Very interesting indeed! My guess is that the bulk of the nay-sayers have sold out their investment, and there may be another group of investors coming in to buy, that hold a more positive view about Straco's bet on SF. Just my two-cents of hunch.
Straco buying The Singapore Flyer at a knock-down price of S$140 million is a bargain from the original cost S$240 million to build and was launched in April 2008.
The 165-metre-high Singapore Flyer attraction by the Marina Promenade dubbed the highest observation wheel in the world, is a prominent feature of the Singapore skyline. The Singapore Flyer is a rare catch for Straco which will raise the company porfile. It would provide further earnings momentum and reduce concentration risk of it's operation in China.
My 5 reasons Straco the new owner will succeed in turning The Singapore Flyer to profitable venture:
1. Straco will deploy the purchase with part of its S$100 million cash pile. The company will be taking on some debt. (It's 90% share cost S$126 million). As compare to the company behind The Singapore Flyer ran into financial trouble, partly because it took on too much debt at the start and revenue ran short of projections.
2. Straco struck gold with the acquisition of the Xiamen Underwater World in 2007. It turned the aquarium around remarkably. I believe Mr Wu, Straco founder and executive chairman and his team through the years have learn valuable lessons and experience to develop plans in place and calculated all the risks in order to landed this spectacular deal and manage it sucessfully. Straco will reveal it's plan and reinvent itself and create excitement and will sucessfully turn The Singapore Flyer around remarkably too.
3. The remaining 10 per cent of Straco Leisure is owned by WTS Leisure, a unit of private bus operator Woodlands Transport Service. Woodlands Transport has 350 buses and has been in the local tourism business for over 25 years. WTS Leisure will able to compliment on it's business and bring in addition visitors for The Singapore Flyer through it network and reach.
4. Tim Reid, partner of recovery firm Ferrier Hodgson, said that he is "confident that the prospects of the Flyer are extremely exciting under the new ownership". He revealed that the Flyer is operationally sound and already generating positive cash flows.
5. Lionel Yeo, chief executive of the Singapore Tourism Board (STB), said that Straco had a strong track record in managing overseas attractions. STB will work with Straco Leisure on its plans for the success of The Singapore Flyer because the Flyer is a prominent feature of the Singapore skyline to attract tourists to Singapore.
One incredible benefit for Straco is that the Singapore Flyer is getting a lot of headlines these days and will surely continue to do so for news-related reasons. It's free publicity and the $ value is immense as it can up the cool factor and lead to higher visitorship numbers.
There is a cover story on the Singapore Flyer in The Sunday Times today, in case you don't already know.
Shouldn't there be a scarcity value to Straco, as it is the only direct Singapore-listed stock with its entire exposure to China's booming domestic tourism? Now add in the Singapore Flyer. This is a recognisable national icon and doesn't Straco deserve an additional premium for this? Just wondering....
Since the news of Straco buying over the Singapore Flyer late August 2014 there are some selling pressure. Most of the selling are from the weak holders as the volume are low. Straco had strong support at 72 cents. Those who believe in The Singapore Flyer it's good time to buy. Reasons:
Singapore Flyer - Some issues tackled, 'enormous upside' ahead:
1. Tour operators who had tour desks at the Flyer profiteering from discount tickets to walk-in visitors.
2. Tour Agencies were allowed to pay through credit cards resulting in the Flyer incurring credit charges of 2.5% to 5%.
3. Tenants rentals were less than 50% of the market rate and under the reciever the tenants pay market rate.
4. Function halls have left sitting idle, this place has enormous upside and the receiver decided not to commit to new major leases in order not to place the incoming new owner of the Flyer in an onerous situation.
5. So far for the first seven months of 2014, the Flyer's revenue rose 9% y-o-y while earnings before interest, taxes, depreciation and amortisation (Ebitda) margins increased 50%.
Tim Reid, partner at Ferrier Hodgson:
"If we can improve Ebitda, with tenants paying less than 50% of the market (price), and function halls that people are wanting to take which we have left sitting idle, (then) this place has enormous upside.
"I have enormous confidence that this business will do significantly better under the new owner than what we have done, which is only tweaking."
I believe Mr Wu, Straco founder and executive chairman and his team through the years have learn valuable lessons and experience to develop plans in place and calculated all the risks in order to landed this spectacular deal and manage it sucessfully. Straco will reveal it's plan and reinvent itself and create excitement and will sucessfully turn The Singapore Flyer around remarkably too.
WTS Leisure, a unit of private bus operator Woodlands Transport Service. Woodlands Transport has 350 buses and has been in the local tourism business for over 25 years. WTS Leisure will able to compliment on it's business and bring in addition visitors for The Singapore Flyer through it network and reach.
Singapore Flyer being part of the landscape at the Marina Bay will able to compliment it's acttraction to many activities at the Marina Bay throughout the year, it can attract additional local visitors to the Flyer. Straco being the new owner of the Flyer will benefit from enormous upside' ahead.
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