The Good And Bad Aspects That Investors Should Know About Straco Corporation Ltd’s Latest Earnings

Straco Corporation Ltd (SGX: S85) is a tourism asset operator with operations 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. 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.

The company recently reported its second quarter results for the financial year ending 31 December 2018. In this article, I will look at the good and the bad aspects from the latest announcement.

But before we dig further into the results, let’s first have a quick overview of the main numbers below.

Source: Straco’s 2Q2018 earnings release

From the above, we can see that all metrics came in weaker as compared to the same period last year.

The negatives

First of all, revenue was lower at Shanghai Ocean Aquarium and Singapore Flyer. The lower revenue at the former was due to value-added taxes on ticket sales while that of the latter was due to its suspension from 25 January to 1 April this year.

Secondly, overall visitor numbers to all the attractions decreased 1.2% year-on-year to 1.22 million visitors.

Thirdly, quarterly operating margin declined from 56.0% last year to 55.1% this year. The lower operating margin was due to revenue falling faster than operating cost.

The positives

To start with, Lixing Cable Car and Underwater World Xiamen reported higher revenue for the quarter despite lower revenue at the other attractions.

Secondly, Straco’s balance sheet remained strong, as of 30 June 2018, with a net cash position (cash less debt) of S$136.5 million, after paying out S$21.6 million as dividends and S$6.6 million in loan repayments.

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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.