Straco Corporation

[JanQuin]

@JanQuin,
No. Din't attend Straco AGM.
However, do look out for the ppt materials for your favourite companies.
This year onward, AGM should have ppt and also meeting minutes.


Enjoy Singapore Flyer, Cruise and MBS light show:


Take a look at Penguin International Limited if you have some time:
(Link to PIL presentation on 25 April 2019)

[chialc88]

Hi WeiJian,
I guess I had been overdone again.

Consider this as my last post for 2019.

Wish all valuebuddies a healthy body and healthy mind.

Continue to share your ideas as many other valuebuddies including myself will benefit from your kind gesture tremendously
thou you might not know it.

See you again. 再见 It's been a long day.

[weijian]

The opening the Disneyland in Shanghai, expanded the entire pie - ie. it brought more tourists to Shanghai as a whole. A new Ocean Park definitely cannibalizes SOA business.

New Shanghai Ocean Park hoping to glean some of Disney’s magic and net 5 million visitors a year

Creator Haichang Ocean Park being seen as playing important role in cementing city’s plan to become a world-class tourist destination

Haichang Ocean Park Holdings, the mainland’s largest marine theme park operator, is targeting annual attendance of five million visitors at its soon-to-open venue in Shanghai, buoyed by the rising affluence of people living in the Yangtze River Delta region. Wang Xuguang, chief executive of the Hong Kong-listed company which is based in the northern Chinese city of Dalian, told South China Morning Post that estimate was based on a joint assessment with local tourism authorities on entertainment demands.

http://www.scmp.com/business/companies/a...ic-and-net

The Shanghai Haicheng Ocean park opened for business last week. Looking at the pictures, it looks like a cross breed between SOA and Disney land. Ticket prices are 279yuan (SHCOP) vs 155yuan (SOA), which is 1.8x more expensive. To put into perspective at Sentosa, USS (76sgd) and SEA (39sgd) is at ~1.95x more expensive. Ratios are pretty similar although it suggests SHCOP/SOA is a slightly more value proposition compared to USS/SEA benchmark. Of course, with ticketing agents and other tie ups/promotions, the difference might be insignificant.

That said, check on ctrip seems to suggest SHCOP rating of 3.9 (415 reviews) needs to do quite alot of catch up to SOA (rating of 4.5 with 13439 reviews). Remains to be seen whether SHCOP can resolve the issues and meet the expectations. SHCOP officially launched last week and so Straco's 1Q19 results would be very interesting to review.

http://www.themeparx.com/shanghai-haicha...rk/?page=1
SHCOP ratings on ctrip: http://you.ctrip.com/sight/shanghai2/4651499.html

yeokiwi's ctrip post on SOA: https://www.valuebuddies.com/thread-2915...#pid144898

Straco's 1Q19 results seems to suggest some decline in its topline and visitor numbers. Could it be related to SHCOP (as competition) or simply a general decline in discretionary spending in China as the trade war hits?

As Kelvesy mentioned before, such tourist attractions have fixed costs with operating leverage which cuts both ways - If it is attractive, marginal cost of accommodating more visitors is almost zero. If it is not attractive, then one still has to pay for all the feeding of the fishes and water filters despite the less eye balls.

1Q17 topline: 27.5mil. Visitors: 1.06mil
1Q19 topline: 24.5mil. Visitors: 0.986mil (Reduction of 74k)

1Q19: https://links.sgx.com/FileOpen/Straco1Q1...eID=559352
1Q18: http://straco.listedcompany.com/newsroom...U9I5.1.pdf

[Coco]

Business Times article (attached) today on the positives of Straco. Strong free cashflow, lots of cash building up, inexpensive valuation.

(Didn't mention that visitorship nos. are flat )

[edragon]

Business Times article (attached) today on the positives of Straco. Strong free cashflow, lots of cash building up, inexpensive valuation.

(Didn't mention that visitorship nos. are flat )

Flat is good. Slowly milk it. I like.

[weijian]

Business Times article (attached) today on the positives of Straco. Strong free cashflow, lots of cash building up, inexpensive valuation.

(Didn't mention that visitorship nos. are flat )

I took a quick look at Merlin. It is majority owned by Kirkbi (29% stake), a charity trust fund The Wellcome Trust (5%) and 2 investment managers - Value Act Capital (9.3%) and Marathon Asset (5.8%).
Kirbki (the Lego guys) actually owns this company, IPO-ed it and wants to take it private again. Quite interesting that on 23rd May, they disclosed a discussion with Value Act Capital about selling the company, and then an offer was made on 28th June.

https://www.ft.com/content/c7757e7a-7cd5...85092ab560

The context for this Merlin privatization looks quite different from what the ST writer is alluding wrt to Straco i would feel.

