Now Wu has to convince the investors the rationale of taking over a failed business. Paying at distressed price may be well and good, the next key step is to explain the viability of this new investment. The ball is in Wu's court now.
Market sell off today because of concern as CIMB Reseach point out:
CIMB Research does not see a quick turnaround for the Flyer, and downgraded the stock on Thursday night from "add" to "reduce" with a target price of 79 cents. While acknowledging immediate positive cash flows, it cautioned that high operating costs and interest cost could squeeze margins. "We will turn more positive when visitor arrivals gain traction and bring efficiency gains."
SINGAPORE FLYER ALREADY OPERATIONALLY SOUND
Tim Reid, partner of recovery firm Ferrier Hodgson, said in a statement yesterday 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 GENERATING POSITIVE CASH FLOWS. This enabled the receivers to pay all interest and make principal repayments on the debt the previous company owed.
"At the commencement of the receivership, the directors expressed concern that we would need to borrow funds for working capital to run the business," Mr Reid said.
"We have not borrowed funds . . . the receivers implemented changes to the way the business ran and these changes have brought about positive results."
Mr Reid also told The Business Times that with the exception of three larger units designated for corporate events, the Singapore Flyer's 65,000 square foot, three-storey commercial complex is otherwise fully occupied.
Mr Wu, Straco founder and executive chairman, said:
More information would be released when Straco Leisure officially takes over the asset from the receivers. This could be two to three months from now after administrative issues such as licences and permits are sorted out.
The question for us is whether:
* to doubt the ability of Straco Management as indicated by CIMB Research and sell out.
* or trusting in Tim Reid, partner of recovery firm Ferrier Hodgson indicating the 'Flyer is already operationally sound' & the ability of Straco in managing 'The Singapore Flyer' profitabily.
It's only firing a warning shot. Just 125,000 shares today = S$96,600. Straco has a lot of ammo => S$100 million cash haha. No worries, it will not let the share price fall too much.
How Straco can make good $ on the Flyer, according to William Lim They have to utilise the asset more. Pay to sit inside and do nothing cannot. Best if breakfast/tea/lunch/tea/dinner/supper time got food and music inside. Make it become a revolving restuarant! Offer one or two karaoke cabin. At 11pm, budget travellers can use it as capsule hotel for sleeping till 7am next morning. Straco, you can thank me later.
back in april 2013, there was this article that gave insights into Straco's thinking about M&A. The company appears to be conservative in assessing M&A opportunities that have come its way.
Hopefully, the Singapore Flyer is the best of all the opportunities.
furthermore, the company has successfully turned Xiamen Underwater World which it bought as a distressed asset.
Hopefully, the Flyer will be Straco's next trophy.
Then, Straco's share price can reach for the stars! ----> S$1.20 as a near-term target
STRACO CORP: After Another Solid Year And A Bigger Cashpile, Will There Be M&A?
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