PRKA Writeup
Parks! America, Inc (ticker PRKA) is a $12 million market cap company that owns two regional Wild Animal Safari theme parks located in Georgia and Missouri. At the Wild Animal Safari theme parks, visitors travel through a 3.5-mile self-guided tour, experiencing hundreds of animals and having the opportunity to feed and interact with them. The parks primarily generate revenue from admission fees which are $20-25/person, but also rent vehicles, sell animal feed, and have food and souvenir shops. PRKA is under-discovered and the market is not giving credit for the significant growth in revenue and EBITDA and for the upbeat outlook for the future with shares trading at just 4.2x EV/EBITDA vs larger peers at 10x. I estimate fair value is $0.37 today, +125% upside, and will increase to $0.68 over the next 3 years, +340% upside. Management owns over half the company and has been buying more in the open market
Thesis
• Management has significantly upgraded the facilities and the overall park experience and is beginning to realize significant progress in their financial results. This is driving strong attendance growth and consistent pricing increases since current management took over in 2013. With theme parks, incremental margins are about 90% so maintaining or growing attendance is key to growing profits. Similarly, incremental profit on pricing increases is 100%.
o Attendance has grown at a +10% CAGR including accelerating to +26% in the most recent quarter
o Ticket pricing has grown at a +5% CAGR including +4.5% in the most recent quarter
o Ratings on travel websites for both Animal Safari parks have significantly improved over the last couple years (4.5 stars with 613 reviews on Trip Advisor) which is tangible evidence of management improving the experience for visitors
o Management has successfully turned around the Georgia park, growing EBITDA +75% over the last two years. The company is just starting to get traction on its Missouri park. If Missouri reaches the same level of profitability as Georgia, the company will more than double its EBITDA to $4.2mm. Plus Georgia continues to see attendance and pricing growth and will continue to grow EBITDA
• Management is well-aligned with shareholders. Management owns 69% of the shares including purchasing 11% of the float in the open market over the last two years. Clearly they see value in PRKA shares and are motivated to continue to create value
• Powerful value creation formula as management continues to drive revenue growth and EBITDA growth. Continuing the playbook they have used for the last couple years of +10% attendance growth and +5% pricing gains drives +15% revenue growth and +36% EBITDA growth. I estimate PRKA will grow revenue dollars by $0.8mm in the next 12 months and EBITDA dollars by $0.7mm. In addition, PRKA will generate $1.8mm of FCF. Each year, the company creates $0.7mm EBITDA x 10x EV/EBITDA = $7mm of enterprise value plus $1.8mm of FCF generation = $8.8mm value creation or $0.12/share. This means shares should appreciate by about $0.12/year or 80% annually.
• Discount to intrinsic value. PRKA shares are trading at 4.2x NTM EV/EBITDA vs theme park peers at 10x EV/EBITDA (SEAS 8.8x NTM EV/EBITDA, FUN 10.4x, and SIX 13.2x). In addition, peers are only seeing LSD to MSD organic growth vs PRKA +15% organic growth. Valuing PRKA in-line with peers at 10x EV/EBITDA, fair value is $0.37/share.
o It gets even more interesting if you take a 3 year view. Assuming a 3-yr revenue CAGR of 15% and 90% incremental margins, consistent with what they have realized the last few years, PRKA will generate $4.5mm of EBITDA, up +125% from LTM, and generate $6mm of FCF over the period. Valuing at 10x EV/EBITDA, consistent with peers, PRKA is worth $0.68/share, +340% above its current price.
• The company has a conservative balance sheet with $1.4mm cash, $3.2mm debt, and $1.98mm of TTM EBITDA, putting leverage at just 0.91x net debt / EBITDA. Theme parks can easily handle 3-4x of leverage, giving borrowing capacity of $4-6mm in addition to the $1.8mm of FCF PRKA generates each year. Management may look at acquisitions where they can apply their best-in-class management expertise of regional theme parks to improve operating results as they have with the Georgia and Missouri Safari Parks.
