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Cedar Fair L.P. [NYSE:FUN] August 10, 2009: $10.64 - 2:50 PM EST

52-week range: $5.75 (Mar. 6, 2009) - $23.57 (Aug. 18, 2008)

Distribution = $0.25 quarterly = 9.39% current yield

Cedar Fair, L.P. (NYSE:FUN) is a master limited partnership that operates regional amusement parks. During the year ended December 31, 2008, the Partnership owned11 amusement parks, six outdoor water parks, one indoor water park and five hotels. The amusement parks include Cedar Point; Kings Island; Canada’s Wonderland; Dorney Park and Wildwater Kingdom (Dorney Park); Valleyfair; Michigan’s Adventure; Kings Dominion; Carowinds; Worlds of Fun; Knott’s Berry Farm, and California’s Great America (Great America). The Partnership also owns and operates the Castaway Bay indoor water park Resort in Sandusky, Ohio, and six separate-gated outdoor water parks.

Units of Cedar Fair (equivalent to shares) took a big hit in March when fears about debt refinancing led to investor panic. Management took steps to ease the problems including reduction of the distribution rate from $0.48 quarterly to $0.25.

Since the March lows, FUN has rebounded to today’s quote of $10.64 /unit. This is still off by almost 55% from its 52-week high set last August. Even with the bad economy Zacks looks for earnings of $1.28 and $1.48 for 2009 and 2010 respectively.

That makes the multiple a very low 8.3x this year’s and 7.2x next year’s estimates. As a master limited partnership the tax rate is extremely low and the (already reduced) distribution rate is still a very attractive 9.39%.

Here are the per unit numbers from continuing operations as reported by Value Line:

Year
Sales
C/F
EPS
Distrib.
Avg. P/E
52-wk range
2002
9.95
2.24
1.39
1.65
16.7x
19.60-24.80
2003
10.06
2.58
1.67
1.74
16.0x
22.70-31.50
2004
10.13
2.41
1.47
1.79
21.4x
28.70-36.00
2005
10.57
2.68
1.61
1.83
19.0x
25.70-34.00
2006
15.37
3.29
1.59
1.87
17.2x
24.10-29.90
2007
18.19
3.20
0.79
1.90
33.9x
20.60-30.70
2008
18.09
3.62
1.34
1.92
18.9x
11.30-25.00

Just a glance at the chart will show you how cheap Cedar Fair is right now. The P/E is the lowest ever, the distribution rate is the highest and the units are priced below the lows from the entire period 1997 through 2008.

FUN units have actually traded for more than double their current price at some point in each of the past twelve calendar years.

Unless you believe the company will not survive the current recession these units look like compelling value. Value line sees FUN’s financial strength as an adequate ‘B+’. proceeds from a recently announced sale of excess undeveloped Canadian land for $50 million have been earmarked for debt reduction and cash flow appears steady.

A return to even thirteen times 2009 – 2010 projections would make for a 12 – 18 month target price range of $16 - $19. Value Line is using a 15 multiple and per unit earnings of $2.50 in calculating their 3 – 5 year projections for a rebound to $30 - $45.

FUN looks like a winner for outstanding total return for investors with a medium to long-term time horizon.

Note: I was able to sell March $10 puts for $1.35 /share and March $12.50 puts for $2.70 /share today giving me break-evens of $8.65 and $9.80 respectively.

Disclosure: Author is long FUN units and short FUN puts as described.

Source: Cedar Fair: Make Money by Having FUN