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Newly listed Sim Leisure aims to grow as regional operator of 'budget' theme parks

Jeffrey Tan
Jeffrey Tan • 8 min read
Newly listed Sim Leisure aims to grow as regional operator of 'budget' theme parks
SINGAPORE (Mar 18): Forget adrenaline-pumping roller-coaster rides or movie-themed attraction games. Think water slides, dunk tanks and tree swings. Newly listed Sim Leisure Group aims to build and operate amusement parks that are reminiscent of tradition
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SINGAPORE (Mar 18): Forget adrenaline-pumping roller-coaster rides or movie-themed attraction games. Think water slides, dunk tanks and tree swings. Newly listed Sim Leisure Group aims to build and operate amusement parks that are reminiscent of traditional childhood outdoor activities.

The company operates a theme park on Penang island that has two sections — ESCAPE Adventureplay and ESCAPE Water-play — that are located next to each other. And it will soon open another section called ESCAPE Gravityplay, which will be located next to the other two sections. The company is planning to build and operate more amusement parks in emerging markets (EMs) in the region, especially China.

Sim Leisure avoids going into movie- or theme-based amusement parks because this -usually means having to sell expensive tickets. “Those theme parks are not [meant] for the masses. They are for those who can afford to pay,” says Sim Choo Kheng, founder, executive director and “chief escape officer” of Sim Leisure, in an interview with The Edge Singapore. “It’s like trying to sell a Mercedes-Benz car in poor markets with heavy discounts. It’s not going to work.”

Instead, Sim says the company intends to “disrupt” the amusement park industry by offering cheaper tickets, similar to how budget airline AirAsia has revolutionised air travel. In a sense, that makes Sim Leisure an operator of budget amusement parks. “Yeah, you can say that. It’s not a shameful word to use,” he says.

However, the company’s vision has failed to gain traction in the market. Sim Leisure, which was listed on the Catalist board of the Singapore Exchange on March 1, debuted at 17 cents — 22.7% lower than its IPO price of 22 cents a share. The stock closed at 18.8 cents on March 12. Trading volume in the company’s shares has averaged about 117,800 shares daily after its debut trading day.

Sim says he preferred to list the company in Singapore for the sake of international growth. The city state’s status as a regional financial hub offers a suitable platform for Sim Leisure’s aspirations, he explains. “Our growth story is not just in Malaysia. It is regional: Asean and China,” he says. While Sim Leisure could have listed on the Hong Kong Stock Exchange to tap Chinese investors, Sim says the company is “not big enough” yet to do so.

Sim Leisure raised IPO proceeds of $5.8 million, of which about $5.6 million will be used to fully redeem outstanding redeemable convertible preference shares, with financing costs of more than 9%, held by Penang Development Corp, a state economic agency. The remainder amount will be used to cover IPO expenses.

The IPO consists of 26.4 million placement shares, which represent 20% of the enlarged shareholding of 134.2 million shares. Among the substantial placees are SBI Islamic Fund II (Brunei) and Micro Carbide Engineering, which hold 6.7 million shares and 2.9 million shares, respectively. The former is a joint venture between Brunei Darussalam’s Ministry of Finance and Japan’s SBI Holdings, while the latter is a private precision tooling manufacturer based in Penang.

Post-IPO, Sim and his wife Silviya Georgieva Georgieva collectively own a 78.43% stake in the company. Asked why Sim Leisure offered a relatively small amount of shares to the public, Sim says he wants to maintain control of the company. “I think we have a great business idea that has growth potential. I don’t want to dilute myself too fast. This shows the commitment of the founder. So, this is just for us to get into the capital markets.”

Will Sim Leisure succeed as an operator of budget amusement parks? Will the company be able to attract visitors to its parks?

Traditional, outdoor games

Sim has been involved in the amusement park industry since 1993. He founded Sim Leisure Consultants (SLC) and Sim Leisure Gulf Contracting, which are involved in designing and constructing theme elements and fixtures for amusement parks in Southeast Asia, the Middle East and Europe. This included the Egypt and Jurassic Park zones of Universal Studios Singapore, Bollywood Dubai, the Laguna Waterpark at La Mer in Dubai, as well as the DreamWorks zone at the Motiongate Park in Dubai.

