April 2014 – OneMint

Wonderla Holidays IPO Review

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

Stock markets are going up and as always people are getting excited, disappointed, confused or hyper. Excited, as they are seeing this kind of jump after a very long time and short-term investors have made some real quick money. Disappointed are those who just could not participate and missed this rally. Confused, as they don’t know whether it is the right time to buy stocks or sell their current holdings. Then, there are those who are getting hyper in search of potential multibaggers.

In search of multibaggers and with some quick profits made in the recent issues like Just Dial, Engineers India, Power Grid Corporation, Goldman Sachs CPSE ETF etc., the investors are showing interest in fresh public issues as well. Such an issue has hit the primary markets with Wonderla Holidays Limited, which is one of the largest operators of amusement parks in India.

What is an Amusement park?

Amusement park is the generic term for a collection of rides and other entertainment attractions, assembled for the purpose of entertaining a large group of people, including kids, teenagers and adults. For people like me, who have never visited an amusement park, I would like to name some amusement parks so that we get somewhat familiar with Wonderla’s business model.

Apart from Wonderla Kochi & Wonderla Bangalore, Essel World in Mumbai, Adventure Island (Rohini) & Appu Ghar, both in Delhi, Nicco Park in Kolkata, Ramoji Film City in Hyderabad, Kishkinta in Chennai, Entertainment City in Noida etc. are some of India’s famous amusement parks. Disneyland is the global leader in this business and has presence in many countries, including the United States, Hong Kong, France, Australia etc. Singapore’s Universal Studios is also one of the popular amusement parks.

Amusement park industry today is worth about $25 billion globally and continues to stay dominated by the US, contributing almost half of the pie. India has around 150 amusement parks and the industry here is estimated to be worth Rs. 26 billion.

There are three major heads of revenues for amusement parks – (i) Entry Fees, (ii) Foods, Beverages & Merchandising, and (iii) Resort & other rentals. In India, entry ticket sales contribute to a major chunk of the total revenues of amusement parks. Wonderla generated 81.06% and 79.81% of its total income through such entry fees in FY 2013 and the nine month period ending December 31, 2013, respectively.

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About Wonderla Holidays Limited

Wonderla Holidays is a company promoted by Kochouseph Chittilappilly and his elder son, Arun Kochouseph Chittilappilly. Kochouseph Chittilappilly is also the promoter of V-Guard Industries Limited, which is a listed company on the BSE and NSE and has given some good returns to its investors since it got listed in 2008.

Wonderla was founded in 2002 and is one of the largest amusement park operators in India. It currently operates two amusement parks, one in Kochi (Kerala) and the other in Bangalore (Karnataka), and the company is in the process of setting up its third amusement park ‘Wonderla Hyderabad’ in Ranga Reddy District of Andhra Pradesh. It also owns and operates a resort in Bangalore, Wonderla Resort, which contributes about 4% in Wonderla’s overall revenues.

Though I have never been to any of Wonderla’s amusement parks, Ketki has visited it in Bangalore and she liked it quite a lot. This is what she has to say about it.

ketki April 17, 2014 at 3:15 pm [edit]

Any views on the upcoming “WONDERLA HOLIDAYS LTD : WONHOL” ipo? opening 21st April…worth a buy ? I personally have visited their park in bangalore and was quite impressed with cleanliness and quality of the park/rides…

Also, I personally found their website to be quite unappealing.

Initial Public Offer (IPO) Details

Initial public offer of Wonderla opened yesterday and is scheduled to close tomorrow i.e. April 23. Wonderla has fixed the price band at Rs. 115-125 per share and is offering 1.45 crore shares during this period. At Rs. 125 per share, the company plans to raise Rs. 181.25 crore in the IPO. As always, 35% of the issue size is reserved for the retail individual investors.

Objective of the Issue – Out of Rs. 181.25 crore, Wonderla plans to use approximately Rs. 173.31 crore to finance the balance of its estimated cost for setting up Wonderla Hyderabad.

IPO Grading – The issue has been graded by CRISIL as 4 out of 5, indicating that the issue is fundamentally above average relative to other listed equity securities.

Risks

* Wonderla has acquired 49.57 acres of land to set up Wonderla Hyderabad, out of which 14.70 acres of land is subject to two litigations. Adverse court ruling will impact proposed development, which may affect operations and financial performance of Wonderla.

* Due to the bifurcation of Andhra Pradesh into two separate states, Wonderla Hyderabad may finally be situated within Telangana. Due to various political as well as socio-economic changes, the company might face certain new restrictions in relation to approvals already obtained.

