29 August 2014

Straco - My View of Its Acquisition / Lease of Singapore Flyer - August 2014

I had been to Singapore flyer once, and it was during 1-for-1 promotion which I bought it from Groupon website if I still remember correctly. It has one of the most beautiful scene in Singapore, and if possible you can try to ride on it during sunset (so you could enjoy both day and night scene for just 1 ride).The nearest MRT station is Promenade station (Circle Line). You may still need to walk down for 5 - 10 minutes to reach there.

Some of the information of Singapore Flyer:

The Singapore Flyer, which cost $240 million to build and has 28 air-conditioned capsules each able to accommodate 28 passengers, was opened in March 2008. It was the world's tallest Ferris wheel at 165m until Las Vegas' High Roller (167.6m) opened in March this year.
Ticket prices range between $21 (children) and $33 (adults), and passengers can also opt for unique experiences like sky dining. The Flyer's three-storey terminal building houses retail shops, restaurants and a flight simulator. 
The attraction, however, has suffered from poor visitor numbers. High ticket prices and competition from the nearby Marina Bay Sands were often cited, while tenants within its terminal complained of poor business. 
Its six-year history has also been marred by breakdowns and stoppages, including an incident on Dec 23, 2008, when a fire broke out in the wheel control room. In that incident,173 passengers were trapped for about six hours.
A more recent mishap occurred in July 2010, after lightning struck one of its electrical cables that supplied power to the air-conditioning systems. The ride had to shut down and more than 200 passengers were evacuated.

I am still quite curious on why Straco like to acquire Singapore Flyer as it is a money-losing business as of current state. It may have a full plan to integrate its resort business in Shang Hai with this Singapore Flyer. Straco had reached its peak of S$0.82 from just S$0.40 in one year time. It is one of the very few counters listed in Singapore to have a good cash flow without a need of huge capex every year. With the acquisition of Singapore Flyer, I am doubt that it is still able to pay out such good dividends to the shareholders.

I will keep this record here and update the progress again maybe some time later.

P/S: Straco was trading down 7.3% today

Some other news on Straco acquisition of Singapore Flyer could be found here.

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