Above, an artist’s concept of Six Flags Dubai theme park. Courtesy Dubai Parks and Resorts
Dubai Parks and Resorts on Sunday started work on the construction of its Six Flags theme park.
The company said a ground-breaking ceremony was held to mark the second phase of the development of Dubai Parks and Resorts and what will be the fourth theme park on the site. The other three – a Motiongate, a Legoland Dubai and a Bollywood Parks Dubai – are due to open in October, while Six Flags is set to open in late 2019.
The Six Flags park will contain 27 rides across six themed zones: Thrillseeker Plaza, Magic Mountain, Fiesta Texas, Great Escape, Great Adventure, and Great America. It will cost Dh2.6 billion to build – Dh1.68bn of which was raised through a rights issue in May.
Raed Kajoor Al Nuaimi, the chief executive of Dubai Parks and Resorts, said: “We are delighted to announce that construction has commenced on the region’s first Six Flags branded theme park.
“This is the fourth theme park at our destination and it will help us strengthen the appeal of Dubai Parks and Resorts as a must-visit destination in the region.”
Dubai Parks and Resorts’ shares have climbed by 46 per cent so far this year, far outweighing the 5 per cent average gain for the Dubai Financial Market.
Ayub Ansari, senior analyst with Bahrain-based Securities and Investment Company, said that at its current level of Dh1.57 per share, or a market capitalisation of Dh12.6bn, the company is overvalued.
“It’s a great project – no doubt about it. It’s something that the region requires. It’s just that the valuation doesn’t justify [the current share price],” he said.
Its management is currently forecasting 6.7 million visits within its first full year of operation. However, Mr Ansari said that even if it achieved a best-case scenario of 10 million visits it would only achieve revenue of Dh3.5bn.
“That’s the best case. My current estimate is Dh2.4bn. Even if I look at the best case and extend our valuations to 2021 when the existing parks will operate at full capacity and Six Flags will be online … Even on that we are looking at an implied price-to-earnings of 14x, which is rich.
“To put that in perspective, a company like Disney trades at a P/E of around 17x. But that’s a company that has not just theme parks. In fact, theme parks is its least profitable business segment.”
Mr Ansari believes that investors are pricing in the possibility of further development on the site.
“The market is looking too much into the future,” he said. “Let the existing project come on line first before we talk about expansion. I think that right now it is very expensive.”
He has set a target price of Dh1.25 on the company’s stock. The shares closed 0.6 per cent higher at Dh1.57 on Sunday.
Last week, Dubai Parks & Resorts confirmed that it had created an exception to its GCC-wide exclusivity deal with US-based Six Flags Resorts to allow for the potential development of a Six Flags-branded resort in Saudi Arabia. It said the exception applied only to the Saudi Arabian government.