Wonderla Holidays IPO-Crisil rates 4/5-You should invest
Wonderla Holidays IPO would open on 21st April, 2014 for subscription. This Bangalore based Wonderla Holidays is planning to raise Rs 190 Crores through this IPO. This company revenues are growing at CAGR of 22% in last 5 years. Crisil rates this IPO as 4/5. Is Wonderla Holidays IPO is good for investment? How does split of Andhra Pradesh State into two states would impact this Wonderla Holidays performance?
About Wonderla Holidays Limited
Wonderla Holidays Limited is a Bangalore based Amusement Park operator. Currently it owns and operates two amusement parks, one in Kochi and other in Bangalore. It also owns and operates a resort beside its Bangalore Amusement Park. Currently it is planning to expand its operations by setting up Wonderla amusement park in Hyderabad.
Issue details of Wonderla Holidays IPO
- IPO opens: 21-April-2014
- IPO closes: 23-Apriil-2014
- Face value: Rs 10 per share
- Issue price band: Rs 115-Rs 125 per share (Includes premium of Rs 105-Rs 115 per share)
- Minimum bid: 100 shares
- Minimum investment: Rs 11,500-Rs 12,500
- Listing: BSE and NSE
- Lead Managers: ICICI Securities and Edelweiss Financial Services
Purpose of the IPO: The funds would be used for the following purposes.
- To set up an amusement park, Wonderla Hyderabad
- General Corporate purpose
- The company has posted revenue of Rs 6,330 Lakhs for the year ended Mar-2009 and Rs 13,917 Lakhs for the year ended Mar-2013. First 9 months of this financial (FY 2013-14) it year made a revenue of Rs 12,152 Lakhs.
- The company has posted a profit of Rs 1,103 Lakhs for the year ended Mar-09 Vs profit of Rs 3,348 Lakhs for the year ended Mar-2013. First 9 months of this financial year (FY 2013-14) it made a profit of Rs 3,099 Lakhs.
Reasons to invest Wonderla Holidays IPO
- Good revenue growth in last 5 years. Revenues increased from 6,330 Lakhs for the year ended Mar-2009 and Rs 13,917 Lakhs for the year ended Mar-2013 at CAGR of 22%. If we expect 9 months performance to repeat for this quarter too, this year, revenue estimate would be at Rs 16,200 Lakhs (approx)
- Good profit growth from Rs 1,103 Lakhs for the year ended Mar-09 Vs profit of Rs 3,348 Lakhs for the year ended Mar-2013. The profitability for 9 months is at 25% margins, which is good.
- Crisil rated this IPO as 4/5 (4 out of 5) which indicates fundamentals are above average.
Reasons not to invest in Wonderla Holidays IPO
- The company is in 2 litigations pertaining to 14.7 Acrores of Land connected with Wonderla, Hyderabad. If determined against the company, it can impact the performance.
- Accident mishaps at amusement parks can expose financial liabilities.
- Wonderla, Hyderabad is expected to start its operations after 20 months, any delay could impact its performance.
- Due to the reconstitution of Andhra Pradesh State, Wonderla, Hyderabad would be part of the State of Telangana and any political issues in the future can affect the revenue and profits of the company.
Also Read: How to do SIP in stocks for higher returns?
Recommendation / Investment strategy:
- Average EPS of Wonderla Holidays for the last 3 years is Rs 7.61 and last financial year ended Mar-2013 is Rs 7.97. Based on last 3 years average EPS of Rs 7.61 and issue price of Rs 115 – Rs 125, the P/E ratio works out to be 15 to 16. Similarly, based on last financial year EPS of Rs 7.97, P/E ratio works out to be 14 to 16. There is no listed company to compare the issue price, hence we cannot comment on whether the share price is overpriced or underpriced.
- The company is generating good revenue and profits and growing at a faster pace. The margins are also good at 25% of revenues. Considering risks indicated above, I would still bet and suggest investors to invest in this IPO.
- Though I am not able to comment on issue price, considering the growth prospects and consistent performance, I would personally like to invest in this Wonderla Holidays Initial Public Offering.
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Wonderla Holidays IPO