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MarketWatch & their opinion on SeaWorld's future

Post: #1
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So... I was looking at SeaWorld's stock and a story from "MarketWatch" popped up. Basically, this analyst Benjamin Chaiken believes that they need more rollercoasters and selling off Busch Gardens is an ideal move.

"So instead, he (Chaiken) said SeaWorld should “cut” its dividend, even if it is a covenant breach, and use the money, an expected $80 million a year, to buy two to three roller coasters a year.

SeaWorld could pursue a more “aggressive reinvestment” strategy and sell its Busch Gardens Parks, potentially to Cedar Fair FUN, -1.25% or Six Flags SIX, +0.34% for a resulting $1 billion in proceeds, Chaiken wrote in a note to clients. With that money, he said SeaWorld could pay down its debt, while adding 25 new roller coasters “which would help transform the experience of its park overnight.”

What do you guys think? I really don't believe that selling two of your biggest assets will automatically improve your outlook.

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08/11/16 at 06:15pm in MarketWatch & their opinion on SeaWorld's future (Latest Edit: 08/11/16 at 06:17pm by Unagi.)
Post: #2
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(08/11/16 05:50pm)CoasterJon18 Wrote:  SeaWorld could pursue a more “aggressive reinvestment” strategy and sell its Busch Gardens Parks, potentially to Cedar Fair FUN,

https://www.youtube.com/watch?v=-K7fCQlUhj0
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08/11/16 at 06:30pm in MarketWatch & their opinion on SeaWorld's future (Latest Edit: 08/11/16 at 06:37pm by Eric.)
Post: #3
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Busch Gardens in six flags or cedar fairs hands, no way.

Rollercoaster?,oh, you must be talking about our festa landscaping project!
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Post: #4
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well Kd and BGW would not coexist as sister parks and six flags would kill the park's image, sooooo no. That said seaworld is already making great strides in orlando. I think that Seaworld has the best coasters in Fl. Add a few more and the numbers should support the quality. I have faith in SWO yet.

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08/16/16 at 01:43pm in MarketWatch & their opinion on SeaWorld's future (Latest Edit: 08/17/16 at 08:00am by acrossdapark.)
Post: #5
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According to SEAS own annual report Busch Gardens name itself is still owned by AB and used under a royalty-free agreement and SEAS has right of first refusal should AB ever decide to sell/transfer the name.

Also SEAS in their annual report makes great care to detail and lay out what BGW/BGT means to the company and branding and how it could adversely effect SEAS should the agreement be voided, changed, etc.

I doubt SEAS could suffer the loss of BG in a whole, Seaworld parks are declining in attendance yet Aquatica and WC seem to do well as is Tampa. Wmbg is off about 244k based on their half-year reports due to weather but that will pick up during HOS. In the end they need BG to survive and stay at $1.3B.

Almost sounds to me this guy who works as and analyst for Credit Suisse is trying to push some activist investors like a Starboard or similar investment house to push for leadership and company changes but thats just my guess.
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Post: #6
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Very good analysis, and I do agree that there has been recent activism among investors. Whether they want to convince voting in leadership changes in their favor, or suggesting a completely different investment plan for the better, selling your two biggest assets (under an AB trademark agreement that would end in legal shambles) is not recommendable.

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Post: #7
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(08/16/16 03:45pm)CoasterJon18 Wrote:  Very good analysis, and I do agree that there has been recent activism among investors. Whether they want to convince voting in leadership changes in their favor, or suggesting a completely different investment plan for the better, selling your two biggest assets (under an AB trademark agreement that would end in legal shambles) is not recommendable.

Agreed. While I have no knowledge of the legalities other then what is stated in their annual reports. It would be curious as to how such an agreement and/or arrangement would work should SEAS forgo the Busch parks and try and sell them. Who knows if AB would extend such an offer to another buyer.

Highly debatable considering they need capital for their acquisitions of SABMiller (MillerCoors in the US).
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08/17/16 at 09:38am in MarketWatch & their opinion on SeaWorld's future (Latest Edit: 08/17/16 at 09:39am by Shane.)
Post: #8
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I think it just goes to show that this guy doesn't know what he is talking about if he thinks the chain should buy 25 roller coasters within the span of a season or two (or three). That is unsustainable and hasn't been done in the industry since the late 90s when SixFlags lost their damned minds. If I recall correctly SixFlags America added four coasters in the span of two seasons? He is ludicrous.