* Amusement parks are extremely land intensive as large parks require some 40-50 acres of land. Some of the proposed amusement park projects have suffered due to uncertainty in the land acquisition process. With the recently passed bill, land acquisition has become extremely expensive as well as difficult.

* Amusement parks are capital intensive also, as they require huge investments in land, equipments etc. Regularly adding rides to keep visitors’ interest and replacement of existing equipments also require huge funding.

Financials of the Company

(Figures are in Rs. Crore, except per share data & percentage figures)

As on December 31, 2013, the net worth of the company was 152.44 crore as against Rs. 121.45 crore as on March 31, 2013. The net asset value per share as at March 31, 2013 and as at December 31, 2013, stood at Rs. 28.92 and Rs. 36.29 respectively.

As of December 31, 2013, Wonderla’s outstanding indebtedness stands at Rs. 21.02 crore and its debt-to-equity ratio works out to be 0.1 times.

Valuation

Considering annualised profit after tax of Rs. 41.32 crore and post-issue outstanding shares of 5.65 crore, its FY 2014 EPS would stand at Rs. 7.31. At the upper end of its price band i.e. Rs. 125, the offer discounts Wonderla’s annualised FY 2014 earnings by 17.10 times. CARE Research expects revenue of the amusement parks to grow by 15-18% on account of rising footfalls and increased spending on other items like food and beverages, spas etc.

For a growing company, the valuation seems reasonably attractive, but it would take at least 3-4 years for the company to fully utilise the IPO proceeds and generate meaningful returns for its shareholders. So, I think it is an attractive offer for the long-term investors, but short to medium term investors should not expect superfast returns from this IPO.

3D Printed House Drinks Water After a Workout

Regular readers know my fascination with 3D printing, so you can guess how amazed and fascinated I was when I read that a Chinese company has actually 3D printed a house!

It is quite incredible, and my first reaction was skepticism, however they really have printed a house, well, almost. The house needed assembly, but I wouldn’t say it is wildly inaccurate to say that this is the first 3D printed house. Article here.

Equally interesting was this article that explains a little bit about why we feel good after a workout. The answer was really quite surprising.

MIT has come up with a great instrument (not yet fully built) that lets the blind “read” text.

The high speed trains are coming, well maybe not.

Everyone who owns a LIC policy will be glad to hear that they made Rs. 10,000 crores in the recent rally.

I think everyone understands the answer to this intuitively but I must urge you to read and reflect on this article and then think about your spending habits. How long does it take to save a month’s expenses?

Finally, you know you need water, but do you know why?

Unpredictable beard interviews an earthquake

Arun Shourie’s interviews are always a pleasure to read, I have very high regard for him, and quite enjoyed reading this interview he gave to Shekhar Gupta.

Arvind Kejriwal also gave an interview this week, and if you haven’t read it already, you can find it here.

New York Times has a nice article on an Alaskan earthquake in 1964 which contributed a lot to our understanding of earthquakes.

The Economist explains why India is good at conducting elections.

John Elliott on Rahul Gandhi’s unpredictable beard.

Amazon actually pays its employees money to quit.

Cutest thing on the internets.

Enjoy your Sunday!

Systems versus Goals: There’s an app for that

I had reviewed “How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life” written by Dilbert creator Scott Adams a few months ago, and one of the key ideas in that book was working towards a system and not a goal.

Here’s a small snippet from my review to briefly explain the idea:

System versus Goals

One of his key ideas is that people shouldn’t have goals but instead rely on a system to achieve success. An example of a difference between a goal and a system is that a goal can be losing 25 kilos by the end of the year while a system can be getting into a routine of exercising 15 minutes every day.

For me a good example is the difference between having a target in terms of subscribers – say 15,000 OneMint subscribers by the end of the year or a system where I say I will set aside an hour for blogging every day.

The latter is a system whereby I am telling myself that I need to get in the habit of blocking an hour for blogging every day. If I’m not able to finish a post in that time, or I’m not able to answer all comments that is still fine because I was dedicated to the blog for that one hour and what you achieve within the hour will always vary.

This type of thinking is good for motivating me to write because often the idea of finishing a post is a lot more daunting than the idea of spending one hour on blogging.

I think this is a useful way to look at things, and I’m trying this idea out with blogging and a few other things.

I’ve been using the idea of a system since then, and I have about 6 things that I track on a daily basis which include exercising, blogging or more broadly OneMint related activities, reading, and building on a skill etc.

Now psychologically, I feel that the idea of the system is a lot more rewarding, and indeed disciplining because you have these things that you promised yourself you’d do every day, and invariably you end up doing them a lot more than you would have otherwise. Since I’ve been only doing this for a few months, it is hard for me to convincingly say whether it has practically paid off or not, but I feel that it has, and I definitely recommend you try it out as well.

