Is Wonderla Holidays a Multibagger Stock based on Warren Buffet?

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: 300.00

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

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It is a Sad Truth that the Investors did not got the V-Guard kind of Appreciation from this stock, which they expected a lot.  There can be multiple factors into it like IPO-overpricing, Growth-perspective, Asset-intensive operations, 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.

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.

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 has Low Debts which is good in one sense & bad in another view that Leveraged Growth is not there.

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

No Pledging of shares.

Wonderla in the process of acquiring land and setting up one more park in Chennai. Once the 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.

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.

Warren Buffett Checklist

History of Consistently Increasing Sales, Earnings & Cash FlowYes.

 

 

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Durable Competitive AdvantageModerate.image
Future Growth DriversModerate.image
Conservative Debt (long term debt < 3 Net Profit)Not.image
Debt Equity Ratio, Current RatioDER is Zero, Current Ratio is Averageimage
Return on Equity must be Above AverageNo.image
Low CAPEX required to maintain current operations

High Capex required.

(this also works as entry barrier or economic moat for competitors)

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Management is holding / buying the stock

Yes.

(current price crash is opportunity)

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Price is Under Valued (< intrinsic value)

No.

As per the Futurecaps Intrinsic Value Calculator with 20% growth projection the company is trading at NO DISCOUNT to current market value.

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Stock Price is consolidating (now)Yes.image
Stock Price is growing in past years along with EPS growthYes.image

Additional Futurecaps Checklist

Consolidated PE, PB Ratio

PE is high, PB is 2X

(PB is attractive)

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Cash Flow Positive, Net Profit % greater than 8%Yes. Yes.image
Paying Dividends, TaxYes, Yesimage
EPS Growth Rate

Not impressive.

(but once Chennai park is running & 2-3 year new parks additions happening, the EPS shoudl clock around 20%)

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Jump in Trailing Result EPSYes. But moderate. 
Jump in Quarterly Result EPSYes. But moderate.image
Expected Gain in 5 Years2-3Ximage
Price Movement Graph, 52 Week High & LowOkayimage
Volume AnalysisOkay.image
Power of BrandGood.image
Corporate Governance, Reputation of LeadersOkay.image
Fraud reportedNo.image
Celebrity InvestorsYesimage

Summary

Based on the analysis, I would declare that the Stock definitely has Multibagger properties with expected 2-3X returns in next 5 years.  For getting super bagger returns of 10-20 times, one should keep an Investing view of 20 years plus.

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Note

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Disclaimer Futurecaps is an independent equity research team. Use of the information herein is at Investor’s own risk. This is not an offer to sell or solicitation to buy any securities and Futurecaps will not be liable for any losses incurred for the investment based on the advice.  The Investor is advised to do due diligence in the scrip mentioned.  None of Futurecaps Advisors hold 1% above Holdings of this company.

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