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Straco Corporation Ltd’s Latest Earnings: Growth in Revenue and Profit

On Tuesday, Straco Corporation Ltd  (SGX: S85) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

As a quick background, Straco Corporation is an owner and operator of tourism attractions 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 Corporation has a majority stake in the iconic Singapore Flyer.

You can catch the results from the company’s previous quarter here.

Financial highlights

The following’s a quick rundown on some of the latest figures from the first quarter:

1. Revenue rose 4.2% year-on-year to $27.5 million.

2. Profit attributable to shareholders did better, increasing by 6.9% to $8.9 million.

3. Earnings per share (EPS) was up 7.2% to 1.04 cents, up from 0.97 cents in 2016’s first quarter.

4. Cash flow from operations was $11.7 million and capital expenditures was $0.7 million. The low capex gave the tourism asset operator $11 million in free cash flow, which is a slight decline from $11.4 million a year ago ($13.2 million in cash flow from operations and $1.87 million in capex).

5. As of 31 March 2017, the company had $167.9 million in cash and equivalents and $58.9 million in borrowings. This gives a net cash position of $63.9 million. This compares favorably with the $139.9 million in cash and equivalents and $61.9 million in borrowings recorded on 31 December 2016.

In all, Straco recorded growth in revenue and profit. The firm also generated free cash flow and maintained a strong balance sheet.

Operational highlights and what lies ahead

Revenue growth came from all its assets. Straco Corporation also recorded a 7.8% year-on-year growth in visitor arrivals to 1.07 million for all its attractions in the reporting quarter.

The company’s executive chairman and founder, Wu Hsioh Kwang, commented on the quarter’s earnings:

“Our first quarter results were encouraging, with positive growth in revenue and earnings over the corresponding period in 2016. Our flagship asset, Shanghai Ocean Aquarium reported double-digit growth in visitor numbers compared to the corresponding period, while visitation to Underwater World Xiamen also increased 9.3%.

While the number of visitors to Singapore Flyer remained stable, overall revenue for the quarter had increased on better yield and higher F&B revenue. Our earnings per share for the quarter increased 7.2% to 1.04 cent.”

In its earnings report, the company added the following outlook:

“The National Bureau of Statistics of China reported that China’s gross domestic product (“GDP”) grew 6.9% in the first quarter of 2017 from a year ago. Though first quarter growth was driven by government investment in infrastructure and recovery in exports, consumer spending remained strong as consumption contributed a higher percentage to growth compared to last year.

According to the China National Tourism Administration, domestic tourism is expected to increase 10 percent year on year to 4.88 billion trips in 2017, with revenue rising 12.5 percent to 4.4 trillion yuan.

Singapore economy grew 2.5% year-on-year in 1Q2017, based on advance estimates from the Ministry of Trade and Industry. On the tourism sector, the Singapore Tourism Board (“STB”) reported that tourist arrival reached 2.8 million as of February this year, an increase of 3.4% compared to the same period last year. For the whole of 2017, STB projected a 0-2% increase in visitor arrivals and 1-4% growth in tourism receipts.”

At its closing stock price of $0.84 on Tuesday, Straco Corporation traded at around 15.3 times trailing earnings and had a dividend yield of 3%.

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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.