Waking up fresh every mornin'; Openin' up for you; Waitin' for your laughter; With so much new to do! Busch—Gardens! Busch—Gardens! Come to Busch Gardens and come to life! Come to Busch Gardens and come—to life!
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08/17/16 at 10:59am in MarketWatch & their opinion on SeaWorld's future (Latest Edit: 08/17/16 at 10:59am by CoasterJon18.)
Post: #9
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(08/17/16 09:38am)Shane Wrote:  I think it just goes to show that this guy doesn't know what he is talking about if he thinks the chain should buy 25 roller coasters within the span of a season or two (or three). That is unsustainable and hasn't been done in the industry since the late 90s when SixFlags lost their damned minds. If I recall correctly SixFlags America added four coasters in the span of two seasons? He is ludicrous.

Didn't Six Flags file bankruptcy in the early 00's?

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Post: #10
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(08/17/16 10:59am)CoasterJon18 Wrote:  Six Flags file bankruptcy in the early 00's?
Correct!

Back in the late 90's Six Flags bought a lot of attractions for the parks. For example, in 1999 SFGADV had a "War on Lines" in which they dumped 42 million into that park alone. This brought 25 new rides including Medusa. The same year SFOG opened at brand new B&M stand up Georgia Scorcher. Hurricane Harbor also opens up at SFSL in 1999. Six Flags also re-branded Six Flags Holland (Walibi Holland), Six Flags Ohio (Geauga Lake), and SFNE. But, Six Flags is all about more flags more fun so they buy Warner Bros. Movie World in Germany, Reino Adventura (Six Flags Mexico), Splashdown in Houston, and White Water in Georgia.

This all happened in one year. Years later after all this crazy spending Six Flags would sell off Darien Lake, Elitch Gardens, Frontier City, Splashdown, and Wild Waves which were all sold in 2007. Warner Bros Movie World in 2004,Geuga Lake was sold in 2004, and Walibi Holland was sold in 2006.

In 2009 early June Six Flags filed for bankruptcy.

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Post: #11
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Dont forget the horrid little park outside Seattle. I still have nightmares about that place.

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Post: #12
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(08/17/16 10:59am)CoasterJon18 Wrote:  Didn't Six Flags file bankruptcy in the early 00's?

That's why I said "when SixFlags lost their damned minds..."

Waking up fresh every mornin'; Openin' up for you; Waitin' for your laughter; With so much new to do! Busch—Gardens! Busch—Gardens! Come to Busch Gardens and come to life! Come to Busch Gardens and come—to life!
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Post: #13
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Why SeaWorld's Stock Could Stop Sinking


Fortune Wrote:If the tide doesn’t turn, there’s always real estate.

Earlier this year, SeaWorld Parks & Entertainment took the bold step of blowing up its business model. It announced on March 17 that it would soon end its iconic Shamu shows and the breeding of killer whales altogether. At the time, investors and the general public cheered the move; the stock SEAS 1.85% shot up 9.5% that day in mid-March.

SeaWorld management was heartened by the reaction. It appeared they had at last removed what CEO Joel Manby called their “blocking” issue: A virulent controversy over their treatment of orcas that had generated plenty of negative publicity and weighed on the company’s performance in recent years. (For the full story of SeaWorld’s battle to recover from the controversy, read Fortune’s feature, “The Love-Peddling Showman Saving SeaWorld From Itself.”)Finally, the path seemed clear for the turnaround strategy Manby had publicly mapped out at the company’s Investor Day in November 2015. His plan is to infuse the company’s parks with mom- and millennial-pleasing “purpose”; to make them more about animal conservation than animal entertainment; and to make them more educational (with more naturalistic animal displays and lessons about creatures in the wild), but also more fun (with more rides). Manby also has a broader vision for the company, which includes launching international locations, resorts, and a global animal rescue organization.

Manby has said it will take time to get the beleaguered theme park company back on track, but it’s unlikely he realized how briefly the post-announcement bump would last. The news since SeaWorld’s splashy March rebranding has been surprisingly bad. The stock has plunged 30%, and attendance numbers and revenues for the first half of the year were down from already-disappointing 2015 levels, largely due to weak attendance at its Orlando park. Given the revenue decline, analysts have flagged the risk of the company tripping its debt covenant, which would require SeaWorld to borrow more money in order to afford its fat dividend.

