Since its listing in SGX in 2004, the Company has only made 1 major M&A - acquiring Underwater World Xiamen for $12.33 million in Sept 2007. In FY 2006, the asset generated NPAT of $1.9 million so it was a pretty decent buy. Going forward, the asset enabled Straco aquarium division results to surge dramatically with PBT increasing from $14.5 million in 2008 to $31.7 million in 2012. This is attributed to rising visitor level (the Underwater World Xiamen had seen visitors increasing by over 50% and higher ticketing price). Unfortunately, this was the sole major M&A in this period highlighting the difficulty of acquiring excellent assets in China.
Straco refuses to come down in price. Instead, there is enough accumulation despite the illiquidity to nudge the price upward (closed at 31 cents yesterday).
I decided to revisit the financial statements to try to understand the business better -- and perhaps convince myself to pay up for the stock at current levels.
I found the cashflows amazing.
In 2012, Straco generated S$27.5 m in operating cashflow on revenue of $55.2 m revenue.
It didn't have to use net cash for capex, as its S$1.1 m PPE expenditure (presumably to repair, to replace marine exhibits, etc) was more than covered by its interest income of S$1.5 m.
Cash really pours into its bank account.
So what did it do with the cash? Last year, it paid $6.5 m as dividends and $4.6 m to buyback shares.
Net net, it had $17.1 m from 2012 to add to its cash pile, raising it to S$96 million.
Any one who follows the cash flows above will recognise that this is a solid business matched by few others.
Straco will pay its 1.25 cent dividend on 22 May 2013. Anyone buying now at 31 cents will need to wait less than 2 months for the dividend -- the annualised yield is 1.25 divided by 31 x 6 x 100% = 24%!
Then you wait 1 more year ... to get the regular 4% yield assuming the payout is still 1.25 cent a share. (Of course, Straco is so cash-rich it can afford to raise its dividend, unless it has a M&A project in the pipeline).
I thought of looking for comparables and found them right at our doorstep -- Haw Par Corporation. It owns 2 aquariums in Sentosa and in Pattaya.
In its annual report 2012, Haw Par gave the turnover of this business segment as $30.2 m and the operating profit as $11.9 million. Well, that's a nice juicy 39% margin, which is similar to Straco's!
