06 June 2013

Straco - Summary - June 2013

Straco is a China based company listed in SGX since few years ago. It is a tourism player in China, mainly in Shang Hai, Xi An and Xia Men. Just a glance on its FY2012 annual report, I found that its revenue basically depends on the growth of domestic tourists arrival as well as any major events held on its assets in China.

In my humble opinion, Straco is a cash cow company as it is generating Free Cash Flow consistently.  Nonetheless, due to the volatility of the revenue generated over the years, I would be more conservative on forecasting the future earnings in next couple of years.

Factors to improve the net profits of the companiy:

1. Increase of wages among locals.
2. Increase of major events held on the assets.
3. Acquisition of more assets that can bring net operating cash flow.

Things to note:

1. The income stream is volatile, although there is an improvement in FY2012.
2. However, I am quite confident in longer term revenue growth, as I believe the management can use the cash balance wisely to contribute it back to the shareholders or for future investment purpose.


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