Village Roadshow’s Strategic Spark for Share price: Reopening of Theme Parks

  • Jul 01, 2020 AEST
  • Team Kalkine
Village Roadshow’s Strategic Spark for Share price: Reopening of Theme Parks

Summary

  • With Queensland Government’s go-ahead on opening up outdoor amusement parks, zoos and arcades, Village Roadshow’s Gold Coast theme parks can be reopened with up to 50% capacity, based on COVID Safe plans approved by government.
  • VRL is in talks with its existing bank syndicate and Queensland Government to strengthen its liquidity position to facilitate reopening of its Gold Coast theme parks and cinema circuit and to retain employees and maintain and go forward with vital capital expenditure projects.
  • The last five-year performance of VRL showcased share prices decreasing by 64.70% with COVID-19 further denting its performance. However, with BGH deal in hand, and the gradual reopening of theme parks, there is a possibility that VRL’s business performance may experience an uptick.

The Queensland Government has allowed opening up outdoor amusement parks, zoos, and arcades from 10th July with a maximum of 100 people.

While the news was welcomed by theme park investors, the operational and financial viability of running a theme park with 100 people does not seem to be feasible. 

To achieve operational excellence along with implementing COVID-19 safety, Village Roadshow Limited (ASX:VRL) has tied up with Ardent Leisure Group Limited (ASX:ALG) to develop industry specific COVID Safe plans that would enable entry to more guests without compromising on safety.

Since the closing of theme parks to adhere to COVID-19 restrictions, the Queensland Government has pledged millions of dollars funding to assist VRL along with other theme operators including Ardent Leisure and Currumbin Wildlife Sanctuary.

Business update

Opening of theme parks

According  to Village Roadshow, its Gold Coast theme parks (Warner Bros. Movie World, Sea World, Wet'n'Wild and Paradise Country) can be reopened up to 50% capacity, based on COVID  Safe plans approved by the Queensland Government. Company’s Sea World and Paradise Country were announced to reopen on 26 June. Australian Outback Spectacular on 3 July and Warner Bros. Movie World and Wet'n'Wild on 15 July.     

Funding

VRL intends to increase its debt financing facilities and is in talks with its existing bank syndicate and the Queensland Government.  The increased debt facility is expected to give the company, liquidity to proceed with reopening of its Gold Coast theme parks and cinema circuit. Fund from Queensland government will be used to operate VRL’s theme parks in Queensland including retaining employees along with upkeep and go forward with vital capital expenditure projects.

The Company reiterated on its previous announcement on having no near-term debt maturities in its group debt facility and has further informed that they have received confirmation from its lenders as not to apply financial covenants as at 30 June 2020.

Effect on share price on reopening announcement

Upon receiving a positive announcement on Government’s approval on reopening of theme park on 23 June 2020, share price of VRL increased by 3.74%. However, share price fell back by 2.70% at A$2.16 on 24 June 2020 when the company announced that it will operating on a limited capacity of 50% and that the Company is seeking more funding to facilitate the reopening of its theme parks and further maintaining the same or for capital expenditure projects.  

On 30 June, VRL closed the trading session at A$2.150, down by 1.376 from its last close. Though, on 1 July 2020, the stock was trading at A$2.200, rising by 2.326% (at AEST 11:40 AM).

Source: ASX

Source: ASX

Ongoing business deal – takeover by BGH Capital

On 16 June 2020, the Company announced that the exclusivity period for its discussion with BGH Capital Pty Ltd was extended by two weeks, with a further two week extension if the parties continue to actively pursue the potential transaction.

On 18 May 2020, Village Roadshow Limited announced receiving a revised, non-binding proposal from BGH Capital who intends to acquire all shares of VRL A$2.40 each share in an arrangement comprising-

  • Base offer price of A$2.20 per share.
  • Additional offer price of A$0.12 per share on the day when Warner Bros. Movie World and Sea World restarted for the people three business days before the day VRL shareholders were to come together and vote on the privatisation deal.
  • It includes another A$0.08 per share if most of the Cinemas business locations have reopened to the public three business days before the day VRL shareholders come together and vote on the privatisation deal.

BGH Capital and VRL signed a Transaction Process Deed giving BGH Capital a chance to commence confirmatory due diligence and discuss transaction documents over four weeks on an exclusive basis.

The offer price of A$2.20 per share and A$2.40 per share represented a 25-36% premium to the closing price of A$1.765 dated 15 May 2020. The VRL stock closed at A$2.13 on 18 May 2020, up by 20.68% from A$1.765 dated 15 May 2020.

Also Read: Village Roadshow & BGH – How are the share prices moving with Takeover Updates?

Impact of COVID-19

In the last week of March 2020, VRL had to close down its Gold Coast theme parks, Australian Outback Spectacular Topgolf and its Film Studios as a response to COVID-19 restrictions. Other businesses, which contribute minimally to the Group’s revenue, such as its company Roadshow Distribution and Marketing Solutions is also not at par due to the pandemic.

VRL is striving hard to reduce its operational expenses and defer nonessential expenses including lay-offs and salary cuts till 30 June 2020 to bring more stability and increase liquidity in the Company.  VRL is also deferring large capital expenses projects pertaining to its Cinema Exhibition segment.

Bottomline

Village Roadshow’s last five-year performance showcased share prices decreasing by 64.70%. COVID-19 impact has further dented the Company’s performance. Nevertheless, with BGH deal in hand and the gradual reopening of theme parks, there is a possibility that VRL’s business performance may experience an uptick.

Source: ASX

Source: ASX

 


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