The market probably have wind of Straco as the main contender for Singapore Flyer. Since June this year the share price has being increasing from about 60 cents to over 80 cents. Thus I believe the acquisition of Singapore flyer is positve for Straco. These are some of the reasons:
* It would provide further earnings momentum.
* It reduce concentration risk of it's operation in China.
* Straco more than $100 millions can be use for business expansion.
Zouk already shows interest in the Singapore Flyer location. Straco management under the leadership of Mr Wu can devise a holistic strategy (working with STB and Zouk, for example) to turn Singapore Flyer into profitabe venture.
Straco can raise cash easily. Example: through right issue and than sweeten with bonus issue by, 1 for 4 @ 50 cents (40% discount) with bonus issue 1 for 4. This will kill two birds with one stone.
1. It can raise cash by more than $100 millions without getting in debt.
2. Increase Straco free market shares liqudities.
Proposed Acquisition of the Business and Assets of Singapore Flyer Pte. Ltd. for $140 milliom. I believe at $140 milliom is great bargain for Straco and is therefore positive for Straco. Funding the acquisition will not be a issue.
Straco & WTS Leisure together paying S$140 m for SG Flyer. How much annual return (from ticket sales, from rental, and whatever else) should it achieve for a decent ROI assuming there is 20 years lease left on the land plus an option to extend for 15 years?
Background: The project was formally announced and endorsed on 27 June 2003 by the Singapore Tourism Board with the signing of a memorandum of understanding, formalising the understanding between the developer and tourism board with regard to the land-acquisition process. Under this agreement, the tourism board was to purchase the plot of land in Marina Centre from the Singapore Land Authority, and lease it to Singapore Flyer Pte Ltd for 30 years with an option to extend the lease by another 15 years. The land was to be rent-free during the construction phase of the project. In July 2003, Jones Lang LaSalle was appointed as the real estate advisor. Takenaka and Mitsubishi were selected as the main contractors, and Arup as the structural engineer.
Straco Leisure, a subsidiary of Straco Corporation, on Thursday (Aug 28) announced that it bought the Singapore Flyer for S$140 million. The Flyer has been in receivership for over a year.
In a media release, Mr Tim Reid, the Receiver of Singapore Flyer, said both parties have entered into an agreement to sell the business and assets of the Singapore Flyer to Straco Leisure. He said the receivers and managers are "confident that the prospects of the Flyer are extremely exciting under the new ownership".
Straco Corp's Executive Chairman Wu Hsioh Kwang has more than a decade's experience in managing attractions. The company runs tourist attractions in China in places such as Shanghai, Xi'an and Xiamen.
Mr Lionel Yeo, Chief Executive, Singapore Tourism Board (STB) said, “The Singapore Flyer is a key attraction in the local tourism scene. We are therefore pleased that Straco Corp, a Singaporean company with strong track record in managing overseas attractions, has chosen the Singapore Flyer as their first attraction in Singapore to establish a presence back home.”
STB will work with Straco Leisure on their plans for the Flyer.