Why buy?
The following are the key reasons why I purchased Straco.
- The group has been able generate cash consistently. This leads to its ability to pare down its debt and to increase its dividend over the years.
- The acquisition of Singapore Flyer marked its foray beyond China. I believe this would lead to other acquisitions when opportunities arise.
- The ability of the group turning over the fortune of Singapore Flyer within one year of acquisition gives me confident that the management team knows what they are doing.
What I expect?
Base on the past actions, I expect the management to use its cash to repay its debt in the next few years and hence dividend should remain the same. After which, it would increase its dividend unless there are new attractions to acquire. I also think that the management will improve Singapore Flyer's business further within the next 2 to 3 years.
When will I sell?
I am confident that the company will continue to grow and hence look to hold on to the shares for a long time. I will sell if the competition in Shanghai significantly affects SOA's top and bottom lines. Recent results
20161H saw Straco's revenue decreased marginally by 0.5% from 20151H. Its net profit dropped by 8.2%. Management attributed the drop to poorer number at SOA and UWX but offset by increase in revenue at SF. Net cash flow from operation also decreases by about the same amount.
I have a slight concern of company's performance at SOA and UWS. I am not sure if the numbers will continue to deteriorate and will continue to monitor the coming quarters results. I have decided to reduce to my holdings in the company even though I think it's still a good company to collect dividend due to its ability to generate cash. I will also re-classified the company in the dividend category rather than growth category in my portfolio.
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