Over the years, he observed that the business model of theme parks in EMs was flawed because it was copied from developed markets without sufficient local context. Ticket prices were not aligned with the local purchasing power, owing to the payment of significant royalties for intellectual property rights and costly equipment with extensive design specifications. “The average family in Malaysia or China — not everybody can afford to spend US$120 [per ticket],” Sim says.

Also, he reckons that movie- or theme-based amusement parks are a sunset phenomenon. “It is reaching a plateau because this whole movie-based mechanical theme park has been around for too long. There have not been any changes to it. It is the same thing that has been recycled. If you go to a typical theme park, you will see only seven types of games,” he says. “It is not correct to say that that is the trend. It is the only option the market has been told to have.”

Moreover, Sim points out that most of these amusement parks do not immediately benefit shareholders. The development costs can easily run up to hundreds of millions of dollars. “It is madness. How long [before] they have a return on investment?” he says. “There is clearly a mismatch in investments.”

While working on a project in Vietnam, Sim had a eureka moment to build and operate better amusement parks. He was inspired by his childhood, which was spent playing in the natural environment of his kampong in Penang. “I wanted to build a theme park that represented my childhood; how all of us used to play,” says the 53-year-old.

Also, this would fit in with the current trend of leading a holistic lifestyle, which Sim reckons is by reconnecting with the environment. “We talk about healthier living; becoming greener; getting the kids outdoors because we are concerned with their addiction to digital devices. We want to exercise more,” he says.

Developer, government tie-ups

ESCAPE Adventureplay and ESCAPE Waterplay, which were injected into Sim Leisure from SLC, were built at a cost of about RM11.2 million and RM22.7 million, respectively. The former commenced operations in 2012 and the latter, in 2017. ESCAPE Gravityplay will cost about RM10.6 million ($3.5 million) and is expected to start operations in 1H2019.

So far, Sim says, the ESCAPE amusement park has registered an average footfall of 185,000 visitors a year. They include teenagers and adults between 15 and 40 years old, he says. The company’s main revenue streams are from ticketing sales and fees for organising team-building events. He estimates that visitors spend about RM120 on average, including for F&B.

Sim Leisure does not own the land on which the ESCAPE amusement park is sited. The land is leased from the Penang government for 30 years starting from 2012, with an option of extension for 30 years. Sim says the leasing approach is what the company intends to do for future -ESCAPE amusement parks.

In particular, Sim Leisure’s strategy is to lease land from property developers or governments for at least 40 years. The company will build and operate the amusement park and give a percentage of its top line to the property developer or government instead of rent. “This works well because, traditionally, the developer will have to invest hundreds of millions of dollars and learn a new business,” Sim says. “We take away the headache of theme park investors, who are traditionally real estate developers.”

For instance, Sim Leisure signed a non-binding memorandum of understanding with Chinese property developer Fei County Wonder Stone Characteristic Town Development, an indirect subsidiary of SGX-listed Imperium Crown. This is for the design and operation of an amusement park in Linyi, Shandong province. The company could be looking at more potential deals in the future. “Every week, we get people writing to us to invest in their place, ever since we signed the MOU with the developer in Shandong. Yesterday, I got one from Thailand. In Xiamen, developers there are talking to us. All of them have been to our ESCAPE theme park. They love the idea,” he says.

According to the International Association of Amusement Parks and Attractions, China is expected to continue to be the fastest-growing country in Asia-Pacific on amusement park spending over the next five years. IAAPA has projected the country to grow at an annual compounded rate of 10.7%. Part of this growth will be driven by improving infrastructure in western China, it says.

How is Sim Leisure’s financial performance so far? For the six-month period ended June 30, 2018, the company registered earnings of RM2.1 million on revenue of RM8.4 million. It had cash and bank balances of RM765,678 as at June 30, 2018.

For FY2017 ended Dec 31, Sim Leisure recorded y-o-y revenue growth of 4.8% to RM9.7 million on the back of higher admission fee revenue. However, earnings nearly halved to RM1.3 million from the previous year as cost of sales and other expenses ballooned 20% y-o-y and 32.6% y-o-y, respectively. The company had cash and bank balances of RM818,738 as at Dec 31, 2017.

As for potential investors, Sim has a message for them. “We are looking at something very big in the near future. We have created a disruption. If we are able to be profitable in Penang, which has a population of one million, imagine what we can do with a theme park in places with a bigger population,” he says. “It is scalable. Our intention is to replicate it in multiple locations.”

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