|Shares Out. (in M):||86||P/E||23.4||15.7|
|Market Cap (in $M):||1,548||P/FCF||0||0|
|Net Debt (in $M):||1,562||EBIT||0||0|
|Borrow Cost:||General Collateral|
SEAS Short Thesis
We view SeaWorld as an over-valued, over-levered, structurally disadvantaged theme park operator. Bulls have been calling a turnaround for years, and the industry is thriving, yet SeaWorld continues to struggle. Structural issues have been labeled as temporary, and the company has been left playing defense; changing orca shows, adding atypical attractions, and the company is now a late follower into the theme park/hotel space. Nevertheless, SeaWorld remains a consensus “contrarian” long. We see the risk/reward for SEAS skewed lower and think there could be up to 40% downside. If the US were ever to fall into a recession, SEAS could ultimately have to restructure.
SeaWorld experienced flat attendance and declining rev/capita in 2015 despite a less-competitive environment in Orlando (lapping Universal’s Harry Potter launch), easier weather comps vs 2014, the opening of a new attraction at Busch Gardens Tampa, strong consumer confidence, healthy domestic travel (low oil), strong results by competitors (SIX, FUN), and booming tourism in Orlando (Orlando RevPar, airline traffic, and other tourism data were strong all year (http://media.visitorlando.com/research/). The company continues to highlight challenges at two parks, SeaWorld San Diego and SeaWorld San Antonio, but we estimate these represent <30% of visitors and <25% of adjusted EBITDA, and mask SeaWorld’s biggest problem – that stronger and better capitalized competitors are increasingly positioned as better options for the consumer. Six Flags continues to invest and grow (vs declines for Busch Gardens) and two of the largest theme park operators (Disney and Universal) are in the early stages of a significant arms race.
Source: SEAS Fillings
Regional analysis and competitive outlook
While SEAS does not break out parks individually, this slide provided at the company’s November analyst day shows the relative importance of Florida and California, and Orlando in particular.