Mr Wu is almost 70 - But I also disagree that he lacks a succession plan as the ST writer says so. The fact that there are 2 Wu juniors who have worked for ~10-15years in the company, currently holding SVP positions in the company and are alternate directors in the BOD - smells of a strong succession plan to me? The Wu family will probably to continue to issue shares to themselves from the regular share buyback that they have been doing. Finally, i can't really fathom why would any Asian boss want to sell and then become an employee instead?

Of course, we can't rule out a PE-backed GO from the Wu family (can't help speculating with all the recent privatizations on-going). But it probably has to be done together with its SOE minority parent to hedge their political risks.

[weijian]

The opening the Disneyland in Shanghai, expanded the entire pie - ie. it brought more tourists to Shanghai as a whole. A new Ocean Park definitely cannibalizes SOA business.

New Shanghai Ocean Park hoping to glean some of Disney’s magic and net 5 million visitors a year

Creator Haichang Ocean Park being seen as playing important role in cementing city’s plan to become a world-class tourist destination

Haichang Ocean Park Holdings, the mainland’s largest marine theme park operator, is targeting annual attendance of five million visitors at its soon-to-open venue in Shanghai, buoyed by the rising affluence of people living in the Yangtze River Delta region. Wang Xuguang, chief executive of the Hong Kong-listed company which is based in the northern Chinese city of Dalian, told South China Morning Post that estimate was based on a joint assessment with local tourism authorities on entertainment demands.

http://www.scmp.com/business/companies/a...ic-and-net

The Shanghai Haicheng Ocean park opened for business last week. Looking at the pictures, it looks like a cross breed between SOA and Disney land. Ticket prices are 279yuan (SHCOP) vs 155yuan (SOA), which is 1.8x more expensive. To put into perspective at Sentosa, USS (76sgd) and SEA (39sgd) is at ~1.95x more expensive. Ratios are pretty similar although it suggests SHCOP/SOA is a slightly more value proposition compared to USS/SEA benchmark. Of course, with ticketing agents and other tie ups/promotions, the difference might be insignificant.

That said, check on ctrip seems to suggest SHCOP rating of 3.9 (415 reviews) needs to do quite alot of catch up to SOA (rating of 4.5 with 13439 reviews). Remains to be seen whether SHCOP can resolve the issues and meet the expectations. SHCOP officially launched last week and so Straco's 1Q19 results would be very interesting to review.

http://www.themeparx.com/shanghai-haicha...rk/?page=1
SHCOP ratings on ctrip: http://you.ctrip.com/sight/shanghai2/4651499.html

yeokiwi's ctrip post on SOA: https://www.valuebuddies.com/thread-2915...#pid144898

Straco's 1Q19 results seems to suggest some decline in its topline and visitor numbers. Could it be related to SHCOP (as competition) or simply a general decline in discretionary spending in China as the trade war hits?

As Kelvesy mentioned before, such tourist attractions have fixed costs with operating leverage which cuts both ways - If it is attractive, marginal cost of accommodating more visitors is almost zero. If it is not attractive, then one still has to pay for all the feeding of the fishes and water filters despite the less eye balls.

1Q17 topline: 27.5mil. Visitors: 1.06mil
1Q19 topline: 24.5mil. Visitors: 0.986mil (Reduction of 74k)

1Q19: https://links.sgx.com/FileOpen/Straco1Q1...eID=559352
1Q18: http://straco.listedcompany.com/newsroom...U9I5.1.pdf

2Q18 visitors: 1.22mil
2Q19 visitors: 1.08mil (-11.4% or 140k)

Visitor numbers have decelerated from -7% (1Q19) to -11.4% (2Q19). Q3 visitor numbers, which is the peak season for China holidays and account for ~40% of annual visitor numbers for Straco will be a very key metric to watch.

2Q19: https://links.sgx.com/FileOpen/Straco2Q1...eID=574236

A check on CTrip shows SHCOP has caught up to SOA with rating of 4.4/5 (~6000reviews). Its prices have also increased from 279yuan to 350yuan.

[¯|_(ツ)_/¯]

Suspended again: Singapore Flyer 19 Nov 2019

(click for ST article)

Suspended due to technical issue involving one of the spoke cables.
Singapore Flyer undergoes inspection, repairs and rectification works.
It's unclear when the Flyer will reopen to public.
The reopening will subject to Building and Construction Authority (BCA) approval.

