A Look At Six Flags Entertainment (FUN) Valuation After Its $1b Debt Refinancing Transaction

Six Flags Entertainment (FUN) has simply priced and accomplished a US$1b providing of 8.625% senior notes due 2032, utilizing the proceeds to totally redeem senior notes maturing in 2027 and reshape its debt schedule.

See our newest evaluation for Six Flags Entertainment.

The refinancing information comes after a busy few months for Six Flags Entertainment, together with the grand opening of Six Flags Qiddiya City and choices round its Six Flags Over Texas stake. The 1 day share value return of 4.25% and 30 day share value return of 6.91% distinction with a 1 12 months complete shareholder return decline of 65.62%, as long run momentum has been weak.

If this type of refinancing story has you occupied with the place else capital and execution may matter most, it may very well be value sizing up quick rising shares with excessive insider possession as a beginning listing of concepts.

With the share value nonetheless nicely under the place it was a 12 months in the past and buying and selling at a big low cost to some analyst targets and intrinsic estimates, it’s important to ask: is that this a reset stage, or is the market already pricing in any restoration?

Most Popular Narrative: 38.9% Undervalued

With Six Flags Entertainment closing at US$15.94 and the narrative truthful worth at US$26.08 per share, the hole between value and thesis is vast sufficient to concentrate.

The Cedar Fair merger and rigorous price self-discipline are structurally reducing the fee base, enhancing margins, and accelerating debt discount via stronger free money circulate.

Read the whole narrative.

Want to see what’s baked into that truthful worth? The story leans closely on enhancing margins, sturdier free money circulate, and a future earnings profile that appears very completely different from at present.

The most generally adopted narrative makes use of a 12.5% low cost fee and assumes income, earnings and revenue margins all shift meaningfully over the following few years, which in flip helps a better future P/E a number of than at present. It is that this combine of upper profitability, completely different capital construction and a re rated earnings a number of that underpins the US$26.08 truthful worth estimate and the conclusion that the present share value implies a steep low cost.

Result: Fair Value of $26.08 (UNDERVALUED)

Have a learn of the narrative in full and perceive what’s behind the forecasts.

However, excessive leverage, with web debt of about US$5.3b, and climate pushed attendance volatility may shortly undermine the margin and money circulate enhancements this story assumes.

Find out about the important thing dangers to this Six Flags Entertainment narrative.

Build Your Own Six Flags Entertainment Narrative

If you take a look at the numbers and really feel the story ought to run in another way, or just need to check your personal assumptions, you’ll be able to construct a customized thesis in only a few minutes utilizing Do it your method.

A terrific start line on your Six Flags Entertainment analysis is our evaluation highlighting 3 key rewards and a pair of vital warning indicators that would influence your funding resolution.

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If you might be severe about placing your cash to work, don’t cease at one firm. Use the screener to identify contemporary concepts earlier than everybody else catches on.

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