Straco Corporation Forges Ahead in 2013

Straco Corporation (SGX: S85), a developer and operator of aquatic-related facilities and tourism-related assets in China, saw its revenue climb 32% year-on-year to S$72.8 million while net profit surged 72.8% to S$34.1 million for the full year when it announced its earnings on Friday.

As a result, the company’s diluted earnings per share (EPS) grew 73.6% to 4.01 Singapore cents.

The revenue growth was mainly attributed to more visits being made to Straco’s flagship attraction, the Shanghai Ocean Aquarium. The aquarium is situated in the New Pudong Area, next to Shanghai’s landmark Oriental Pearl Tower.

Other than the strong operating performance, net profit was also boosted by favourable currency movements as the Chinese yuan appreciated against the Singapore dollar. In addition, there was a one-off gain of S$1.29 million due to the disposal of Land Use Rights to the local government in the first quarter of 2013. If the one-off gain were excluded, Straco’s net profit would have climbed by a smaller – but still impressive – amount of 66% instead.

In any case, the reported net profit for the company resulted in a net profit margin of 46.8% for the year, a huge improvement over last year’s 35.7%.

As of 30 Dec 2013, the firm had a cash balance of S$108.1 million, without any debt. This is an improvement over the end of 2012 when it had S$96 million in cash and no debt. Interestingly, Straco has been debt free since 2008.

For 2013, the company’s return on equity (ROE) was at 20.8%, a remarkable improvement over the 14.7% ROE that was seen last year. It’s also good to point out that Straco’s ROE had increased even though the cash hoard on its balance sheet went up significantly, suggesting strong improvements in the company’s operations.

During the year, Straco generated S$35.7 million in net cash flow from operations, an increase of 29.6% from a year ago. With capital expenditures of S$1.4 million, the company had generated free cash flow of S$34.2 million for the year as compared to S$26.4 million in the previous year.

A final dividend of 1.25 Singapore cents per share and a special dividend of 0.75 Singapore cent per share has been recommended. This translates to a total dividend of 2.0 Singapore cents for 2013. In 2012, a total dividend of 1.25 Singapore cents was given out. With 842.8 million shares outstanding, S$16.9 million in dividends will be dished out in all for 2013.

Straco’s Executive Chairman, Mr Wu Hsioh Kwang, commented on the year’s results, “FY2013 saw another record performance for our Group, with revenue of $72.8 million and net profit of $34.1 million. Visitor numbers to each of our three attractions saw double digit growth ranging from 10% to 33%. Our operating cash flow reached $35.7 million for FY2013, an increase of 29.6% over FY2012. Our net asset value also increased 22.5% to 19.07 cents per share.”

Straco closed at S$0.485 on Friday. At that price, shares of the company are valued at 12.1 times historical earnings and carry a dividend yield of 4.1%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns shares in Straco Corporation.