A strong turnout of Straco shareholders. NextInsight photo.
Time & date: 10 am, 29 April 2015
Venue: Amara Hotel
THERE IS still a mistaken notion among some people (including the general public in Singapore) that the Singapore Flyer is bleeding red ink. 
Singapore Flyer: Straco Leisure (90% owned by Straco) became the new owner from end-Nov 2014.
NextInsight file photo.At the AGM, the management was asked for initiatives being undertaken by Straco Corp to turn it around.
CFO Amos Ng, citing page 87 of the annual report, said that the Flyer achieved revenue of S$3.7 million and a loss of nearly S$600,000 in December 2014, the first month after it was acquired by Straco and a 10% JV partner.
To some shareholders' (pleasant) surprise, Amos said the loss figure took into account one-off expenses -- for stamp duty ($1.5 million), and legal and professional fees totalling S$2.2 million related to the acquisition of the Flyer.
In other words, operationally, the Flyer was profitable in Dec 2014, the final month of its financial year.
In fact, a CIMB report in March 2015 had not only highlighted the profitability of the Flyer but estimated the figure to be around S$1.4 million pre-tax. This CIMB report was republished on NextInsight. (see: STRACO: Target Price Raised To $1.01 On Positive Factors, Says CIMB)
Other writers -- Kyith Ng and Kevin Scully -- also had flagged that the Flyer was profitable in Dec 2014.
Asked how the Flyer had performed since then, Amos said it's sensitive to discuss this topic as the 1Q results are scheduled to be released soon, on 8 May.
 CFO Amos Ng. NextInsight file photo.But Amos added: "During the bidding process and in our due diligence, we found that the Flyer has a lot of potential but it wasn't quite well managed. For instance, the cost structure. To us, there was a lot of wastage and excesses. "Our first task was to stabilise the team and bring in new hires to strengthen the team. The next thing was to boost the revenue. About 80% of it comes from ticket sales, 20% from rental of space. If you look at the retail mix, it's far from ideal. "We can't disclose our plans yet but in our pitch to the tourism board and the URA, they were convinced we can make a difference." |
To a shareholder who pointed out that the Flyer still faced challenges such as lack of accessibility, Amos said these have been highlighted to the Singapore Tourism Board, the landlord, and there is an ongoing discussion on how to overcome them.
"Our interests are aligned."
Amos said the lease period of the Flyer is 30 years, ending in July 2035 with an option to renew for another 15 years.
» Disneyland impact: Turning to Straco's flagship aquarium in Shanghai, another shareholder asked for the chairman's view on the likely impact of the opening of Disneyland in Shanghai in 2016.
Straco chairman/CEO Wu Hsioh Kwang and his wife, non-executive director Chua Soh Har, jointly own about 55% of the company. Both are Singaporeans.Mr Wu Hsioh Kwang replied: "Disneyland is projected to attract an extra 30 million tourists to Shanghai. That's positive for us. The tourists will not go to one place only -- they will definitely visit other places too."
» Cash pile: To a question on why Straco was "keeping so much cash", Amos replied that the company had been looking into opportunities for M&A, and it was its strong financial position that helped it win the bid for the Singapore Flyer.
The company had taken into account all stakeholders, and had paid dividends every year to shareholders since FY2006. (For FY2014, the final dividend is 2 cents a share.)
Since 2008, Straco has had no borrrowing and a growing cash pile -- that is, until the S$140-million acquisition of the Flyer for which Straco took a S$84-million bank loan.
As at end-2014, Straco had $112.5 million in cash on its balance sheet but after taking into account the loan it took for the Flyer, Straco's net cash is not high, Amos pointed out.
Still, Straco's aquarium business generates very high cashflow, and its cash pile will continue to grow -- by S$45.5 million this year, according to CIMB. It has forecasted that Straco's cash level would hit S$158 million by end-2015.
