Is This A Possible Tailwind for Straco Corporation Ltd?

Prior to 2015, Straco Corporation Ltd (SGX: S85) was a China-focused company. The company’s revenue and profit had come from its China-based tourism assets such as the Shanghai Ocean Aquarium and Underwater World Xiamen.

Things changed in 2014. In November of that year, the company completed the S$140 million purchase of an iconic tourism landmark in Singapore, the Singapore Flyer. The purchase had thus added Singapore as an important geographical source of revenue for the company.

The Singapore Flyer, which is one of the world’s largest observation wheels, had not been a particularly easy asset to run for its previous owners; to that point, the Singapore Flyer had fallen into receivership by 2013, just five years after its official opening in 2008.

But, Straco seems to have been doing a decent job with the giant observation wheel. In the first nine months of 2015, Straco’s revenue and profit had experienced strong year-on-year growth of 42.4% and 28.5%, respectively, due mainly to organic growth at the Shanghai Ocean Aquarium and new contributions from the Singapore Flyer.

We’re in the midst of the earnings season, and there have been some recent results from listed trusts here which point to a possible tailwind for the Singapore Flyer.

In CDL Hospitality Trusts (SGX: J85) latest earnings release, the hospitality-focused stapled trust commented (emphasis mine):

“Singapore is expected to see a better events calendar in 2016 as compared to 2015. These include the return of biennial citywide events such as Singapore Airshow in February and Food and Hotel Asia in April, introduction of new marquee events such as Rugby World Seven Series in April and hosting of prominent medical congresses in May 2.

Singapore has also been successful in attracting big corporate incentive groups. For instance, in 2016, companies such as Herbalife and Unicity International are bringing approximately 20,000 and 25,000 people into Singapore respectively for company incentive trips.”

CDL Hospitality Trusts’ view is supported by that of another hospitality-focused trust, Frasers Hospitality Trust (SGX: ACV). The latter wrote the following in its own earnings release (emphasis mine):

“Capitalising on its strength as a MICE destination, two first-ever prestigious medical events, the ISMRM annual meeting and exhibition and SpineWeek 2016 would be held in Singapore in May 2016. Together with the Singapore Air Show, Unicity Global Convention, World Rugby Sevens Series among others, the strong events pipeline may benefit the tourism sector.”

So in short, what we’ve seen from the two trusts is that 2016 may see a possible rise in Singapore’s tourism market. If that really does happen, let’s see if Straco has the ability to take advantage of that positive trend and bring the Singapore Flyer to new heights.

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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 writer Chong Ser Jing owns shares in Straco Corporation.