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Straco Corporation Ltd’s Fourth Quarter Earnings: The Good And The Bad

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

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

The company has released its full year results for 2017 at the end of February. Today, we will be looking at the positives and negatives from its announcement.

Before we dig further into the results, let’s first take a quick overview Straco’s fourth-quarter results.

1. The Bird’s Eye View

Source: Straco’s latest earnings announcement

From the above, we can see that the company’s latest quarter results had a mix of higher sales but lower profit  compared to the same period last year. Fourth quarter revenue was up 5.8% year-on-year to $24.6 million, however profit attributable to shareholders fell 1.1% to $6.07 million.

2. The Positives

To start, all its tourist assets saw higher revenue on a year-on-year basis, except for the Straco Leisure segment which operates the Singapore Flyer.

Overall, there were also more visitors for the quarter. Straco recorded 0.983 million visitors, 7.4% higher than the same quarter in 2016.

Elsewhere, Straco generated a strong operating cash flow of S$66 million for 2017. As of 31 December 2017, Straco’s had a strong balance sheet with cash and cash equivalent of S$190.4 million, and total borrowings of S$49.9 million.

3. The Negatives

On the flipside, some of its expenses grew faster compared to its revenue growth of 5.8% for the quarter. These expenses include operating leases (up 7.5% year-on-year), property and other taxes (up 19.4% year-on-year), repair and maintenance (up 10.1% year-on-year) and other operating expenses (up 24.1% year-on-year).

Finally, quarterly operating margin declined to 39.5% in 2017, down from 40% in 2016. The lower operating margin was due to decline in other income, and the higher operating costs mentioned above.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool Singapore has a recommendation for Straco.