10-Aug-2017
DXB Entertainments - 2Q17 conference call takeaways
Rating: Neutral
Target Price: AED0.73
Closing Price: AED0.81
Management of DXB Entertainment hosted a conference call to discuss 2Q17 results and outlook. The call was conducted by newly-appointed CEO Mohamed Almulla and CFO John Ireland. To access the company’s presentation, please click here.
Restructuring ongoing led by new senior management team
The new management team is reviewing existing assumptions and setting a new plan. The new structure will entail three main segments: i) theme parks; ii) family entertainment centres (include Meraas assets); and iii) retail and hospitality (includes Lapita, Riverland and Meraas’s Roxy). New hires have been made for a number of positions, including a GM for the theme parks, a GM for retail and hospitality, and a VP for marketing. Pending roles include a GM for the family entertainment centres, which management aims to fill shortly. Management has stressed that management fees generated from managing the Meraas assets will be minimal, and the focus will be to create value from potential synergies and cross marketing and sales.
More light on the quarter’s trends; 2Q17 cost base to likely continue
72% of revenue came from theme parks (AED86.5mn), 10% from hospitality, 7% from retail, while the remaining 11% from other sources. Out of the total theme park revenue, 63% was from admissions, 32% was from in-park spend, and 5% from other sources. As for the number of visits in 2Q17 that came in at 414,454 visits; 38% were from walk-ins, 31% online and call centre and 14% from tour operators (in line with 1Q17 breakdown), with 70% of the visits made by locals and 30% from visitors from international markets. The sequential drop in revenue from retail revenue (AED8mn vs. AED14mn in 1Q17) was attributed to lower lease rates applied during the summer months. On the cost side, management indicated that the cost base in 2Q17 will likely continue, with the planned 20% cost reduction mostly completed. On the balance sheet, the drawdown of AED4.2bn phase I facility has been concluded, with repayments scheduled for Sep-17. The drawdown timings of phase II (AED1bn), which will be largely related to the capex plan starting 2018, is currently under study by management.
Increased focus on sales and marketing in the short term
This will be with the purpose of: i) driving footfall and number of visits by targeting the resident market (including GCC nationals), which are expected to drive the number of visits in 4Q17-2018; ii) simplify and maintain consistent pricing strategy, with the purpose of encouraging multiple visitation and increase footfall numbers (management is inclined to introduce a number of price sets as a benchmark to limit price confusion (for example: one for the winter, another for summer and a third one for holidays); and iii) activate core markets through B2B channels. Internationally, management has identified growing tourism markets, namely China, Russia, the UK, and Germany as an area of focus for marketing efforts. Management had refrained from giving an update to the expected number of visits for 2017, but reiterated their earlier view that 4Q17 is expected to carry improved visit numbers, with support coming from seasonality.
Mai Attia
Sara Boutros
Target Price: AED0.73
Closing Price: AED0.81
Management of DXB Entertainment hosted a conference call to discuss 2Q17 results and outlook. The call was conducted by newly-appointed CEO Mohamed Almulla and CFO John Ireland. To access the company’s presentation, please click here.
Restructuring ongoing led by new senior management team
The new management team is reviewing existing assumptions and setting a new plan. The new structure will entail three main segments: i) theme parks; ii) family entertainment centres (include Meraas assets); and iii) retail and hospitality (includes Lapita, Riverland and Meraas’s Roxy). New hires have been made for a number of positions, including a GM for the theme parks, a GM for retail and hospitality, and a VP for marketing. Pending roles include a GM for the family entertainment centres, which management aims to fill shortly. Management has stressed that management fees generated from managing the Meraas assets will be minimal, and the focus will be to create value from potential synergies and cross marketing and sales.
More light on the quarter’s trends; 2Q17 cost base to likely continue
72% of revenue came from theme parks (AED86.5mn), 10% from hospitality, 7% from retail, while the remaining 11% from other sources. Out of the total theme park revenue, 63% was from admissions, 32% was from in-park spend, and 5% from other sources. As for the number of visits in 2Q17 that came in at 414,454 visits; 38% were from walk-ins, 31% online and call centre and 14% from tour operators (in line with 1Q17 breakdown), with 70% of the visits made by locals and 30% from visitors from international markets. The sequential drop in revenue from retail revenue (AED8mn vs. AED14mn in 1Q17) was attributed to lower lease rates applied during the summer months. On the cost side, management indicated that the cost base in 2Q17 will likely continue, with the planned 20% cost reduction mostly completed. On the balance sheet, the drawdown of AED4.2bn phase I facility has been concluded, with repayments scheduled for Sep-17. The drawdown timings of phase II (AED1bn), which will be largely related to the capex plan starting 2018, is currently under study by management.
Increased focus on sales and marketing in the short term
This will be with the purpose of: i) driving footfall and number of visits by targeting the resident market (including GCC nationals), which are expected to drive the number of visits in 4Q17-2018; ii) simplify and maintain consistent pricing strategy, with the purpose of encouraging multiple visitation and increase footfall numbers (management is inclined to introduce a number of price sets as a benchmark to limit price confusion (for example: one for the winter, another for summer and a third one for holidays); and iii) activate core markets through B2B channels. Internationally, management has identified growing tourism markets, namely China, Russia, the UK, and Germany as an area of focus for marketing efforts. Management had refrained from giving an update to the expected number of visits for 2017, but reiterated their earlier view that 4Q17 is expected to carry improved visit numbers, with support coming from seasonality.
Mai Attia
Sara Boutros