Sponsorships and advertisement

Resort, Banquets, Lawns etc

Miscellaneous Rentals

% Contribution to

overall revenue

75-80%

15-20%

3-4%

<1%

Description

As most of the amusement parks in India deploy ‘single ticket for entry’,

entry fee has a considerable contribution

As most of the amusement park visits are day long, food and beverages

consumption is considerable. However much lower than its globally peers

Items like clothes, caps, bags, goggles, cosmetics along with souvenirs

especially for the outstation visitors.

Selling the free space for advertising

Overnight stay as well as corporate events

Photo and video shooting, concerts live shows, wedding receptions and

other events. Most of the water parks provide swimming costumes and

locker facility for a charge

Source: Company, MOSL

Exhibit 62:

Revenue composition in India

India

Exhibit 63:

Revenue composition globally

Global

F&B

Merchandis

ing

34%

Entry Fees

33%

F&B

Merchandis

ing, 18%

Resort and

Rentals, 2%

Entry

Fees, 80%

Resort and

Rentals

33%

Source: DRHP, MOSL

Favorable demographics for growth of industry

India, being one of the

youngest countries in the

world with the median age

of 26.5 years, has majority

of its population between

15-59 years, which will be

the biggest growth driver

for the industry

Amusement parks are targeted to attract young generation. India, being one of the

youngest countries in the world with the median age of 26.5 years, has majority of

its population between 15-59 years, which will be the biggest growth driver for the

industry. Countries like the US, Japan and China have older population with median

age of 37.1 years, 45.4 years and 35.9 years respectively. As per the study conducted

by E&Y, in India, children are the key influences for amusement and theme parks

visits. They generally come to parks in school groups or with families. But they

constitute only 25% of the park visitors and balance 75% are adults. In India,

~28.50% of the population is in the age group of 0-15 years, 63.40% in 15-59 years

and 8.10% in 60 years and above, respectively.

8 January 2015

Wonderla Holidays

Exhibit 64:

India has the youngest population of world

Exhibit 65:

Children influence adults to visit parks

Age wise distribution India (2011)

60+ yrs

Visitors age profile

Children

, 25%

15-59yrs

29%

0-14yrs

63%

Adults, 75%

Source: DRHP, MOSL

Industry concentrated with few larger players

Amusement park industry

in India is highly

concentrated with larger

players like Essel Group,

Nicco Park and Wonderla

constituting most of

the market

Amusement park industry in India is highly concentrated with larger players like

Essel Group, Nicco Park and Wonderla constituting most of the market. Most of the

theme parks have both dry and wet rides. Amusement parks across India offer

varied experience to users ranging from dry rides, wet rides, snow parks, resorts,

shopping malls etc, though most of the rides remain similar in nature. Parks have

different pricing strategy. Large parks like Essel World in Mumbai and Nicco Park in

Kolkata charge separately for their water parks, while in others like Wonderla

Bangalore and Kochi, Kishkinta in Chennai, dry and wet rides can be accessed on the

same ticket. Encouraged by the global parks, Wonderla and Ramoji have come up

with resorts making amusement park a “destination park” as against “one day

attraction” like peers. Pricing strategy also differs across parks. Large parks in India

have predominantly adopted ‘pay one price’ wherein the customer is entitled to

unlimited use of rides after paying a single entry fees. Worlds of Wonder in

Entertainment City, Noida provides both the options of ‘pay-one-price’ and ‘pay-as-

you-go’.

8 January 2015

Wonderla Holidays

Annexure

Exhibit 66:

Products and services offered at amusement parks in India

Products/Services

Constituents

Giant wheels

Amusement Park -

Dry Rides

Merry-go-round

Toy trains

Rides

Swings

Video games

Virtual games and

indoor activities

Bowling

Car race

air-hockey

Snow park

Sking

Skating with other rides

Water Park

Water rides

Water Park

Waves pool

Swimming pool

Rain Dance floor

Food and beverages

Restaurants

Spa

Spa and health club

Aromatherapy

Body massage

Other recreational Services

Lodging

Resort

Restaurant Separate

payment

Banquet Hall

Golf course

Sports

Shopping Mall

Gift store

Tournaments resort

General Merchandise

Gifts

Separate payment sometimes complementary

with resort

Separate payment sometimes complementary

with

Separate Payment

Separate payment

Separate payment, sometimes complementary

with amusement park or resort

Not included in entry fees

Separate entry fee, combined package or

complementary with other rides. Generally

separate rent is charged for swimming costumes.

