Cedar Fair Shareholders Having Fun

If you've owned shares of theme parks or resorts the past three years, you have undoubtedly had more fun going to said parks and resorts than watching your stocks. Shares of Cedar Fair (NYSE: FUN  ) , Great Wolf Resorts (Nasdaq: WOLF  ) , and Vail Resorts (NYSE: MTN  ) are down 56%, 83%, and 40%, respectively, during this recessionary period. Poor Six Flags Entertainment (NYSE: SIX  ) even had to restructure under Chapter 11! Only Walt Disney (NYSE: DIS  ) has managed to do well, and that's mostly because it's a diversified conglomerate.

Investors in Cedar Fair, however, have been enjoying the real e-ticket ride. Attendance plunged 8% in 2009 compared to 2008, slicing revenues by $80 million and adjusted EBITDA from $356 million to $300 million. Crushed under $1.8 billion in debt, the company was facing a potential liquidity crisis due to possible debt covenant violations.

Investors sold the stock off from $25 to $6.

Management made a deal with Apollo Global Management for an $11.50 buyout, but a hedge fund run by former Carl Icahn associate Geoffrey Raynor purchased 18% of the company stock, and convinced shareholders to shoot the offer down.

I think Raynor saw that Cedar Fair just needed some breathing room via recapitalization while waiting for consumer spending to pick up. The company did manage to refinance the debt in a difficult credit market, which I think speaks to the company's higher intrinsic value than either the current price or buyout price. In addition, park attendance was up 7.5% for the first half of the year compared to last year.

The takeaway for investors is that, with the company's debt maturity pushed out to 2016, attendance on the mend, and a 20% year-over-year increase in operational cash flow in the first half of the year, Cedar Fair seems like a compelling play here at $12 a share. The buyout offer of $11.50 was for a distressed asset that now shows signs of significant improvement, leading me to believe downside is limited.

Another few quarters of even 10% operational cash flow improvement should support a higher stock price, and if the economy truly rebounds, I don't see any reason the stock cannot return to previous highs -- without investors screaming over any more loop-de-loops.