Straco

Straco: OSK DMG special situations report have a Buy call on Straco (the owner of Shanghai and Xiamen’s aquarium), noting that the group is conservatively worth $0.70 on an ex-cash basis. Recall, the company on Friday reported net profit growth of 73% to $34m for FY13 on the back of increased visitation across all its three attractions. Visitor numbers to each of its three attractions saw double-digit growth ranging from 10-33%, driving a 32% increase in top-line to SGD73m. There is also a strong appreciation of Straco’s cash-generative business model coupled with strong pricing power, resulting in pretax margin of 68% and a net cash of $130m. Going forward, Straco expects to benefit from rising domestic travel as the Chinese government looks towards higher domestic consumption, with aims to drive steady growth across its tourism assets. The stock is attractively priced at an ex-cash 8.5x FY13 P/E. versus regional peers of at least 20 to 30x.