As someone who traffics in the obscure and the unusual, I am always particularly interested when I happen across a company with a unique business model. Often, the company is the only publicly-traded entity in its line of business. As far as I can tell, this is the case with Parks! America Inc. Parks! America operates wildlife parks in Pine Mountain, Georgia and Stafford, Missouri under the “Wild Animal Safari” brand. These are exactly as they sound, enclosed areas where exciting non-native wildlife roams for visitors to observe. At both locations, visitors can observe dozens of species in a natural(ish) setting. Visitors can feed some of the more amiable species. I would imagine this does not include the wolves and tigers.
Now, I know what you might be thinking, and it’s the same thing that occurred to me when I first ran across the company. How do I know this isn’t some shifty carnival-type operation where sad-eyed, underfed wild creatures pace in circles in tumbledown enclosures? While I have not visited either of Parks! America’s properties in person, visitor reviews tell a different story. Tripadvisor reviews for both the Georgia and Missouri properties are overwhelmingly positive, with hundreds of reviewers speaking of their good experiences, especially families with young children.
Financially speaking, running a wildlife park appears to be a surprisingly good business. In 2016, Parks! America reported an operating margin of 28% and a return on tangible equity of 20%, adjusted for a one-time tax benefit. But these figures don’t tell the whole story. For several years now, Parks! America’s Georgia property has been a standout, strongly profitable and with growing revenues. However, the company’s Missouri property has struggled. Wild Animal Safari in Missouri has only recently achieved an operating profit for the first time since 2012. Below is a breakdown of yearly results at each property.
So what we really have in Parks! America is a company with one astonishingly profitable and successful property, and one struggling property. To me, that spells upside potential. If Parks! America is able to build on the small amount of positive momentum their Missouri property has generated, a sharp increase in profits could result. Alternatively, it the company chose to pack it in and sell the property, significant capital could be released.
For the trailing twelve months, Parks! America’s wildlife parks produced $2.29 million in operating income. Corporate expenses were $0.66 million, leaving company EBIT of $1.63 million. Annualized interest expense in the most recent quarter was $0.20 million, leaving pre-tax income of $1.43 million. Parks! America is not a taxpayer for the moment as it works off its $1.9 million federal NOL. Georgia state corporate income tax is 6%, giving pro forma trailing net income of $1.34 million, or 1.8 cents per share on a market cap of $9.7 million. Oh, did I forget to mention that Parks! America is tiny? Indeed, it’s one of the smallest public companies I have run across that actually generates attractive margins and cash flow.
At a market cap of $9.7 million, Parks! America trades at 7.2x trailing earnings. These earnings will likely rise substantially in fiscal 2017 if the company can again increase visitor numbers at its Georgia property and increase margins at its Missouri property.
Parks! America does carry debt, but the terms are generous compared to the usurious rates that most other companies this size must pay. In 2013, the company secured a 20-year loan from a local Georgia bank, secured by substantially all the company’s assets. The loan bears interest at prime plus 2.50%, currently 5.75%. Principal amortization requirements are minimal, so the company enjoys a lot of freedom to deploy its cash flows as it sees fit.
For the trailing twelve months, Parks! produced operating cash flow of $1.34 million. After capex of $0.43 million and principal repayments on debt of $0.12 million, the company produced $0.79 million in true free cash flow. For now, that cash sits on the balance sheet. Assuming the company’s profitability remains strong, the biggest question for me is what the company will ultimately decide to do with all the cash they will generate. Will they build another park? This could be lucrative, but also potentially risky if the park runs into the same troubles the Missouri property has faced. Perhaps they’ll begin paying dividends. A management buyout is also a possibility. Insiders control about 55% of the company’s shares, and it wouldn’t take a lot of capital to make an offer to the minority shareholders. Including other major holders, only about 31% of the company’s shares are freely floating.
Readers looking to do further research on Parks! America should be aware that this company is extremely small and its shares are very illiquid. I own a very small stake, which took me months to accumulate. And as usual, it’s far easier to buy into these tiny companies than it is to sell out of them. Shares of Parks! America should be considered a very long term investment.
Alluvial Capital Management, LLC holds shares of Parks! America. Alluvial may buy or sell shares of Parks! America at any time.
Alluvial Capital Management, LLC may buy or sell securities mentioned on this blog for client accounts or for the accounts of principals. For a full accounting of Alluvial’s and Alluvial personnel’s holdings in any securities mentioned, contact Alluvial Capital Management, LLC at firstname.lastname@example.org.
isn’t too late to buy tem, because the price jumped to a high recently? And as you accumulated them month after month, you got also them at much better price). Thank you for your answer. Regards, Gérard
Readers will have to be the judge of that. I have not sold any of my shares, which ought to reveal my own opinion. But I would never recommend readers buy or sell any security.
I enjoy your blog. Funny you covered PRKA.
If you haven’t so far, I encourage you to speak to the CEO who is very open and will be glad to clarify for you the capital allocation going forward.
Sounds like you have Stefan, care to share the short version?
It is impressive what they managed to do given they were at the brink of bankruptcy in 2009.
Re: capital allocation – I got a sense that management would like to go into theme park business (CEO’s expertise lies there, has a pretty good track record). They don’t see any attractive opportunities at the moment. They acknowledge that theme parks cost more than safari parks. My guess is that there could be new equity issued if they find an attractive opportunity. This might work out great, but the timing and pricing of it is a risk for shareholders buying today, since most of the value of the stock would be coming from the newly acquired theme park.
Another thing I spotted was revenue per guest growth at Georgia park – this might be indicative of excellent management (creating revenue opportunities from such as feeding food, special souvenirs, better trucks to go on the drive thru, etc.) or decreasing value for customers. Comments on Tripadvisor/Google are mixed and I don’t see this as a near-term concern.
thx for the great idea
one quick question: how do you look at succession / overhang risks. CEO/chairman is 75 years old and controls 20% of the company?
They could acquire another park. I know of one in Florida and it seems popular.
True, there are a number of successful wildlife parks across the country.
Any (bad?) news concerning Parks! America? The stock price is just tumbling.
wow very nice info,
Parks! America reported an operating margin of 28% and a return on tangible equity of 20%, adjusted for a one-time tax benefit !
not bad, its really good price quote, nice sharing
Hello, just asking myself if this stock has still potential: bought at +- 0,24 $ in 2017, now 0,16 $ …
Activists are keeping pressure on management.
They pushed for a special dividend or dutch tender
Nice ideas indeed. Thanks Olivier.