Many investors think Manby’s strategy is solid and see promise in an environmentally oriented theme park—one investor even speculated to me that such destinations will be more appealing to Millennial parents than princess-themed amusement parks in the not too distant future. However, there’s a real question whether he can work quickly enough to turn things around and compete in an industry that adds wildly popular attractions like Universal Orlando’s Harry Potter attraction or Disney World’s’s recently opened Frozen Ever After ride each year.

Ben Chaiken, a Credit Suisse analyst who has been bearish on SeaWorld’s prospects, argues the company will likely have to cut its dividend to keep up. In an August research note, he suggested the $1.4 billion company’s annual payout to investors would be better spent on new attractions; that sum, approximately $80 million, could fund two or three new roller coasters.

But, even if Manby struggles with his turnaround plan, analysts and investors point out there’s lots of value there. The company owns 11 parks, only three of which are branded SeaWorld (they account for roughly 60% of attendance, says FBR Capital analyst Barton Crockett). The others include Busch Gardens, Sesame Place, and an assortment of water parks. Those brands remain attractive, as does all the prime real estate that SeaWorld’s parks are situated on. Crockett, who is bullish on SeaWorld, notes that even if things get much worse, the company has a portfolio of properties that, in its IPO filings, was valued at $5 billion; that’s more than two times the current value of its market cap and debt.
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Post: #14
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It looks like there is some truth to some of the accounting and investing information posted. After reading these I checked the SEC website to see if anything interesting was posted by the company and found the below info they filed on 9/19.

"On September 19, 2016, SeaWorld Entertainment, Inc. (the “Company”) issued a press release announcing that its Board of Directors (the “Board”) declared a cash dividend of $0.10 per share of common stock, payable on October 7, 2016 to shareholders of record at the close of business on September 29, 2016. This cash dividend was reduced from the Company’s previous quarterly dividend declarations of $0.21 per share of common stock. The Board also decided to suspend the Company’s quarterly dividend subsequent to this dividend declaration. Future dividends, if any, and the timing of declaration of any such dividends, will be at the discretion of the Board and will depend upon, among other things, the Company’s financial condition, capital needs, covenants, economic conditions and other factors that the Board may deem relevant.

In addition, the press release stated that the Company expects to redeploy this additional capital to shareholders by opportunistically repurchasing the Company’s shares in the open market during the remainder of 2016. A copy of the press release issued by the Company relating to these announcements is furnished as Exhibit 99.1 to this Current Report on Form 8-K."

It looks like with the second statement that they really want to boost the stock price with the repurchase program.
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09/21/16 at 12:49pm in MarketWatch & their opinion on SeaWorld's future (Latest Edit: 09/21/16 at 12:49pm by acrossdapark.)
Post: #15
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(09/21/16 08:43am)Alf33 Wrote:  It looks like there is some truth to some of the accounting and investing information posted.  After reading these I checked the SEC website to see if anything interesting was posted by the company and found the below info they filed on 9/19.

"On September 19, 2016, SeaWorld Entertainment, Inc. (the “Company”) issued a press release announcing that its Board of Directors (the “Board”) declared a cash dividend of $0.10 per share of common stock, payable on October 7, 2016 to shareholders of record at the close of business on September 29, 2016. This cash dividend was reduced from the Company’s previous quarterly dividend declarations of $0.21 per share of common stock. The Board also decided to suspend the Company’s quarterly dividend subsequent to this dividend declaration. Future dividends, if any, and the timing of declaration of any such dividends, will be at the discretion of the Board and will depend upon, among other things, the Company’s financial condition, capital needs, covenants, economic conditions and other factors that the Board may deem relevant.

In addition, the press release stated that the Company expects to redeploy this additional capital to shareholders by opportunistically repurchasing the Company’s shares in the open market during the remainder of 2016. A copy of the press release issued by the Company relating to these announcements is furnished as Exhibit 99.1 to this Current Report on Form 8-K."

It looks like with the second statement that they really want to boost the stock price with the repurchase program.

The biggest thing to note here is the reduction of the dividend. If the article is correct in the $1.4B/yr cash dividends they are now saving $700M+ yearly provided there isn't a run to purchase more stock.

This helps the company in two ways it's bottom end and cash start adding up which look good on the reports and two gives them as the article states needed cash for reinvestment without having to look at much financing to accelerate transformations at SEAS and other parks thus potentially having the end result of more visitors, more spent per person in the parks and stock prices that reflect.
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