SEAS

1. SeaWorld Entertainment (SEAS)
Blackfish Scared Investors, but Not Customers
LONG, TP $28 (+40%)
RESEARCH TEAM
Parker Kim, Senior Director
Vishal Bhat, Senior Analyst
Nancy Liu, Junior Analyst
Patches Chen, Junior Analyst
Nathan Kim, Analyst
Austin Partridge, Analyst

2. Table of Contents

3. Investment Thesis

4. Investment Thesis
The “Blackfish” Expose Has Scared off Investors…
-40%
TP $28
LTM Stock Price Chart for SEAS

5. Investment Thesis
…but not Theme Park Customers
BlackfishRelease
-1%
-13%
+0.3%
-5.2%
-2.2%
Park attendance has taken a
hit, but nowhere close to the
40% drop that’s priced in
SeaWorld Quarterly Attendance (000s)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014

6. Investment Thesis
Airline Ticket Sales Show Customers Are Loving Cheap Oil
Oilplummets
+14%
+8%
+2%
Cheap plane tickets mean
everyone booking a vacation
US Airline Ticket Sales ($mns)

7. Company Overview

8. Company Overview
The King of the Sea
Annual Revenue
Spending per Person
AdmissionsIn-Park
Over 22.4 million
guests visited SEAS
parks last year,
including 3.6 million
international visitors

9. Company Overview
Since its 2013 IPO and Blackfish, SEAS Has Been Improving
SEAS IPO’d from Blackstone
ownership in 2013 at $27 per share
$250mn (13% of
market cap)
authorization to
buyback SEAS shares
while price is low
Share Buyback Cost Restructuring Long Term Projects Brand Improvement
$50mn cost cutting
effort targeting 300
jobs with funds to be
deployed into
marketing and
advertising to capture
benefits of current low
oil prices
SEAS spends ~$110mn
per year on
advertising and
marketing before this
year’s cost-cutting
funded increase
$300mn is being spent
on updates to the
killer whale exhibits in
the 3 Seaworld parks,
designed to encourage
previous visitors to
come back

10. Industry Overview

11. Industry Overview
Snapshot of the Water Park and Theme Park Industry
The United States has the largest
theme park market in the world:
Theme parks are an attractive
investment sector:
5 of the 10
largest theme parks
11 of the 25
most visited theme parks
$15.4bnin US theme park revenue
stable cash flow
allows safe leverage
Strong consumer
value proposition
Relative to other service
based out-of-home
entertainment

12. Industry Overview
Competitor Analysis Shows SEAS Success and Growth
Six Flags
8.2%
Universal
9.5%
Disney
14.1%
Other
39.5%
Seaworld
28.7%
Water Park Market Share
Water Park Revenues by Company ($mns)
SEAS
DIS
UNI
SIX
Theme Park Attendance (mns of visitors)
SEAS
DIS
UNI
SIX
FUN

13. Industry Overview
Analysis of Competitive Factors Shows Opportunity
Indirect Competition
Competition Basis
Direct Competition
Seaworld Strengths
Competes with other forms of recreation and
entertainment: movies, at-home-entertainment,
sports, attractions, vacation travel
1
2
3
Location, ease of travel access
Price: admissions and bundles
Quality: rides, creativity, cleanliness
a
b
c
Brand recognition
Zoological collection as differentiator
Strong variety in rides and attractions

14. Financial Overview

15. Financial Overview
Relative Valuation Constrained by Small Peer Universe
The relative valuation is constrained by the small number
of publicly-traded theme parks, and the lack of publicly-
traded water parks.
Company Ticker EBITDA margins EBITDA/Attendee Attendance (mns) EV/EBITDA P/E
Six Flags SIX 29% $13.3 24.9 16.9x 63.9x
Cedar Park FUN 29% $14.2 22.9 13.9x 31.2x
Merlin Entertainment MERL 33% $6.9 45.8 12.4x 24.1x
Seaworld SEAS 25% $15.0 23.2 10.0x 34.7x
Median 29% $13.3 24.9 13.9x 31.2x
Average 30% $11.5 31.2 14.4x 39.7x
Outperform/Underperform UNDERPERFORM OUTPERFORM UNDERPERFORM OUTPERFORM MIXED
Target Price (Median) $36.99 $17.44
Target Price (Average) $38.80 $22.22

16. Financial Overview
Historical Valuation Gives a More Accurate Multiple
Blackfish
Pre-Blackfish Average:
10.4x
Current:
8.8x
Historical EV/EBITDA Multiple (2013-2015) Historical P/E Multiple (2013-2015)
Blackfish
Pre-Blackfish Median:
48.4x
Current:
31.1x
Average
Median
Resulting Target Price: Resulting Target Price:
$23.41 (+17%) $27.09 (+36%)

17. Financial Overview
Summary of Valuation Methods and Target Price
Summary of Valuation Results
Current Price: $20
+94%
+85%
+35%
+17%
+11%
-13%
Average TP
$28
(+40%)

18. Considerations

19. Considerations
Competitors are a Primary Risk Factor for SEAS
$147 $147 $105 $85
The $100 psychological barrier of many Orlando theme
parks should reduce their ability to compete with
Seaworld, the only remaining sub-$100 theme park

20. Considerations
High Leverage is Not a Concern Due to Strong Cash Flow
Capital Structure
Equity
580mn
Debt
1.56bn
Operating
Cash Flow
$260mn
Interest
$29mn
CFO vs. Interest Comparable Balance Sheet Health
D/E
Interest Coverage
Seaworld has relatively
low debt compared to
other theme parks and
has industry-leading
ability to meet its interest
payments

21. Investment Thesis
The “Blackfish” Expose Has Scared off Investors…
-40%
TP $28
LTM Stock Price Chart for SEAS

22. Investment Thesis
…but not Theme Park Customers
BlackfishRelease
-1%
-13%
+0.3%
-5.2%
-2.2%
Park attendance has taken a
hit, but nowhere close to the
40% drop that’s priced in
SeaWorld Quarterly Attendance (000s)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014

23. Investment Thesis
Airline Ticket Sales Show Customers Are Loving Cheap Oil
Oilplummets
+14%
+8%
+2%
Cheap plane tickets mean
everyone booking a vacation
US Airline Ticket Sales ($mns)

24. SeaWorld Entertainment (SEAS)
Blackfish Scared Investors, but Not Customers
LONG, TP $28 (+40%)
RESEARCH TEAM
Parker Kim, Senior Director
Vishal Bhat, Senior Analyst
Nancy Liu, Junior Analyst
Patches Chen, Junior Analyst
Nathan Kim, Analyst
Austin Partridge, Analyst

25. DO NOT WRITE OVER, TEMPLATE SLIDE
DON’T EVEN THINK ABOUT IT MISTER