04 March 2014

Straco - Cash Cow Company Still - Mar 2014

Straco released the full year report last month. Below is short summary of Straco and my own data compilation.

No. Outstanding Shares843,739,580
Share Price0.50
Market Cap421,869,790
EPS0.0404
PE Ratio12.37
EPSG72.45%
PEG Ratio0.1708
DPS (latest year)0.02
Dividend Yield4.00%
BPS (latest year)0.1907
PB Ratio:2.62

Income Statement
























Net profit improved to S$35M on the back of revenue S$73M which is compared to S$20M and S$55M last year. Gross profit margin stands at 80% while net profit margin recorded an impressive result of 47%. EPS improved by 72% to 4.04 cents from 2.34 cents a year ago.

Balance Sheet



























Equity attributable to owners of the company improved by 23% to S$161M from S$131M last year. The company has around S$108M cash which is enough for dividend distribution or business growth in future. As the debt level remains low (around 10% of total assets), I believe that the company has little credit risk.


Cash Flow Statement



























The company managed to generate free cash flow for many years including year 2013 (S$34M) and 2012 (S$26M).


Company Comments
The Group is principally engaged in the development and operation of tourism-related attractions. Retail, food and beverage are auxiliary goods and services arising from the operations of the above facilities.

The Group has one reportable segment, as described below, which consists of the Group’s strategic business units which are managed separately. For each of the strategic business units, the Group’s Executive Chairman (“EC”) reviews internal management reports on a monthly basis. The following summary describes the operations of the Group’s reportable segment:

• Aquariums – Operation of aquatic-related facilities and tourist attractions, including dolphin and sealion performances. Retail, food and beverage are auxiliary goods and services arising from the operation of the above facilities.

Other operations include the operation of cable-car facility and show performances. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2013 and 2012.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group’s EC. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.



















My Personal View
ROE of the company is now around 20% - 30%, which I think is quite impressive. As the company managed to generate free cash flow for many years, I believe the company would have little credit risk in managing working capital as well as capex needed for future business growth.

As this is a China-related company, the company is trading at around PE of 13X and enjoys around 4.00% dividend yield (including special dividend).

Risks

  • accelerated competition among theme park players especially Disney land in Shang Hai is currently under construction and it maybe tougher for the company to increase the average ticket selling price in future
  • depreciating renminbi against Singapore dollars and it would reduce the DPS indirectly
  • liquidity issue as the company is now trading at low volume
I would consider to buy the counter if the P/CF ratio is below 10X or around 40 cents. But if you are long term investors, you may do your own forecast (e.g. if long term growth rate is 10% for next 5 years and 5% after that, and discount rate is 15%, the fair value would be S$300M - S$400M etc). 


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