Separate entry fee, combined package or

complementary with other rides

Primarily included in the entry fees, sometimes

as pay-as-you-go

Primarily included in the entry fees, sometimes

as pay-as-you-go

Fees structure

8 January 2015

Wonderla Holidays

Financials and valuations

Income statement

Y/E Mar

Net Sales

Change (%)

EBITDA

EBITDA Margin (%)

Depreciation

EBIT

Interest

Other Income

Extraordinary items

PBT

Tax

Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Min. Int. & Assoc. Share

Adj Cons PAT

2012

1,131

26.2

558

49.3

116

442

456

144

31.6

312

-7.4

312

2013

1,378

21.9

625

45.4

119

507

500

164

32.8

336

7.8

336

2014

1,536

11.4

703

45.8

132

571

579

180

31.1

399

18.7

399

2015E

1,818

18.3

882

48.5

167

715

769

254

33.0

515

29.2

515

(INR Million)

2016E

2,126

16.9

1,074

50.5

206

868

948

313

33.0

635

23.2

635

2017E

3,241

52.5

1,540

47.5

267

1,272

1,322

436

33.0

886

39.5

886

Balance sheet

Y/E Mar

Share Capital

Reserves

Net Worth

Debt

Deferred Tax

Total Capital Employed

Gross Fixed Assets

Less: Acc Depreciation

Net Fixed Assets

Capital WIP

Investments

Current Assets

Inventory

Debtors

Cash & Bank

Loans & Adv, Others

Curr Liabs & Provns

Curr. Liabilities

Provisions

Net Current Assets

Total Assets

2012

420

518

938

216

1,188

2,078

868

1,210

143

200

104

-57

1,197

2013

420

780

1,200

210

1,446

2,420

981

1,440

163

102

213

128

-50

1,447

2014

420

1,079

1,499

239

1,772

2,553

1,099

1,455

201

348

200

111

231

141

116

1,772

2015E

565

2,999

3,564

3,616

3,733

1,266

2,468

1,445

1,265

127

352

182

169

1,094

3,616

(INR Million)

2016E

2017E

565

3,469

4,157

4,034

4,722

4,067

4,755

5,213

6,413

1,471

1,739

3,742

4,674

698

604

489

335

146

168

415

588

211

344

203

244

283

4,067

4,755

E: MOSL Estimates

8 January 2015

Wonderla Holidays

Financials and valuations

Ratios

Y/E Mar

Basic (INR)

EPS

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation(x)

P/E

Cash P/E

Price / Book Value

EV/Sales

EV/EBITDA

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

Turnover Ratios (%)

Asset Turnover (x)

Debtors (No. of Days)

Inventory (No. of Days)

Creditors (No. of Days)

Leverage Ratios (%)

Net Debt/Equity (x)

2012

7.4

10.2

22.3

1.5

23.5

42.3

30.9

14.1

10.1

20.4

0.5

37.8

44.8

0.9

0.6

5.9

61.4

0.2

2013

8.0

10.8

28.6

1.5

21.9

39.3

29.0

11.0

8.2

18.2

0.5

31.4

40.7

1.0

1.3

7.4

41.6

0.2

2014

9.5

12.6

35.7

2.0

24.9

33.1

24.8

8.8

7.3

16.0

0.6

29.6

37.8

0.9

0.8

7.9

39.5

0.2

2015E

9.1

12.1

63.1

2.0

25.7

34.4

26.0

5.0

5.5

11.3

0.6

20.4

29.4

0.5

0.8

10.0

71.1

0.0

2016E

11.2

14.9

71.4

2.5

26.0

27.9

21.1

4.4

5.0

10.0

0.8

16.7

24.9

0.5

0.8

9.9

73.3

0.0

2017E

15.7

20.4

83.6

3.0

22.4

20.0

15.4

3.8

3.3

7.0

1.0

20.2

30.2

0.7

0.8

10.6

73.9

0.0

Cash flow statement

Y/E Mar

OP/(Loss) before Tax

Depreciation

Others

Interest

Direct Taxes Paid

(Inc)/Dec in Wkg Cap

CF from Op. Activity

(Inc)/Dec in FA & CWIP

(Pur)/Sale of Invt

Others

CF from Inv. Activity

Inc/(Dec) in Net Worth

Inc / (Dec) in Debt

Interest Paid

Divd Paid (incl Tax)

CF from Fin. Activity

Inc/(Dec) in Cash

Add: Opening Balance

Closing Balance

2012

445

116

-139

447

-392

-388

-11

-73

-37

2013

500

119

-151

-2

486

-374

-371

-15

-23

-73

-111

2014

579

132

-198

-19

502

-270

-259

-27

-74

-71

172

200

2015E

769

167

-254

782

-1,034

1,682

-221

-13

-132

1,316

1,064

200

1,265

(INR Million)

2016E

2017E

948

1,322

206

267

-313

-436

113

877

1,266

-1,468

-1,222

-1,468

-1,222

-18

-1

-165

-198

-184

-198

-775

-154

1,265

489

335

E: MOSL Estimates

8 January 2015

Wonderla Holidays

NOTES

8 January 2015

Disclosures

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report is for personal information of the select recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or

Holidays

Wonderla

inducement to

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