Affected customers with prior flight bookings to call 6333-3311. 

Updates will be available on Flyer's website, Facebook page and WeChat account (新加坡摩天轮).
(click for status update)


=========== Signature ===========

感恩 Thank you

[¯|_(ツ)_/¯]

Who is buying Straco?

Despite the dropped in price, Straco is at still staying as my top 3 holding.
I'm eyeing to dip my toes into the hot bath as the share price continue to weaken.

In additional to myself, at least 3 players publicly shown their love for Straco.

1. Of course, you know. Straco itself started to buy-back it's shares.

2. Lim Jun Yuan of thesingaporeaninvestor.com
JY published a very comprehensive article in 17th September 2019. 
On that article, JY will be keen if Straco dropped to 67 cents.
Obviously, JY's investment merit does not include analysis on the impact of halted Singapore Flyer.
On the contradictory, at that time, JY felt that Singapore Flyer could be a beneficiary of the re-development of Greater Southern Waterfront announced during 2019 National Day Rally PM speech.
(Click to see Jun Yuan's 10 pages analysis on Straco)
Today, yes, 3rd December 2019, JY updated that he is vested in Straco.
In general he is very optimistic about Straco business but prefers to wait for further update on Singapore Flyer by Straco management.
(Click to see Jun Yuan's deep dive into visitor feedbacks)

3. Brian of 3Fs 3foreverfinancialfreedom.com
B published on yesterday, 2nd December 2019 that he had recently brought Straco 67.5cents
(Click to read what is the reason for Brian to buy Straco at 67.5cents)


Hope you enjoy the newly launched Workfare as much as I do:


Adding Straco to your watchlist?
=========== Signature ===========

感恩 Thank you

[weijian]

Who is buying Straco?

Despite the dropped in price, Straco is at still staying as my top 3 holding.
I'm eyeing to dip my toes into the hot bath as the share price continue to weaken.

In additional to myself, at least 3 players publicly shown their love for Straco.

1. Of course, you know. Straco itself started to buy-back it's shares.

2. Lim Jun Yuan of thesingaporeaninvestor.com
JY published a very comprehensive article in 17th September 2019. 
On that article, JY will be keen if Straco dropped to 67 cents.
Obviously, JY's investment merit does not include analysis on the impact of halted Singapore Flyer.
On the contradictory, at that time, JY felt that Singapore Flyer could be a beneficiary of the re-development of Greater Southern Waterfront announced during 2019 National Day Rally PM speech.
(Click to see Jun Yuan's 10 pages analysis on Straco)
Today, yes, 3rd December 2019, JY updated that he is vested in Straco.
In general he is very optimistic about Straco business but prefers to wait for further update on Singapore Flyer by Straco management.
(Click to see Jun Yuan's deep dive into visitor feedbacks)

3. Brian of 3Fs 3foreverfinancialfreedom.com
B published on yesterday, 2nd December 2019 that he had recently brought Straco 67.5cents
(Click to read what is the reason for Brian to buy Straco at 67.5cents)

1. A sharebuyback generally can signal 2 things - (a) reason of buyback (b) intent of share buyback. The general reason for sharebuyback because the one controlling the money thinks it is cheap, is generally valid. As for the intent, Straco is known to buy back shares and then issue them as options/shares to the board (the last time i calculated, the majority goes to the major shareholder and family). While OPMIs like us prefer Mgt to cancel those "undervalued" shares as the optimal choice if the buyback option is chosen, i would still consider the buybacks a net positive even though it is obvious that the major shareholder is "slowly" taking over the company via the share buyback option.

2. Actually, i don't see how the GSW redevelopment can actually directly benefit the Spore Flyer. On the other hand, the way the Spore Gov/STB works to improve itself to be more and more attractive as a tourist magnet has a more direct impact. As such, visions/plans like IR expansion etc will benefit the Spore Flyer by expanding the entire pie (ie. more visitors and tour packages)

Straco is a very interesting proposition because it is a very FCF generative business with certain degree of operating leverage. Of course, operating leverage cut both ways - it works on the way up and down. Spore Flyer was bought as a distressed (but decent) asset and d.o.g had also previously mentioned that Straco Mgt had revamped the ticketing to improve margins. So i think the elephant in the room is really the SOA, which is obviously getting impacted by a newer/more dynamic competitor down the river.