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Straco Corporation Ltd’s 2018 First-Quarter Earnings: A Poor Start to the New Year

Straco Corporation Ltd (SGX: S85) owns and operates tourism attractions in China and Singapore. In China, the company has the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions under its umbrella. Over in Singapore, Straco Corporation has a majority stake in the iconic observation wheel, Singapore Flyer.

Yesterday, the company announced its financial results for the first quarter ended 31 March 2018. Here are nine key takeaways from the earnings announcement:

1. Revenue for the first quarter slumped 31.7% year-on-year to S$18.8 million. Straco said that the fall in revenue was due primarily to the suspension of the Singapore Flyer’s ride operations for two months following a technical issue on 25 January 2018. The observation wheel re-opened on 1 April 2018.

2. Shanghai Ocean Aquarium (SOA) and Underwater World Xiamen also reported drop in revenues due to “lower visitor numbers, as well as the value-added tax on ticket revenue being accounted for this year by SOA, as the tax waiver on ticket revenue for Shanghai educational bases for this year has not been issued yet”.

3. Overall visitation to Straco’s attractions declined 24.7% year-on-year to 0.8 million visitors.

4. Profit attributable to shareholders plunged 60.1% to S$3.6 million from a year ago.

5. Consequently, diluted earnings per share for the reporting quarter fell to 0.41 Singapore cent from 1.03 cents a year back.

6. Net profit margin for the latest quarter came in at 18.9%, down from 32.4% in the first quarter of 2017.

7. As of 31 March 2018, the balance sheet had S$193.0 million in cash and equivalents, and total debt of S$46.9 million. Straco ended the quarter with a net cash position of S$146.1 million. The latest quarter’s net cash position is an improvement as compared to the end of 2017’s net cash figure of S$143.5 million.

8. Cash flow from operations tumbled 69.1%, from S$11.7 million in the first quarter of 2017 to S$3.6 million in the latest quarter. With a slight increase in capital expenditure from S$0.70 million last year to S$0.73 million this year, Straco’s free cash flow for the 2018 first-quarter came in at S$2.9 million as opposed to S$11 million a year back.

9. Looking ahead, Straco’s executive chairman, Wu Hsioh Kwang, said the following about China:

“The outlook of China tourism remain positive, given the rapid development of the tourism ecosystem through social media and mobile payments. As reported, the country will deepen the implementation of integrated tourism this year, and will continue to eliminate illegal tourism businesses and practices, which bodes well for our future development in China.”

At the closing price of S$0.775 yesterday, Straco is selling at around 16 times its trailing earnings and has a dividend yield of 3.2%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Straco Corporation Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Straco Corporation Ltd.