Is a battle brewing for control of Dreamworld theme park owner?

[New display name]

A battle is brewing for control of Dreamworld theme park owner Ardent Leisure with activist investor David Kingston requisitioning the company’s share register to drum up discontent over what he claims is poor performance by management.  

Mr Kingston has written to Ardent shareholders demanding that the company return its $141 million of idle cash via a buyback to support its ailing stock price, or alternatively, a straight capital return. He also wants Ardent to actively pursue merger and acquisition options, or a sale of key assets including its land.

 

Ardent issued a profit upgrade on July 10, which Mr Kingston said happened after he requisitioned the share register.

In that update, Ardent said it would deliver its best performance since financial year 2016, when four people were killed on one of the key attractions at Dreamworld. Earnings before interest, tax, depreciation and amortisation excluding one-offs would roughly be at breakeven for the full year.

But Mr Kingston said the visitation was only 1.2 million visitors in financial year 2023 – half the visitors recorded in 2016. “In financial year 2016, Ardent’s theme parks were successful with attendances of 2.4 million visitors, which provided the necessary revenue to deliver EBITDA of $35 million,” he said.

“For a relatively high fixed cost business, the failure to recover anywhere near financial year 2016 attendance levels is a major problem.”

Mr Kingston said Ardent’s $230 million market capitalisation implied its parks and surplus land are valued at only $57 million, after deducting the $141 million in cash and a $32 million valuation on its Skypoint Tower, and adding back the $50 million in capital expenditure management have committed to putting into the business.

He said the current management team had failed to deliver on promises made to turn the company around when they took over in 2017.

“Six years later, that cited opportunity has failed to materialise by a massive margin – maybe the chairman’s 2017 plan itself comes from a ‘dream world’,” Mr Kingston said.

Ardent hit back, saying Mr Kingston and Charles Kingston’s K Capital own less than half a per cent of its shares, many of which were accumulated over the past month. It will continue to assess options to return capital to shareholders, as well as work with the Queensland government on park development opportunities.

 

Ardent chief executive Greg Yong said there was no need to rush any M&A ahead of securing the approvals.

“Our view is that’s the first step in us unlocking that value. We want to do that as expeditiously as we can, but we’re not in a hurry to rush out and sell off land. The land is not getting any less valuable in this part of the world,” Mr Yong said.

In his letter, Mr Kingston compares Dreamworld’s performance with that of Movie World and Sea World owner Village Roadshow, which was acquired by private equity outfit BGH Capital in 2020 and subsequently delisted. Parts of the land on which the Village parks sit were sold and leased back to unlock value for investors.

“[It is] bizarre that in the second half of 2023, Ardent delivered zero EBITDA, which is burning cash post-maintenance capex and head office costs, when its peer Village Roadshow parks is performing strongly,” Mr Kingston said.

But Mr Yong, who previously worked at Village, said it was difficult to substantiate any comparison to the now-unlisted competitor, which has not published accounts.

Mr Kingston emphasised his role in having helped to broker BGH’s acquisition of Village Roadshow, saying other private equity outfits including Blackstone and Pacific Equity Partners saw value in the theme parks sector.

Former Village Roadshow executive John Kirby is also on the Ardent register. Mr Kirby sold some of his holding in Village Roadshow after its acquisition, and has not been a part of its operations since he was sidelined when his nephew Clark Kirby took up the role as chief executive after a bitter family feud in 2019.

(Ayesha de Kretser Financial Review)

 

Is the the start of the end for Ardent Leisure?

[Guest 239]

35 minutes ago, New display name said:

Is the the start of the end for Ardent Leisure?

No. Sounds like somebody with very little knowledge of how theme parks operate looking to get rich quick by drumming up discontent against Ardent. Fairly standard stuff for the stock market.

[DaptoFunlandGuy]

Yes it all seems quite baseless. 

This has all been discussed before - recovery was botched, they made changes, the park is now showing positive growth, albeit not yet at pre-incident levels for the aforementioned reasons.

Comparing to Village is the biggest stumble though - it's hard to compare apples when Village is delisted, but the beat up may just serve to make someone some money. Noteworthy this guy bought most of his stake in the company in the past month or so - he's just stirring the pot.

[New display name]

I'm just upset that I never got a letter from Mr Kingston.

 

13 minutes ago, DaptoFunlandGuy said:

Noteworthy this guy bought most of his stake in the company in the past month or so - he's just stirring the pot.

That tells me he is looking for a quick return.