Prashant Jain has an excellent track record for finding winning stocks. His latest stock picks in AIA Engineering, Easun Reyrolle, CESC, VST Tillers, MCX etc are a testimony to his ability to find top-quality stocks which yield high profits.
Today, when Wonderla Holidays was scheduled to list, Prashant Jain was itching to grab the stock. He rushed to the counter early in the morning and before anyone knew what was happening, he had grabbed a massive chunk of 6,89,000 shares for Rs. 164 each, sending its stock price spiraling up 28%. Obviously, his presence boosted the sentiments of the other investors in the stock.
Now, the first thing you must note is that Wonderla Holidays’ surge of 28% on debut is a record of sorts. According to the Business Standard, the other top-performing IPO stocks like MCX, Care and Just Dial have not reached such a high debut price.
Anyway, now let’s get acquainted with the basics of Wonderla Holidays.
The best way to come to grips with Wonderla Holidays is to read the comprehensive research report (pdf) prepared by Bhavesh Gandhi of IIFL.
Wonderla Holidays is promoted by the Chittilappilly family. It owns and operates amusement parks in Kochi and Bangalore along with a resort adjacent to its Bangalore park. Both parks witnessed over a million footfalls each in FY13. The company is likely to post 21% revenue and 22% PAT cagr over FY11-14E.
What must have caught Prashant Jain’s attention is the fact that Wonderla has an operating margin in excess of 40% and >30% RoCE supported by high EBIT margin and lower incremental capex on existing parks.
The IPO funds are intended to fund an amusement park in Hyderabad at a total cost of Rs2.6bn. This is expected to be operational in FY17.
Now, the all-important question is about valuations. If you take the FY15 PAT at ~Rs450mn, Wonderla is quoting at a PE of about 16 times. According to Bhavesh Gandhi, this compares favourably to the CY14E ~14x-27x range for US-listed peers like Six Flags and Cedar Fair.
Bhavesh Gandhi calls Wonderla “a robust business model with inherently strong profitability at an attractive valuation”. Its valuations are also “compelling” he says.
So, it does appear that with the high operating margins, high ROCE, niche & unique business model, ambitious expansion and attractive valuations mean that Prashant Jain has got himself another winner stock in Wonderla.
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