Gold Coast theme parks operators Ardent Leisure and Village Roadshow to see cash burn get worse before it gets better

Ardent Leisure and Village Roadshow’s plans to reopen their parks from later this month has provided a boost to investor sentiment. But Citi warns in a new report that big hurdles remain.

ARDENT Leisure and Village Roadshow’s plans to reopen their parks from later this month has provided a boost to investor sentiment.

But Citi warns in a new report that big hurdles remain including the NSW border closure and an expected increase in Ardent and Village’s cash burn due to the higher costs associated with restarting rides and attractions.

Village announced this week it will reopen its popular Sea World park plus Paradise Country on June 26 followed by Australian Outback Spectacular on July 3 with family favourites Movie World and Wet’n’Wild 12 days later on July 15.

Ardent on the same day said it would follow suit and open its SkyPoint Observation Deck and Climb on July 10.

No reopening date has been set for Dreamworld.

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However, it did not fix dates for reopening Dreamworld and WhiteWater World saying it needs more “clarity on the opening of the Queensland border, the lifting of other restrictions and the outcome of current discussions in relation to Federal and Queensland State Government funding”.

Both Ardent and Village have been under immense financial pressure due to the shutdown of their parks on March 23 due to the coronavirus pandemic.

Village has been burning through between $10 million to $15 million and Ardent $5 million to $10 million in cash each month.

Citi analyst Sam Teeger said in a report released earlier this week that while the reopening plans were good for sector sentiment they would not have a material impact on earnings in the short term.

Movie World is due to reopen on July 15.

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He said this was because of the closure of the NSW border in Queensland preventing interstate visitors coming and the lack of international tourists due to the ongoing ban on international travel.

Mr Teeger also said extending the validity of passes that expired during the shutdown would impact new pass purchases.

“However, over the medium term we see the Gold Coast theme parks to benefit from a resurgence in domestic tourism as international borders remain closed,” the report reads.

Mr Teeger said he “suspects” Ardent may be delaying its reopening announcement because of a lack of government funding.

The new $50 million rollercoaster for Dreamworld arrived and was unloaded before being sent back to the shipping company.

He said the Main Event investment deal struck recently in the US, under which a 24.2 per cent stage was sold to RedBird Capital Partners for $117 million, did not allow for any funds to be returned to Ardent’s Australian business.

In addition, both Ardent and Village are likely to see a higher monthly cash burn because of the investment needed to restart rides and attractions, a lack of new pass sales, and increased spending on cleaning and hygiene.

Citi has a buy rating for both Ardent and Village with target prices of $1.23 and $2.61 respectively.