Straco Corporation Ltd (SGX: S85) is a tourism asset operator with operation in China and Singapore.
In China, the company has the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions under its umbrella. As for Singapore, Straco had bought a majority stake in the iconic Singapore Flyer – one of the largest observation wheels in the world – in late 2014.

In the last six months, the company’s stock price surged by 14%. In this article, we will try to understand what might have caused the surge.
There are many reasons that cause the SGX stock price to move. Generally, stock price movement is driven either by business performance or investor’s sentiment.

The former is related to how a business performs in a given period, looking at metrics like growth, margins, production and others. Here, the ultimate driver is profit.
The latter is driven more by investors’ overall mood, which is described by emotional pairs such as greed and fear, optimistic and pessimistic, bull and bear, etc.
In the case of Straco, I believe it’s the former that better explains the surge in share price in the last six months.

Here are some figures to justify my point:

From the above, we can see that both revenue and profit attributable to shareholders for the first six months of 2017 grew on a year-on-year basis. The positive performance was mainly driven by an increase in number of visitors in 2017 as compare to 2016.
Sharp eyed investors will further notice that the growth in earnings per share of 15.1% during that period almost correlated to the 14% growth in share price during the last six months.

In all, I think that the growth in Straco share price in the past six months was mainly driven by its stronger operating performance.

Going forward, investors might want to pay attention to visitor numbers to the Straco’s assets as this metric will be a key driver of future performance for the company.

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