Six Flags Entertainment (SIX) China Announcement Viewed as Positive at Goldman Sachs

Goldman Sachs maintained a Conviction Buy on Six Flags Entertainment (NYSE: SIX) with a price target of $45. Earlier Six Flags and Riverside Investment Group Co. Ltd., a leading real estate developer in China, announced a new strategic partnership to build multiple Six Flags-branded theme parks in China over the next decade. Analyst Afua Ahwoi views the announcement as a positive.

"At our conference this month, SIX management reiterated that overseas investors have shown strong interest in the Six Flags brand. We believe the timing and multi-park news is earlier and larger in scale than most investors would have thought, even if the announcement is not entirely unexpected," said Ahwoi. "The financial terms of the deal were not disclosed, but the terms are similar to their Dubai project. SIX will earn three primary revenue streams: (1) onetime design and development fees, (2) ongoing licensing fees, and (3) ongoing management service fees. Design and development fees will begin immediately in 2Q14."

"This announcement follows SIX’s release in April on a partnership to bring a Six Flags-branded theme park to Dubai to open in late 2017. Mgmt. commented there is still more interest among developers, and the company continues to look at opportunities in Asia, the Middle East, and South America," added the analyst. "We believe the potential for these international park partnerships over the next couple of years introduces an exciting leg to what we view as an already compelling story. Six Flags’ modest growth strategy in the US and thoughtful use of capital, with a focus on returning excess cash to shareholders through buybacks and dividends (2014E dividend yield of 4.5%), underpin our CL-Buy rating on the name."

For an analyst ratings summary and ratings history on Six Flags Entertainment click here. For more ratings news on Six Flags Entertainment click here.

Shares of Six Flags Entertainment closed at $41.72 yesterday.

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