SeaWorld IPO: A Cool Summer Investment

Theme parks have looked good, and SeaWorld might go public on the cheap

   

A few weeks ago, the Blackstone Group (NYSE:BX) took one of its portfolio companies — Pinnacle Foods (NYSE:PF) — public, and it turned out to be a nice winner, gaining about 21%.

It appears Blackstone isn’t finished — it’s now prepping for a SeaWorld IPO, and again it seems like many investors want a piece of this deal.

SeaWorld expects to issue 20 million shares at a range of $24 to $27; at the top of this range, the company would have a market cap of $2.5 billion. SeaWorld plans to issue stock on the NYSE under the ticker of “SEAS,” and its has a large lead underwriter list that includes Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Citigroup (NYSE:C), BofA Merrill Lynch (NYSE:BAC), Barclays (NYSE:BCS) and Wells Fargo (NYSE:WFC).

Founded more than 50 years ago, SeaWorld has 11 theme parks across the U.S. that includes about 67,000 marine and terrestrial animals as well as 29 killer whales. In all, the locations attracted 24 million guests last year, with 3.5 million visitors hailing from outside the U.S.

Obviously, Shamu is a popular headliner, but SeaWorld has been developing new concepts, such as Aquatica — a park with a tropical South Seas setting, high-energy rides and white sand beaches. Then there is Discovery Cove, a marine-life day resort where guests can swim with dolphins, take underwater reef tours or just relax at private cabanas.

These additions have helped SeaWorld advance its bottom line, with 2012 revenues increasing 7% year-over-year to $1.42 billion, and profits soaring from $19.1 million to $77.4 million.

To get a sense of the valuation, the best comparisons to be made are with pure-play operators including Cedar Fair (NYSE:FUN) or Six Flags (NYSE:SIX), which currently trade at enterprise-value-to-EBITDA ratios of 9.6X and 13X, respectively. Meanwhile, SeaWorld has a 6x multiple, assuming the $27 price tag, so the IPO could be trading at a discount to its peers.

Speaking of Cedar Fair and Six Flags, it’s hard not to notice their gains of late — SIX is up 59% in the past year, while FUN has advanced 41%. Should the economic drivers pushing more people through the gates at those parks continue, one could expect big things for SeaWorld as well.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities, and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/seaworld-ipo-a-cool-summer-investment/.

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