Straco Corporation

[weijian]

It seems like it is pretty hard to get such replacement parts and the Spore Flyer is down for more than 2 months already, a huge bulk during the holiday season. And the double whammy with the Wuhan virus creating havoc in China right now. The Communist Gov will probably start to ban more and more outdoor activities before the infection is seen to be controlled and their flagship attraction SOA will probably be affected in the next few months ahead. Nobody knows how long it will be now, although the expectations is that it will be shorter than the SARS virus.

Shops at Singapore Flyer hit, as giant wheel stays shut more than 2 months after technical issue

The Flyer’s spokesperson added that investigations and a preliminary test revealed some technical issues affecting a small section of the outer layer of a spoke cable.

The Flyer has 112 spoke cables. “Each cable is a unique assembly of a classic wire-rope core consisting of multiple helically twisted wires and layers of profiled, Z-shaped wires that interlock with one another,” the spokesperson said.

The Flyer is seeking a suitable replacement for the cable, although there is no immediate safety or structural concern, the spokesperson added.

https://www.todayonline.com/singapore/bu...-technical

[Elty]

Temporary Closure of Straco's China Attractions - Shanghai Ocean Aquarium, Underwater World Xiamen and Lixing Cable Car.

http://straco.listedcompany.com/newsroom...3LPC.1.pdf

[vingaard]

The closure was since 25 Jan. Why didn't they announce it until 28 Jan?

Sent from my CPH1917 using Tapatalk

[TerryT]

1st day of CNY....

[CY09]

From the looks of it, there is a high chance, straco will have close to zero revenue for 1Q because all of its attractions are closed.

I wonder how badly this will hit, the company

[karlmarx]

I suppose some kind of estimate can be done by referring to previous year's Q1 and discounting its revenue based on different assumptions of severity.

Cash levels will take a hit from the overheads, but is unlikely to be of significant damage to book value. As WB will put it, think of it as a "dividend cheque lost in the mail."

What is more important is how the company will perform in the next 5 to 10 years. And whether present market prices represent an attractive discount to such performance.

[miguelneto]

I wrote up Straco in May of 2019 at my blog: https://netosnotes.blogspot.com/2019/07/...elops.html

I revisted the company recently after the continued price drop: https://netosnotes.blogspot.com/2020/02/...ation.html

And I've also made a short presentation on the company: https://drive.google.com/open?id=1yONP6W...pWHU4vm84G

I think long-term, SCL owns high-quality assets.

[opmi]

Thanks for sharing.

[weijian]

I wrote up Straco in May of 2019 at my blog: https://netosnotes.blogspot.com/2019/07/...elops.html

I revisted the company recently after the continued price drop: https://netosnotes.blogspot.com/2020/02/...ation.html

And I've also made a short presentation on the company: https://drive.google.com/open?id=1yONP6W...pWHU4vm84G

I think long-term, SCL owns high-quality assets.

hi miguelneto,
Thanks for posting your Straco's analysis, I learnt alot from it. I think your journey from May2019 to 4th Feb, and beyond that, will be complimentary to the excellent fundamental analysis you have done.

A couple of thoughts to your discussion:

- You made references a few times to the excellent location of SOA (also been made by various VBs here in the past) - It can't be denied that a good location is supremely conducive for a visit, but i thought it might be overrated especially if the ultimate attraction is the experience it brings. Case in point, Wisma Atria and Ion Orchard are located in the same vicinity down Orchard Road, but there is no debate which offers a better experience - who is going from strength to strength, and who is going down the slippery road to oblivion. And then become worth more when "dead" than "alive"!

- I haven't been to HCOP but as per what you suggested, it does look like a SOA-Disneyland cross-breed. Disneyland and SOA weren't close enough and hence Disneyland became complimentary to SOA by expanding the entire Shanghai tourist pie, but the same can't be said for HCOP's impact onto SOA-Disneyland. Disneyland has a moat with its IP and will be spending CAPEX to renew its assets. I wonder what kind of asset renewal has been done or would Chairman Wu be doing for SOA to attract repeat visits? I thought it is too much of a coincidence that SOA's decline in visits actually coincide with HCOP's ramp up in operations.

- I thought the crux to an investment in Straco - is not the FCF generative ability nor its cash holding - These are quite clear to every investor who bother reading other comments or the AR itself. As you have alluded, it would be how Chairman Wu uses its 2 mentioned abilities to make new acquisitions. Things haven't been cheap in the last few years (unlike SF which came as a distressed asset in 2014). So it would be interesting to see what will happen to those leveraged tourist/entertainment players and how Straco can take advantage of the situation, moving forward.

[karlmarx]

I wrote up Straco in May of 2019 at my blog: https://netosnotes.blogspot.com/2019/07/...elops.html

I revisted the company recently after the continued price drop: https://netosnotes.blogspot.com/2020/02/...ation.html

And I've also made a short presentation on the company: https://drive.google.com/open?id=1yONP6W...pWHU4vm84G

I think long-term, SCL owns high-quality assets.

SOA's visitor numbers does not look like it is growing. And all of SCL's visitor numbers fell slightly last year. In the next 5 years or so, SOA may also have to spend a bit to spruce up the place. So I think a valuation of 15x p/e for SOA looks a bit aggressive to me. 

Given the current market price, the implied valuation of SOA looks quite realistic.