Is Wonderla Holidays a Multibagger Stock based on Warren Buffet?

In this post I would like to provide Analysis on Wonderla Holidays for the Multibagger Stock properties. The company was listed almost 5 years back & still trading at approximated price after Inflation.

Wonderla Holidays

CMP: Rs. 130 (Apr 2020, Last Updated)

Website: https://www.wonderla.com/

Wonderla Holidays Limited operates three largest amusement parks in Kochi, Bangalore and Hyderabad; and the Wonderla resort in Bangalore under the brand name Wonderla.

Promoted by Kochouseph Chittilappilly (of V-Guard) link

Wonderla attracted Lot of Investors due to the Credibility of V-Guard returns of 5000% above in past 10 years. However that kind of Appreciation from Wonderla is not delivered yet. There can be multiple factors into it like IPO-overpricing, Growth-perspective, Asset-intensive operations, Seasonal-business, GST-issues etc.

However, due to the Promoter Reputations on High Quality, Corporate Governance, Humanity aspects, the stock has attracted high profile investors like NR Narayana Murthy.

Recently the company entered into Food Business in the name of Wonder Kitchen during Corona Times too. This will improve the Business during Non-Vacation times too + Prevent further Losses during Corona Times. LINK

So let us look into the business & value parameters to determine any multibagger potentials.

Business Evaluation

The company generates income from the 3 main parks in kochi, bangalore & hyderabad. Interestingly, the food business constitutes 39% of the revenue. Company has recently added Wonderla Kitchen during the COVID period which will increased the Revenue & during the Non-vacation times too.

Positive Factors

Company is expanding to Chennai. plus, adding more rides, in-house manufacturing & improving efficiencies to existing parks. All together these will ensure 150-20% revenue growth in coming years.

Company also have advantage of surplus land which ensures further expansion in coming 10 years. Low Utilization would be a parameter to evaluate.

GST impacted current year Sales, but the latest quarters are improving.

Company is adding RFID, No-Queue solutions in the Technical Arena to increase the Footfalls.

In-house Manufacturing of Rides | High Cost Efficiency

No Debts | Good for Recession Time insurance

No Pledging of shares.

Wonderla in the process of acquiring land and setting up one more park in Chennai. Once the Corona Issues are Over & Chennai park has been set up the company intends to set up one new park 3 years. The parks will be funded through a combination of internal accruals and debt.

Wonderla enjoys the following facts:

Reputed Ethical Management under the Leadership of Kochouseph Chittilappilly who is a Trusted Icon in Kerala.
The largest amusement park chain in India with 3 parks in Kochi, Bangalore & Hyderabad
Wonderla parks in Bangalore, Kochi and Hyderabad were ranked at 1, 4 and 8 respectively in India by Tripadvisor in 2017
Plans for the 4th Park in Chennai underway
Management plans to add one park in every 2-3 years
Management has over 18 years of experience in amusement park sector
Land parcels in all existing parks for future expansions

Concern Factors

Considered as Holiday Tiger – Revenue goes double during June quarter there by increasing NPA / Idle resources during other periods. Scope of Corporate Outing, Official Programmes rendering during Weekdays would increase the ROE.

High PE is one problem with this stock

High PEG ratio is a derived problem

Low ROE

Mr. Kochouseph is not entirely focused into Wonderla and taking care of V-Guard & Veegaland Developer businesses too. So the Focused Passionate Growth & Drive of V-Guard may not be entirely visible in this company.

“The Performance of a Vehicle depends on the Type of Engine empowering it!”

Limited Lows

One advantage I can see is that the Promoters are buying back Wondera stocks due to the bear market so one can expect the lows are limited. This is the right time to Increase the Holdings as the Current Price would be the Lows for a Decade ahead. (Corona Update Apr 2020)

Warren Buffett Checklist

History of Consistently Increasing Sales, Earnings & Cash Flow	Yes.
Durable Competitive Advantage	Moderate.
Future Growth Drivers	Moderate.
Conservative Debt (long term debt < 3 Net Profit)	Not.
Debt Equity Ratio, Current Ratio	Debt Equity Ratio is Zero, Current Ratio is Average
Return on Equity must be Above Average	5%. No.
Low CAPEX required to maintain current operations	High Capex required. (this also works as entry barrier or economic moat for competitors)
Management is holding / buying the stock	Yes. (current price crash is opportunity)
Price is Under Valued (< intrinsic value)	No. Intrinsic Value screwed up due to EPS de-growth on Corona issues. As per the Futurecaps Intrinsic Value Calculator with 20% growth projection the company is trading at NO DISCOUNT to current market value.
Stock Price is consolidating (now)	Yes.
Stock Price is growing in past years along with EPS growth	Yes.

Consolidated PE, PB Ratio	PE is high, PB is 2X (PB is attractive)
Cash Flow Positive, Net Profit % greater than 8%	Yes. Yes.
Paying Dividends, Tax	Yes, Yes
EPS Growth Rate	Not impressive. (but once Chennai park is running & 2-3 year new parks additions happening, the EPS shoudl clock around 20%)
Jump in Trailing Result EPS	Yes. But moderate.
Jump in Quarterly Result EPS	Yes. But moderate.
Expected Gain in 5 Years	2-3X
Price Movement Graph, 52 Week High & Low	Okay
Volume Analysis	Okay.
Power of Brand	Good.
Corporate Governance, Reputation of Leaders	Okay.
Fraud reported	No.
Celebrity Investors	Yes

Summary

Based on the analysis, I would declare that the Stock definitely has Multibagger properties with expected 300-500% returns in next 5 years. For getting super bagger returns of V-Guard times, one should keep an Investing view of 20 years plus.