Now, having a system is not enough, you need a way to track how well you’re sticking to your system. The way I track this is by having a spreadsheet on a Google drive where I have listed out these things, and every day I open up that spreadsheet and mark the activities I did that day in green, and the ones I didn’t in red. It requires some discipline and effort to maintain that spreadsheet but the effort easily pays off.

I was quite satisfied with my spreadsheet and was going on about my business till I discovered an app called “Full” last week.

It is built exactly for the thing I’m doing, but ironically it calls system related activities “Goals”. What you do is enter a few goals in the app, type in how many days in a month you want to do those activities, and then every time you perform one of those activities, just do a simple swipe and let the app know.

The app has a dashboard that shows you how you’re progressing in your goals.

I’ve been using this since last week, and it is much much better than updating the spreadsheet because it is so convenient, and it also shows me the dashboard that I didn’t have in my spreadsheet.

This app is currently available in iOS only, but I’m sure they will come up with an Android version, and if you know of an Android equivalent, please leave a comment, and I’ll update the post.

I think this is 99 cents well spent, and you can give it a try.

Disclosure: The link to the book will take you to Flipkart and if you buy the book from that website I will get a commission.

I have no affiliation with the app and I don’t stand to gain in any way if you buy the app.

Worried zebra wonders why we are alive?

If I know my readers well, and I think I do, then I’m glad to report I have chanced upon the answer to the question you were wondering about all these years.

Yes, you will now know why zebras have stripes (or learn a theory about it anyway).

Obviously no discussion on zebras should go without an equally intriguing discussion about goosebumps, and more specifically, why we get them.

Which takes me to the topic of worrying, and living.

I think I will have this printed and posted above my computer screen: Einstein on why we are alive?

The Economist, on Narendra Modi.

I just remembered that this is a personal finance blog so here you go – a good post about investing mistakes.

Finally, can someone explain to me why there is so much month left at the end of the…?

Enjoy your weekend!

Thoughts on Economic Policies Present in the AAP Lok Sabha Manifesto

I read the AAP Lok Sabha Manifesto today, and was rather disappointed with it. I think it is only fair that I mention my bias before I get to my opinion on the AAP Manifesto.

I started out as a supporter of AAP, and considered them the best bad option we had, but I have now changed my position, and do not believe that they present a viable alternative to the other political parties because of their performance in Delhi.

That being said, here are my thoughts specifically on the “Economy and Ecology” section of the AAP Manifesto.

AAP has listed down the following goals under their Economy and Ecology section.

Facilitating Robust Economic Growth with Holistic Well Being
Creating Decent Jobs and Gainful Employment for our Youth
Simplify Rules, Create Accountable Institutions, Curb Black Money
Promoting Honest Business, Unleashing India’s Entrepreneurial Energy
Empowering Citizens, Particularly Poor and Vulnerable
Reinvigorating the Rural Economy
Improving Farmers’ Livelihoods
Environment and Natural Resources Policy
No Contractualization of Jobs
Social Security for the Unorganized Sector
Protecting the Common Man from Rising Prices

I think most people would agree that these are all worthy goals, except perhaps the contract labor ones, but the goals themselves are not the problem, the problem is how these goals will be achieved, and there AAP has not presented any concrete ideas on what they will do to achieve any of their goals.

For example, here are the measures they have suggested to fight rising prices.

Fight corruption and crony capitalism.
Arrest black marketers, raid their godowns and release food grains in the open market.
Bring a law to regulate the fee charged by schools.
Increase the number of government hospitals and substantially improve the quality of services.
End corruption in the public distribution system with the involvement of gram sabhas.
Instead of direct cash transfer, transfer materials to families.
Include dal and oil in ration materials.

It seems to me that AAP’s answer to every question is reduce corruption, and everything else will fall into place, but their short rule over Delhi didn’t inspire confidence this is in fact the case.

When I supported AAP earlier, I didn’t agree with several of their policies, but I did believe that reducing corruption would outweigh everything else. However, their short stay in Delhi convinced me otherwise. A case in point were their policies on water supply in Delhi.

They had listed out a number of items to deal with the water supply issues in Delhi like tackling the tanker mafia, restructuring Delhi Jal Board, installing bulk meters, and giving out 700 liters of free water etc.

In the end however, they only handed out the free water, and did nothing else. Granted, they didn’t have enough time to implement anything else, but at least in my mind it would have been better if they hadn’t implemented the populist and economically unsound idea of handing out free water as well.

And more importantly, if they come to power in center, or become part of the coalition, they will have to deal with a number of partners much like they did in Delhi, and they didn’t anything that inspires confidence that they will be able to work with the same parties at the center.