Straco Corporation Ltd’s Latest Earnings: What Investors Should Know

Straco Corporation Ltd  (SGX: S85) released its fiscal third-quarter earnings report last Friday. The reporting period was for 1 July 2015 to 30 September 2015.

Straco is an owner and operator of tourism assets in China and Singapore. In China, the company has the Shanghai Ocean Aquarium (SOA), Underwater World Xiamen (UMX), and Lintong Lixing Cable Car attractions under its umbrella. As for Singapore, Straco had bought a majority stake in the iconic Singapore Flyer late last year.

Catch the firm’s second-quarter earnings here. Or, read more about Straco in here and here.

Financial highlights

The following’s a quick rundown on the latest figures from Straco:

  1. Revenue for the third-quarter rose by 27.8% year-on-year to $49.4 million.
  2. Meanwhile, profit attributable to shareholders jumped by 22.6% compared to the same quarter last year. Profit for the reporting quarter was $24.9 million.
  3. Consequently, Straco’s earnings per share (EPS) expanded by 24.5% from 2.27 cents in the third-quarter of 2014 to 2.72 cents.
  4. Cash flow from operations came in at $34.8 million with capital expenditures working out to be just $517,000. The low capex gave the tourism asset operator a healthy $34.2 million in positive free cash flow for the reporting quarter. These figures also represent solid growth of 14.7% from a year ago when Straco had free cash flow of $29.8 million.
  5. As of 30 September 2015, the firm had $140.9 million in cash and equivalents and $77 million in borrowings. This gives a net cash position of $63.9 million.

In all, Straco’s revenue continues to benefit compared to the previous year partly as a result of new sales flowing in from the Singapore Flyer (more on these shortly). Meanwhile, the positive free cash flow generated by Straco had helped it to improve its balance sheet compared to the previous sequential quarter when the net cash position was just $28.9 million.

Operational highlights

The revenue increase for the reporting quarter was supported by higher receipts from the SOA and new contributions from the Singapore Flyer. For the first nine months of 2015, Straco’s revenue increased by 42.4% year-on-year; the Singapore Flyer had accounted for 93% of the revenue growth for the period.

Meanwhile, Straco’s tourism assets experienced a 5.1% year-on-year jump in overall visitor arrivals to 2.03 million for the reporting quarter. This is an important figure to track for Straco as it gives insight into the popularity of the firm’s assets with travelers.

Regarding the company’s future outlook, the following is what management had to say in the earnings release:

“In a recent Global Tourism Economy Forum Macao 2015 held in October, the chairman of the China National Tourism Administration pointed out that China’s tourism was in a new stage of adjustment, reform and leap-forward, and would maintain rapid growth. This augurs well for the Group’s businesses in China.

In Singapore, the tourism sector is expected to be on target to meet its forecast of more than 15 million travelers this year, despite a dimmed economic outlook ahead, as the economy grew 1.4% in the three months to September 2015 compared to the same period a year ago, its slowest pace in three years. From January to August 2015, tourist arrivals hit 10.22 million, a marginal drop of 0.6% compared to the corresponding period.”

Foolish take away

At its closing price last Friday of $0.85, Straco Corporation traded at around 15.4 times its trailing earnings and hasa dividend yield of 2.4%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.