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The Good And Bad That Investors Should Know About Straco Corporation Ltd’s Latest Quarterly Results

Straco Corporation Ltd (SGX: S85) is a tourism asset owner and operator with business interests in China and Singapore.

In China, the company has the Shanghai Ocean Aquarium (SOA)Underwater World Xiamen (UWX), and Lintong Lixing Cable Car attractions under its umbrella. As for Singapore, Straco bought a majority stake in the iconic Singapore Flyer – one of the largest observation wheels in the world – in late 2014.

Recently, Straco reported its 2017 third quarter earnings. There are both positive and negative takeaways that investors may want to learn about. Let’s take a look, starting with an overview of Straco Corporation’s financials:

1. The summary 

Source: Straco 2017’s third-quarter announcement 

As we can see, the company’s latest quarterly results was weaker across all metrics compared to a year ago.

2. The negatives

During the quarter, UWX reported weaker sales due to a decline in visitors, which was down over 30% year-on-year. Capacity restrictions by local authorities at Gulangyu, where the UWX aquarium is located, caused the decline in the number of visitors. The island’s visitor traffic was also affected from traffic controls at Xiamen City which was organizing the 2017 BRICS summit.

Despite the lower revenue, operating expenses came in higher by 3.5% year-on-year. Costs moved up due to  higher depreciation and amortisation, operating leases, staff cost, and utilities cost. As a result, quarterly operating margin declined from the 70.2% recorded in last year’s third quarter to 68.4% in the latest quarter.

3. The positives

UWX was underwhelming but all other assets saw higher revenue on a year-on-year comparison.

Furthermore, Straco Corporation continues to generate strong operating cash flow. For the reporting quarter, the company’s operating cash flow came in at S$33.06 million. Last but not least, Straco Corporation’s balance sheet remained strong with cash and cash equivalent of $189.11 million, and total borrowings of $52.9 million as of 30 September 2017.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.he Motley Fool Singapore has recommended shares of Straco Corporation. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.