'Positive signs' for Gold Coast Theme Parks

Deutsche Bank has reported on "positive signs" in the "competitive environment" of Gold Coast theme park operations.

According to a report in the International Business Times the two dominant theme park operators (Village Roadshow and Ardent Leisure) continue to push "value bundles", offering unlimited access passes that extend into the 2011/12 financial year.

While this partially reflects ongoing softness in the macro environment, for Village Roadshow (VRL), Deutsche notes the annual VIP pass for Warner Bros. MovieWorld, SeaWorld and Wet'n'Wild Water World remains on offer, but while existing customers can renew for $100 before 31st July, new customers will have to pay $110. The new card offering is only available until 31st October.

By contrast, Ardent Leisure has maintained its $69 pass for Dreamworld and White Water World but this pass is now only valid for three months, rather than six months as was the case this time last year. As Deutsche notes, this means the key September school holiday period is not included, as the pass expires on 16th September.

The International Business Times reports that Goldman Sachs expects Ardent will extend the offer until Christmas, but sees scope for a further rise in price for the ticket to $79. The increase by Village and the expected increase by Ardent represent the first price increases since discounting on the tickets began in 2009.

In Goldman Sachs's view this is a positive development for the industry and for earnings for Ardent, as on the broker's numbers a 1% increase in theme park ticket prices increases Ardent's 2011/12 financial year earnings by 0.4%.

Looking to the 2011/12 financial year, Goldman Sachs sees strong prospects for Ardent's theme park revenues given new attractions such as a family friendly roller coaster opening in July and a new thrill ride opening in September. These should boost summer attendances.

As well, Goldman Sachs notes the Queensland theme parks will be cycling relatively weak comparable numbers over December and January. This reflects the impact on operations of the floods and heavy rainfall in Queensland over the Christmas period last year.

Goldman Sachs estimates theme park revenues for Ardent will grow by around 4.5% in FY12, which should translate into an EBIT (earnings before interest and tax) increase of around 7%. Currently Goldman Sachs is forecasting earnings per share (EPS) for Ardent Leisure of 12.7c this year, rising to 13.7c in the 2011/12 financial year and 14.5c in the 2012/13 financial year.

Consensus EPS forecasts for Ardent according to the FNArena database stand at 13.2c and 15.2c for the 2011/12 and 2012/13 financial years. This suggests Goldman Sachs is somewhat conservative with its expectations, especially given Deutsche Bank is forecasting 2011/12 financial year returns for Ardent of 16.2c.

Broker views on the two companies remain positive, the FNArena database showing Sentiment Indicator readings of 0.8 for Ardent Leisure and 1.0 for Village Roadshow. Consensus price targets are also supportive, the target for Ardent of $1.59 and for Village Roadshow of $3.88 implying upside from current levels of better than 21% respectively.

Image: Warner Bros Movie World's Lethal Weapon - The Ride.