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07-Nov-2018

DXBE 3Q18: Footfall up just 5% Y-o-Y; bottom-line pressured by financing costs, despite improved cost controls

DXBE 3Q18: FNumber of visits – 501,394 (+4.7% Y-o-Y, -18% Q-o-Q)
Revenue – AED103mn (-11% Y-o-Y, -11% Q-o-Q, -24% vs EFGe)
Net loss – AED271mn (3Q17: AED284mn, 2Q18: AED255mn, EFGe: AED194mn)
 
DXB Entertainment (DXBE) has announced its financial and operating results for 3Q18. The number of visits to the parks grew a meagre c5% Y-o-Y and fell 18% Q-o-Q on seasonality to 501,394 in 3Q18. This translated into further pressure on revenue, which shrank 11% Y-o-Y and Q-o-Q. EBITDA loss narrowed on improved cost controls; however, financing costs (+27% Y-o-Y) continued to weigh on the bottom-line. Net loss in 3Q18 was AED271mn, only slightly narrower than 3Q17’s AED284mn, and much wider than our estimate of AED194mn. 
 
Key highlights:
Number of visits grew by 4.7% Y-o-Y to 501,394 in 3Q18 (-18% Q-o-Q). August saw an increase in the number of visits due to Eid Holidays, while September saw a slowdown on the back of the school year start. The number of visits in 9M18 reached 1.96mn, up 33% Y-o-Y, with Tour and Travel operators contributing 18% of the total (international visitors 40%). Up to 34% of 9M18 visits comprised multi-park tickets, 35% single-park tickets and 26% annual passes. We forecast total visits of 3.5mn for 2018, which we think would be rather challenging given the number of visits YTD; yet we note that 4Q usually sees the strongest performance for the park, in terms of visitation.  
 
Lapita Hotel’s occupancy rate averaged 66% in 3Q18 (vs 46% in 2Q18, 42% in 3Q17). Average occupancy in 9M18 was 59%, compared with 30% in 9M17. 
 
Revenue fell 11% Y-o-Y and Q-o-Q to AED103mn in 3Q18 (-24% vs EFGe). Revenue was down only 3% Y-o-Y, when adjusted on like-for-like basis (excl. revenues from project management services in 2017), according to the company. Up to AED76mn of 3Q18’s revenue was generated through the theme parks, AED19mn through hospitality and AED5mn through retail. Up to 70% came from admissions and the rest through in-park spend. Revenue in 9M18 totalled AED392mn (-0.8% Y-o-Y). We estimate total revenue of AED856mn for 2018. 
 
Adjusted EBITDA loss narrowed to AED81mn in 3Q18 (vs AED105mn in 3Q17 and AED83mn in 2Q18), which management attributed to improved cost efficiency—G&A expenses were down 16% Y-o-Y and 2% Q-o-Q in 3Q18, and operating expenses continued to shrink sequentially, totalling AED176mn compared with AED188mn in 2Q18. EBITDA loss in 9M18 was AED173mn, compared with AE353mn in 3Q17. 
 
Net loss of AED271mn in 3Q18 (vs AED284mn in 3Q17, AED255mn in 2Q18, AED194mn in EFGe). Financing costs were up 27% Y-o-Y to AED84mn (flat Q-o-Q). Net loss for 9M18 totalled AED733mn, compared with AED862mn in 9M17. We forecast a net loss of AED940mn in 2018. 
 
DXBE Entertainments (DU): AED0.35 as of 6 Nov. 2018, Rating: Neutral, TP: AED0.60/share, MCap: USD785mn, DXBE UH/DXBE.DU
 
Mai Attia