Is SeaWorld Entertainment (SEAS) a Killer Whale of a Stock? SIX & FUN

SeaWorld Entertainment Inc (NYSE: SEAS) had its IPO earlier in the year to join other amusement park stocks like Six Flags Entertainment Corp (NYSE: SIX) and Cedar Fair, L.P. (NYSE: FUN) on the NYSE. Moreover, the SeaWorld Entertainment IPO has been a killer whale of a deal for the Blackstone Group (NYSE: BX), its biggest shareholder, but what about for ordinary investors?

What is SeaWorld Entertainment?

SeaWorld Entertainment's SeaWorld opened its gates for the first time in 1964 on 21 acres along the shore of Mission Bay in San Diego with an initial investment of $1.5 million, 45 employees, several dolphins, sea lions and two saltwater aquariums. Today, there are three SeaWorld parks in the US, including the original San Diego location plus parks in Orlando, FL and San Antonio, TX, plus Sesame Place was developed as the only theme park in American dedicated to Sesame Street with 55 acres containing more than 4-dozen rides, play areas, shows, distinctive experiences and events. 

SeaWorld Entertainment IPO Has Been GREAT for One Investor

The Wall Street Journal's MoneyBeat has two great posts (Blackstone Will Get $12 Million a Quarter From SeaWorld's Dividend and The Many Ways Blackstone Made Money on SeaWorld's IPO) about how the Blackstone Group has found multiple ways of fishing for money out of SeaWorld Entertainment. To begin with, the Blackstone Group sold 19.9 million SeaWorld shares at $27 apiece in the IPO and after accounting for underwriting fees, it saw proceeds of about $505 million.‬ However, the money from SeaWorld Entertainment did not stop flowing with the IPO because:

SeaWorld Entertainment used some of its own IPO proceeds to pay the Blackstone Group $47 million to end an agreement to pay for strategic advice. The Blackstone Group had paid $1.01 billion in cash and issued new debt to buy SeaWorld for $2.3 billion in 2009, plus the private equity group's credit arm took a $100 million slice of a $400 million note that pays 11% interest.‬ SeaWorld Entertainment will be using or has already used some of its IPO proceeds to pay down that note by $140 million. The Blackstone Group will or has already received $5.4 million for its pro rata share of accrued interest (basically, its getting an early payment penalty).  The Blackstone Group will or has already received around $2.1 million for its role as an IPO underwriter.

Finally, the Blackstone Group remaining 63% stake in SeaWorld Entertainment is worth well over $2 billion and will generate $12 million per quarter in dividends as the company has recently announced a 20-cent per-share quarterly dividend for a 2.10% dividend yield. 

Certainly, SeaWorld Entertainment has been a great deal for the Blackstone Group, but what about retail investors? With a trailing P/E of 38.84 and a forward P/E of 28.80, SeaWorld Entertainment doesn't exactly look undervalued right now. For comparison sake, Six Flags Entertainment Corp has a trailing P/E of 9.87 and a forward P/E of 25.01 (plus a dividend yield of 4.80%) while Cedar Fair, L.P. has trailing P/E of 40.77 and a forward P/E of 15.39 (plus a 5.90% dividend yield).

With that said and back in May, SeaWorld Entertainment reported that revenue rose from $212.4 million to $238.6 million year over year while admission revenue was up 14% to $152.4 million and food, merchandise and other revenue rose 9% to $86.2 million. More importantly, costs and expenses increased at a slower pace (rising 5% to $274.5 million) plus attendance rose 2% to 3.5 million. The quarterly net loss came in at $40.4 million verses $45.1 million, but SeaWorld Entertainment has been profitable for the past two years with net income of $77.44M (2012) and $19.11M (2011).

Share Performance: SeaWorld Entertainment vs. SIX and FUN

On Wednesday, SeaWorld Entertainment fell 1.06% to $38.30 (SEAS has a 52 week trading range of $30.26 to $39.65 a share) for a market cap of $3.55 billion plus the stock is up 14.3% since April according to Google Finance. Six Flags Entertainment Corp is up 20.8% since the start of the year, up 38% over the past year and up 294.2% since May 2010 while is up 29% since the start of the year, up 33.2% over the past year and up 149.2% over the past five years.

As you can see from the following chart, an improving economy seems to have helped Six Flags Entertainment Corp and Cedar Fair, L.P.:

Finally, here are the latest technical charts for all three stocks:

The Bottom Line. Again, SeaWorld Entertainment has definitely been a good deal for the Blackstone Group and for any investor who took the risk and got in around the IPO; but at its current valuation, new investors should probably remain as spectators.