Diving into Seaworld? $SEAS

aside: I'm on holidays for the next 10 days, so apologies for my absence! Defeats the stockaday tag, I know.

please comment at the r/investing post, thanks.


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.


View the archive of Stock a Day posts at it's subreddit stockaday. Disclosure: I have no positions in any stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.


Submitted October 19, 2017 at 08:17AM by shane_stockflare
via http://ift.tt/2xQhyDO

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