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3 Things Investors Should Know About Straits Trading Co Ltd’s 2017 Earnings

Straits Trading Co Ltd (SGX: S20) has stakes in real estate, hospitality, resources and investments across the Asia Pacific region.

Last week, the company announced its financial results for the full year ended 31 December 2017. Let’s look at three main aspects of the announcement here.

Show me the money

Revenue declined from S$513.5 million in 2016 to S$473.6 million in 2017, a fall of 7.8% year-on-year. Both the property business, and the tin mining and smelting business performed poorly for the year. Property revenue tumbled 26.4% to S$13.5 million while tin and smelting revenue came down 7.1% to S$460.1 million.

Net profit for 2017 stood at S$48.1 million, plunging 28.5% year-on-year. Consequently, earnings per share fell 28.5% to 11.8 Singapore cents.

The balance sheet weakened over the year. As at 31 December 2017, Straits Trading had S$362.4 million in cash and short-term deposits, and total debt of S$768.7 million. This translates to a net debt position of S$406.3 million. In comparison, at the end of 2016, it had S$328.7 million in net debt.

Cash flow from operations for 2017 was a negative S$38.6 million as compared to a positive S$8.5 million in 2016.

A bright spot for 2017 was the improvement in net asset value per share, which went up to S$3.62 at the end of December 2017, from S$3.34 one year prior, marking an improvement of 8.3%.

Ka-ching!

The board had proposed a first and final dividend of 6.0 Singapore cents per share, unchanged from 2016. The latest dividend represents a payout ratio of 50.8%.

What the future holds?

Chew Gek Khim, Straits Trading’s executive chairman, commented:

“We bolstered our real estate portfolio in FY2017 with the acquisition of several new properties in Japan and Australia. We believe these properties will stand us in good stead as we continue to grow our portfolio of income-generating assets to deliver sustainable returns as well as capital upside for our shareholders.”

She added that the increase in the group’s total assets to more than S$2.4 million in 2017, from S$2.2 billion in 2016, is a “testament to the success of the Straits Trading real estate ecosystem, and highlights our commitment to grow our already sizable asset base”.

Going forward, Straits Trading outlined the following business strategy:

Source: Straits Trading Co Ltd 2017 Earnings Presentation

At the closing price of S$2.26 yesterday, Straits Trading was going at around 19 times its trailing earnings and had a dividend yield of 2.7%.

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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 doesn’t own shares in any companies mentioned.