Nick @ Valuebuddies.com has shared a clever analysis:
Straco continues to power forward with organic growth from the core aquarium operations in China and the inclusion of the Singapore Flyer. Presently, there are 3 operating assets with each facing its own set of challenges and opportunities. Cash-flow continues to be strong since this is a capex light industry and I expect the Group to earn approximately $50 million this year. As always a number of risk (most explained in this thread) exist and investors should be mindful.
Singapore Flyer
For the first time, the result statement presents some figures on the Singapore Flyer profitability. It was reported that the Flyer generated revenue of $17.78 million in 1H 2015 and has an operating cost of $5.88 million in 2Q 15. Assuming constant quarterly cost, the Flyer generates EBIT of $6.00 million. This implies EBIT margin of 33.7%.
1H 2015
Revenue: $17.78 million
EBIT: $6.00 million (assuming 1Q cost = 2Q cost)
Interest Expense: $0.89 million
NPAT: $4.25 million (17% tax)
The annualized NPAT would be approximately $8.5 million with EBITDA of $19.8 million. Considering the total acquisition cost of the Flyer was $140 million, this deal implies a 6% return on investment and EV/EBITDA of 7. Initially, when Straco purchased the Flyer, the consensus was that it will take money and time to rejuvenate this loss making asset and that it will drag down Straco results. Ironically, the Flyer turned out to be profitable without any major rejuvenation projects being undertaken yet. Sometimes, simple cost optimization and experienced tourism asset management goes a long way.
SOA
Increase in visitor numbers, revenue and profits. The key catalyst (or risk) is the opening of the Shanghai Disneyland in the months to come. There are plans to increase the ticket prices substantially towards the end of the year as earlier stated in this thread. Remains a very important profit contributor.
UWX
The curb in visitor numbers to the island has hurt its performance. Increase in ticket prices at the end of the year may stem the decline in operating numbers.
Rich,
The acquisition cost of the Singapore Flyer of was SGD140 million. Straco share of the acquistion was only 90% and the cost of Straco share should be SGD126 million. The calculation should be base on SGD126 million and not SGD140 million.
Market selling down these past weeks. ST index fall about 300 points but there is no panic selling on Straco shares. The daily trading volume for Straco was very low, way below the daily average trading volume. There were 600,000 shares change hand on 20/8/2015. The 600,000 share done were share buy-back by Straco at 92 cents & 93 cents.
Straco reported that in 1H, the Singapore Flyer's revenue was $17.78 m, and the Flyer was profitable. It may still surprise some investors that the Flyer has been profitable since Straco bought it over in end-Nov 2014. In a discussion with CFO Amos Ng (photo), we learnt how Straco achieved profitabily by simply "going back to the basics" -- resulting in lower interest cost on borrowings and on insurance premiums, and improved margins on its ticket sales to travel agents. Look out for our report next week.
Straco bought back 100,000 shares on 22/9 at 86.5-88.5 cents. This is good timing to nudge the price up when market volatility is less intense, compared to the selldown 1-2 months ago. Arguable, it was pointless to buy in when people were panicky and prepared to sell below 80 cents.
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