aside: I'm on holidays for the next 10 days, so apologies for my absence! Defeats the stockaday tag, I know.
It doesn't feel like the stormy times are over at Seaworld, with more job losses announced yesterday. :(
But is there deep value in the stock?
Key Stats
| Ticker | SEAS |
|---|---|
| Sector | Amusement Parks and Zoos |
| Latest price | $12.48 |
| Value | $1,130M |
| Daily vol | $56M |
| Date | 18 October 2017 |
| Financials | SEC Filings |
| Website | http://ift.tt/1e0xQZf |
1. Let's visit!
SeaWorld Entertainment, Inc. is a theme park and entertainment company. The Company owns or licenses a portfolio of brands, including SeaWorld, Sea Rescue and Busch Gardens. As of December 31, 2016, the Company had a diversified portfolio of 12 destination and regional theme parks that are located across the United States.
Locations include: Orlando & Tampa in Florida; San Antonio, Texas; San Diego, California; and Williamsburg, Virginia. The Company operates water park attractions in Orlando, Florida (Aquatica); San Diego, California (Aquatica); Tampa, Florida (Adventure Island); Williamsburg, Virginia; and Langhorne, Pennsylvania.
You may have missed the controversy but there have been a lot of environmentalists take issue with dolphins and orcas being in captivity... but it feels like this has really hurt the brand.
2. No splash Capt'n
Despite the negativity, visitor numbers look like they've stabilized at 22m visitors a year. And the average revenue per visitor is stable at $61. Admissions make up 60% of revenues, food & merchanizing the other 40%.
| Metric | 2012A | 2013A | 2014A | 2015A | 2016A | 2017E | 2018E |
|---|---|---|---|---|---|---|---|
| Visitors | 24m | 23m | 22m | 22m | 22m | N/A | N/A |
| Revenue | $1.4bn | $1.5bn | $1.4bn | $1.4bn | $1.3bn | $1.3bn | $1.3bn |
| EPS | $0.89 | $0.59 | $0.57 | $0.57 | $-0.15 | $-2.07 | $0.45 |
| DPS | $6.07 | $0.60 | $0.62 | $0.84 | $0.73 | $0.00 | N/A |
But stabilized revenues came at a cost, and the business has started to lose money. Worse, in a classic warning EPS was less than dividends from 2013... which is something that's hard to maintain. Only some miracles lets you pay out more than you earn over an extended period. So, it's no surprise to see the dividends been suspended
A sinkhole...
And as earnings have come under pressure, even though they have seen debt's fall, they still has $1.5bn of net debt versus a market cap of $1.1.bn. That's 5.5x it's latest operating profit. Scary!
Though on the latest call they reminded listeners
As a reminder, we recently refinanced approximately $1 billion of debt earlier this year and do not have any maturities prior to May of 2020.
So there's no immediate issue... though I don't know what the debt covenants say!
2. Better excitement elsewhere?
When they talk about competition it's pretty obvious
Principal direct competitors of our theme parks include theme parks operated by The Walt Disney Company, Universal Studios, Six Flags, Cedar Fair, Merlin Entertainments and Hershey Entertainment and Resorts Company.
But sadly there are only 2 of these that are quoted in the US, Six Flag and Cedar Fair. The two big daddies are hidden inside DIS and CMCSA. Regardless, the margins don't look good. Though it's not a surprise. The business has been understress for a number of years.
And we really shouldn't be surprised by the recent redundancies.
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| SeaWorld Entertainment Inc | $1,313M | 21% | -ve |
| Six Flags Entertainment Corp | $1,319M | 33% | N/A |
| Cedar Fair, L.P. | $1,283M | 35% | N/A |
| Merlin Entertainments PLC | £1,457M | 31% | 16% |
| Vail Resorts, Inc. | $1,907M | 30% | 17% |
| Walt Disney Co | $55,500M | 30% | 21% |
| Comcast Corporation | $83,972M | 33% | 18% |
tricky price
With losses in 2017, I've jumped to 2018 for a PE ratio. The business isn't trading at a meaningful discount. On price-to-sales it's trading at 2.0x versus $SIX on 5.4x and $FUN on 4.0x. So a dramatic discount. But that does give a some comfort.
| Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | FCF Yield |
|---|---|---|---|---|---|
| SEAS.K | $1,130M | 28x | 13% | 0% | -ve |
| SIX | $5,126M | 33x | 8% | 4% | 9% |
| FUN | $3,554M | 22x | N/A | 5% | 13% |
| MERL.L | $3,854M | 18x | 11% | 2% | 11% |
| MTN | $8,764M | 35x | 18% | 2% | 6% |
| DIS | $151,817M | 17x | 7% | 2% | 9% |
| CMCSA.O | $171,897M | 18x | 9% | 2% | 13% |
3. Wall Street still cares
It's amazing, on the last earnings call, 10 brokers dialed in to question management, inc. Goldmans, Citi, Barclays and wells Fargo. Imagine these firms still care about a $1bn market cap stock like $SEAS.
These Wall Street professionals have a $13.86 for Seaworld and their recommendation to clients is Buy. That implies an upside of 11% to their target.
But that target price has been a real rollercoaster, as high as $22 back in Oct 2015, dipping to $14 this time last year, ramping again to $20 until June this year.
And the back drop is missing earnings 7 out of the last 8 quarters :(
4. Diving in?
I just can't work out the fair value of this stock. There doesn't seem to be a compelling reason for a turn around, even if they are working hard on their 5-point efficiency plan. Plus the debt levels are a no-no for me. Even if they aren't an issue.
So sorry, Seaworld, I'm not visiting.
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Submitted October 19, 2017 at 10:16AM by shane_stockflare http://ift.tt/2xQQPXr
