Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

A buy-side analyst with over 15 years of experience investing in Asian markets and specializing in the mid-small cap space, emphasizing value investing in companies with good free cash flows/dividends and long-term holding horizons. 
Exempt Financial Adviser (EFA) under CrossASEAN Research Pte Ltd. It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

Times have been tough for <a href="https://www.smartkarma.com/entities/straco-corporation-ltd" target="_blank" data-smartkarma-citation="entities:324:1" rel="noopener">Straco Corporation (STCO SP</a>) as of recent. The share price has been hit for two major reasons :
a) In their recently announced Q3 2019 results, earnings declined by 12% YoY due to a decrease in visitor arrivals at their aquariums in Shanghai and Xiamen.
b) Recently on the 26th of November 2019, the flyer operations were suspended again due to a technical issue. (link: <a href="https://www.channelnewsasia.com/news/singapore/singapore-flyer-suspends-operations-technical-issue-spoke-cable-12127334" target="_blank" rel="noopener">Flyer Suspension - Channel News Asia</a> ). The flyer accounts for 15% of PBT and 23% of EBITDA for the company in years other than 2018. The flyer experienced a technical issue where it was shut down for close to a quarter in early 2018. ( link to history: <a href="https://en.wikipedia.org/wiki/Singapore_Flyer" target="_blank" rel="noopener">Singapore Flyer - Wikipedia</a> )
The bright side though is the build-up in the cash pile. By the end of FY2019, I estimate that the company will have 187 mn SGD of cash ( 22 cents/share ) on its balance sheet which is around 31% of the current market capitalization of 600 mn SGD.  
They pay about 3.5 cents/share of dividends ( if you include the special dividend of 1 cent/share) which works out to a dividend yield of 5%. 
FCF for this year could end at 50 mn SGD or 5.7 cents/share, resulting in an FCF yield of 8.3%. If the company can hold onto an FCF of 50 mn SGD, The cash pile will continue to build by 10% a year.  
The main question in my mind though, is what's going to happen with this cash pile? Will it be used to increase dividend payouts further and do buybacks or will the company use it for an acquisition?

Times have been tough for Straco Corporation (STCO SP) as of recent. The share price has been hit for two major reasons :
a) In their recently announced Q3 2019 results, earnings declined by 12% YoY due to a decrease in visitor arrivals at their aquariums in Shanghai and Xiamen.
b) Recently on the 26th of November 2019, the flyer operations were suspended again due to a technical issue. (link: Flyer Suspension - Channel News Asia ). The flyer accounts for 15% of PBT and 23% of EBITDA for the company in years other than 2018. The flyer experienced a technical issue where it was shut down for close to a quarter in early 2018. ( link to history: Singapore Flyer - Wikipedia )
The bright side though is the build-up in the cash pile. By the end of FY2019, I estimate that the company will have 187 mn SGD of cash ( 22 cents/share ) on its balance sheet which is around 31% of the current market capitalization of 600 mn SGD.  
They pay about 3.5 cents/share of dividends ( if you include the special dividend of 1 cent/share) which works out to a dividend yield of 5%. 
FCF for this year could end at 50 mn SGD or 5.7 cents/share, resulting in an FCF yield of 8.3%. If the company can hold onto an FCF of 50 mn SGD, The cash pile will continue to build by 10% a year.  
The main question in my mind though, is what's going to happen with this cash pile? Will it be used to increase dividend payouts further and do buybacks or will the company use it for an acquisition?

Straco Corp: The Recent Stumble Is An Opportunity