Corsair Capital's Thesis on SeaWorld: Q2 LetterVW Staff
Corsair Capital hedge fund firm recently sent out their second quarter letter and in it they include a pitch on SeaWorld Entertainment Inc (NYSE:SEAS) (H/T Market Folly)
Corsair Capital’s Thesis on SeaWorld Entertainment Inc (SEAS – $28)
SeaWorld Entertainment Inc (NYSE:SEAS) is the owner and operator of 11 U.S. based theme parks under the names SeaWorld, Busch Gardens, Aquatica and Sesame Place. SEAS has a strong business model with high barriers to entry, a good management team and tailwinds in its business. Over the next few years, we expect SEAS to use its significant free cash flow generation to reward shareholders with increased dividends and share repurchases. Amid continued negative sentiment and lowered expectations, we believe SEAS has a strong risk/reward profile – with limited downside and upside of $40-45 per share in the next 12 months.
After two decades under the Anheuser Busch Inbev SA (ADR) (NYSE:BUD) (EBR:ABI) umbrella, SeaWorld Entertainment Inc (NYSE:SEAS) was purchased by The Blackstone Group in 2009. Under The Blackstone Group L.P. (NYSE:BX)’s leadership, SEAS invested heavily to upgrade park infrastructure, create new dynamic exhibits and rides, and improve safety conditions for the nearly 70,000 marine and terrestrial animals it cares for. In 2013, the company completed its initial public offering at $27 per share, and today Blackstone only owns ~20% of the public equity.
While SeaWorld Entertainment Inc (NYSE:SEAS) posted record revenue and EBITDA during 2013, attendance declined by 4%. Management attributed some of this decline to a pricing strategy change implemented in early 2013, prior to plans for a public offering. Additionally, we believe that negative media events regarding captive orcas (i.e. Blackfish), above-average rainfall in Orlando and only a partial year of important new exhibits contributed to the attendance decline. While some of these issues will impact 2014, we believe they are transitory in nature and expect attendance trends to improve in the back half of 2014.
H/T Market Folly
See full Corsair Capital’s Thesis on SeaWorld: Q2 Letter in PDF format here.
You can read Corsair’s full investment thesis on SeaWorld embedded below: