Friday, 10 June 2016

Straco Corporation

It is ranked #8 of 729 things to do in Singapore and has an average rating of 4.5 stars based on 10500 reviews on TripAdvisor. This popular attraction is none other than Singapore Flyer (SF). Straco acquired SF in Nov 2014 for 140 million from Singapore Flyer Pte Ltd. It has a 90% stake of the attraction which was built at a cost of 240 million and opened in 2008.

A shrewd purchase by the management and within one year from its acquisition, it has managed to generate profit from the attraction that has caused the previous owner to go bankrupt.

Reading about Straco and its past annual reports, I wish I have gotten to know this company much earlier. Since listed in 2004, its revenue has grown by 7 times, while net profit and free cash flow have grown more than 10 times. It has also consistently paid out 30% to 50% of its income as dividend. Hence, dividend has grown by 6 times over the past 10 years. 

Straco is a developer, operator and investor of tourist attractions. Before the acquisition of SF, Shanghai Ocean Aquarium (SOA) was their prized asset. Its Lixing cable car service (LLX) ferries visitors to a mid-mountain where Chao Yuan Ge (CYG) located. Underwater World Xiamen (UWX) was acquired in 2007.

On TripAdvisor, SOA is ranked #31 of 1306 things to do in Shanghai with an average rating of 4 stars based on 644 reviews. There are more mixed reviews of the aquarium as compared to SF. The good includes the beautiful and wide selection of aquatic life. The complaints are its entry price, overcrowding of attraction and the tanks are too small for the aquatic life. As for UWX, it received even less reviews as it probably caters more to domestic travellers.

Crunching the numbers

As seen from the data, the group net profit margin for past 5 years is high at around 40% and ROE is around 20% for the past 3 years. With its FCF mirroring or even higher than its NP, the group should be able to sustsin its dividend. Dividend might not increase  in the next few years as cash generated will be used to pare down its debt.

Based on past history, management has shown that they are capable in running a good attraction and chairman Wu Hsioh Kwang is able to spot good potential attraction to develop. Wu currently holds 56% of the company with another 22% held by China Poly Group.

Recent Results
The group's 2016 1Q revenue increased by 5% but net profit dropped by 4%. The drop is attributed to the opening of Chinese restaurant st SF and sales tax for SOA. The sales tax is pending waiver.

With the exception of UWX, the other attractions saw an increase in visitor numbers.

Related News
Shanghai Disney is opening on 16 June 2016. Management sees this positively as there might be a spillover effect.

Shanghai Hai Chang Polar Ocean World will open in 2017. Management feels that SOA central location would have insulated it from this competition.

My Take
The company's past records have given me confidence of its growth. I am hopeful that they would develop SF into a more vibrant attraction and in turn generates more cash from it. The competition to SOA is something to take note of and I will continue to monitor the company's report on it.

I had increased my stake slightly over the past 2 months. I  will probably hold on to my current holdings to participate in the company's growth.

Sunday, 5 June 2016

Portfolio June 2016

With all the actions over the past half a year, this is my current portfolio. Hopefully, there will be less actions in the second half of the year.

The current dividend yield of my portfolio is 4.8%.

For Income (57.1%)

REIT (39.8%)
Parkway Life REIT
Starhill Global REIT
Capital Retail China Trust
CDL Hospitality Trust
Fraser Centrepoint Trust

Dividend Stocks (17.3%)
ST Engineering

For Growth and Punting (39.3%)

Growth Stocks (31.2%)
Best World
Raffles Medical
Food Empire

Punt (8.1%)
Sunningdale Tech

Based on the above, I was reminded that I am drawn to businesses that are linked to health, retail and service sectors. Exceptions are the dividend stocks in which my perception of the companies' ability to sustain its dividend seems to be more important. Of course, I have two stocks Valuetronics and Sunningdale tech in the manufacturing sector. Classified under punt as I have yet to spend too much time to understand their business even though both have positive reports and pay regular dividend.

Portfolio update

My actions over the past 9 months (September 2015 to June 2016)

Sold Kingsmen because of continuous challenge faced in business.

Sold M1 for challenges faced and my uncertainty about Telco business.

Sold CDW as I am unsure of its dividend sustainability.

Sold Design Studio to raise fund for other ideas.

Sold The Hour Glass to raise fund for other ideas.

Sold Croesus REIT to increase stake in other REIT.

Reduced ST Engineering for other ideas.

So what are the other ideas?

Bought Straco, a company that handle tourist attraction for its excellent growth over the past 10 years. It acquired Singapore Flyer in end 2014. More about Straco in the next post.

Bought Best World, a direct sale company for beauty products. I sold it in 2013 due to poor performances in various markets. Bought for its improved and positive business in Taiwan and China for 2015. 

Bought SGX for its stable dividend due to its strong cash position and ability to generate free cash flow.

Bought Raffles Medical for its growth story and my personal belief that healthcare segment will continue to grow.

Bought Vicom for similar reason though unsure how the increase in de-registration of cars fog next 2 to 3 years will affect the business.

Bought a small stake in Valuetronics after reading about it in Nextinsight Forum. 

Bought CDL Hospitality REIT. Believe that the price offered good value for its underlying assets and it will turn around in the next few years.

Increase stake in Food Empire as it expands its business beyond Russia n Ukraine. Also, it is going into coffee capsule production and through joint venture acquired a stake in Korea coffee chain Caffebene.

Increase stake in Parkway REIT due to personal believe in healthcare segment and its strong growth over the past 10 years.

Saturday, 4 June 2016

2015 Performance

Oops, this is 6 months overdue.

Last September, I reviewed my target and strategy and it is followed by reviewing of my holdings in my portfolio. There were quite a bit of churning as I re-build my portfolio to fit my new strategy. I thought it was more or less settled by December but in the first half of the year there were still quite a bit of changes. This only shows that I was still quite hazy on my buy decisions. Something which I would need to work on. More on this in the next post.

Back to last year performance. My portfolio did not escape the drop that the general market suffered. There was a 9.6% decrease in portfolio value over the year. Slightly better than the benchmark of SPDR STI ETF which dropped by 11.9%. I am glad it performed much better over a 10-year period.

The drop pushes  me to take a hard look at my portfolio. It provides an impetus for me to have a clearer idea what are the businesses that I want to hold. As you will read in my next post, I am churning quite a bit recently. Hopefully, this will stabilise soon and I will have a few core stocks that I will hold for long term.

At the end of the year, I was optimistic that 2016 performance will be better.