Straco

Straco: Straco shares hit a new all-time high of $0.85 yesterday, representing a whopping 93% gain since the start of the year. Recall, Maybank-KE had issued a Technical Buy on the counter in Apr ‘14, with a price objective of $0.63 and extension to $0.89. The house noticed that the rise from its Dec ‘09 major Wave 2 low of $0.10 took the form of a bullish weekly Elliott Wave 3 surge to its Apr high of $0.67. Straco’s 1Q14 net profit slid 1% to $5.4m on revenue of $14.7m (+29.6%). The stellar top-line was led by increased visitation at the group’s two major attractions (+22%) - Shanghai Ocean Aquarium (SOA) and Underwater World Xiamen (UWX). Bottom-line was however weighed by a 158.9% jump in admin expenses to $3m, mainly due to due to FX losses as the RMB weakened against SGD during the period; reversing from an exchange gain in the previous year. According to the World Travel and Tourism Council, total contribution of travel & tourism to GDP in China was Rmb4.78t (9.3% of GDP) in 2012 and is expected to rise by 8.9% p.a to Rmb12.1t (10.4% of GDP) by 2023. Meanwhile, the first China Tourism Law which came into effect in Oct last year, includes measures to address issues like unfair competition and forced shopping trips. This could potentially increase the flow of higher-yielding, independent travellers to Straco’s attractions. Overall, Straco has net cash hoard of $106.8m, representing 12.6¢ per share, and at the current price the group trades at 16.8x forward ex-cash P/E versus regional peer average of 21x.