Have been going in and out of the postings on Olam. Poor thing, the company has so much debt, no free cashflow, and lots of debt due in the next 12 months. It's not the kind of stock a value investor would want to touch. The one to fall in luv with is Straco -- lots of free cashflow, lots of profit every year and ZERO DEBT. Valuation-wise, it's a gem at 25.5 cents a share, selling for only 5X ex-cash.
Have you guys noticed 1 attractive feature of Straco? The amount of money it spends on capex to keep operations going ('maintenance capex) is quite small. In FY11, it spent S$1.3 m on 'property, plant & equipment' compared to a net profit of S$17.1 million.
The S$1.3 m on PPE was more than adequately covered by the interest income of the cash pile of S$1.4 million.
The same trend continues into 2012....
I can conclude that this is a wonderful business! Have you discovered it? Just think how tough it is in the capex-intensive business in the manufacturing sector!
Old but insightful posting on Straco Corporation Limited by donmihaihai
3Q2011 results is surprisingly good. The results basically fly yoy. I love aquarium business especially those that situated at the right place and lure people in just like that. It is the one of the must visit place not because people love to visit an aquarium. Somehow a certain % of visitor will step into SOA when they are in Shanghai. Same thing as visiting Underwater World Singapore when in Singapore.
The cost of operating an aquarium is pretty much fixed and when revenues crossed certain level, return will become great. It will not be fast growing but it will most likely to be very profitable growth. Out of the huge number of lost making aquariums in China, Straco owns two profitable aquariums. It acquired UWX few years back and turns out to be a smart buy. With it almost $80 million cash on hand, buying growth is easy but buying profitable assets is another story. Not everything is equal.
There is nothing much to analyse about the number except on the following
1) Fixed Assets â I have a strong feeling that Straco is under invest in itself
2) Expenses â This is an area where management can control.
3) Revenues â Telltail sign of profitability and the place to be for visitor
4) No sign of aggressive gunning for growth.
They'r totally different business. I dun need to go aquarium to watch fishes when i'm hungry. But i'll need rice, wheat, sugar n other soft commodities to survive. These r necessities!! That explains the weightage. I'll invest in Straco shares when i hv extra money or when the management shows me how they want to grow their business. Currently, quite passive.