Straco (SGX:S85): Diagnosing a 5.0% 5-Year Underperformance and Evaluating a Strategic Turnaround Opportunity

Straco Corporation Limited (SGX:S85), a Singapore-listed operator of tourism attractions in Asia, has underperformed by 5.0% over the past five years, despite maintaining a robust cash position and owning iconic assets like the Singapore Flyer. This article dissects the root causes of its underperformance, contextualizes its challenges within the broader Asian infrastructure and tourism sectors, and evaluates whether its strategic assets and recent operational improvements signal a viable turnaround opportunity.

Sector Context: Asian Infrastructure and Tourism in 2025

The Asian infrastructure landscape in 2025 is marked by divergent trends. China’s Belt and Road Initiative (BRI) has driven record-breaking investments in energy, oil and gas, and metals, with USD70.7 billion in construction contracts and USD51 billion in investments in 2024 alone [1]. Green energy projects under the BRI surged by 60% year-on-year, while oil and gas contracts hit USD24.3 billion [1]. Meanwhile, Southeast Asia’s tourism sector has shown resilience, with Vietnam’s tourism infrastructure expanding amid a 32% year-on-year sales increase for Club Med in the region [2]. However, domestic tourism in Indonesia and China has faced headwinds, including weak global demand and tariff actions, which have dampened visitor numbers and spending [4].

Straco’s core operations—aquariums, cable cars, and the Singapore Flyer—are exposed to these dual pressures. While the BRI has fueled infrastructure growth in energy and construction, Straco’s tourism-focused model relies heavily on discretionary spending, which has been volatile in recent years.

Straco’s Financial Performance: A Mixed Bag

Straco’s financials reflect a company navigating a challenging environment. Over the past five years, its revenue has fluctuated significantly. In Q2 2016, group revenue fell 5.2% year-on-year to $27.86 million, driven by declining visitor numbers at its Chinese aquariums [2]. More recently, the company reported a “substantial” net profit for FY2023, reversing a FY2022 loss, thanks to post-pandemic recovery in domestic and international tourism [3]. However, Q2 2025 results reveal renewed headwinds: quarterly revenue growth declined by 9.0% year-on-year, and net profit attributable to shareholders dropped 28.6% in 3QFY2024, partly due to a RMB exchange loss [1][3].

Straco’s EBITDA, while showing a 22.98 million increase over five quarters, remains modest at $35.48 million trailing twelve months (ttm) [1][2]. This pales in comparison to peers like WSP Global, which reported a 21.7% EBITDA increase to $632.8 million in Q2 2025 [5], or Trip.com, which achieved a 23% revenue growth in Q4 2024 [6]. These disparities highlight Straco’s underperformance relative to broader infrastructure and tourism players.

Earnings Understatements and Sector Gaps

Straco’s earnings appear understated when benchmarked against sector averages. For instance, the company’s EBITDA margin (calculated as $35.48M EBITDA vs. revenue figures from 2016 and 2023) likely lags behind peers in energy and engineering. WSP Global’s EBITDA margin hit 18.2% in Q2 2025 [5], while Baidu’s AI Cloud business achieved a 20% EBITDA margin in Q2 2025 [5]. Straco’s tourism model, reliant on fixed-cost attractions, faces thinner margins compared to scalable infrastructure or tech-driven services.

Moreover, Straco’s exposure to Chinese tourism—a segment hit by reduced outbound spending and competition—has exacerbated its vulnerabilities. Its Shanghai and Xiamen aquariums, for example, saw declining profits in 3QFY2024 [3], contrasting with Vietnam’s tourism rebound. This geographic concentration risks further underperformance if China’s tourism recovery stalls.

Strategic Turnaround: Assets, Cash, and Opportunities

Despite these challenges, Straco’s strategic position offers a path to recovery. The company holds $172.51 million in net cash as of September 2024 [3], providing financial flexibility to invest in asset upgrades or diversify into higher-growth segments. Its Singapore Flyer, a flagship asset, remains a stable revenue generator, while its cable car operations in China (e.g., Lintong Lixing) showed marginal improvements in 2024 [3].

A potential turnaround could involve:
1. Diversifying Revenue Streams: Leveraging its infrastructure assets to host events or partner with tech firms for immersive experiences (e.g., AR/VR exhibits).
2. Geographic Rebalancing: Reducing reliance on Chinese tourism by expanding into Southeast Asia’s growing middle-class markets, where Vietnam and Malaysia face significant infrastructure investment needs [5].
3. Cost Optimization: Mitigating currency risks through hedging and streamlining operations at underperforming assets.

Conclusion

Straco’s 5.0% five-year underperformance stems from sector-specific challenges in tourism and geographic concentration risks. While its EBITDA and revenue growth lag behind peers in energy and engineering, its strong cash position and iconic assets position it for a strategic rebalancing. Investors should monitor its ability to diversify revenue streams and capitalize on Southeast Asia’s infrastructure needs, which could unlock value in a sector poised for long-term growth.

Source:
[1] China Belt and Road Initiative (BRI) Investment Report 2024, [https://greenfdc.org/china-belt-and-road-initiative-bri-investment-report-2024/]
[2] Club Med achieves record-breaking performance in 2024, [https://www.hospitalitynet.org/news/4127831.html]
[3] Singapore Flyer operator Straco Corp posts lower revenue ..., [https://sg.news.yahoo.com/singapore-flyer-operator-straco-corp-030906133.html]
[4] Southeast Asia quarterly economic review: Q1 2025, [https://www.mckinsey.com/featured-insights/future-of-asia/southeast-asia-quarterly-economic-review]
[5] WSP reports Q2 2025 results, [https://www.wsp.com/en-us/news/2025/wsp-reports-q2-2025-results]
[6] Trip.com Group Limited Reports Unaudited Fourth Quarter ..., [https://investors.trip.com/news-releases/news-release-details/tripcom-group-limited-reports-unaudited-fourth-quarter-and-4/]