Straco Corporation

I'm pleased to add Straco Corporation into my portfolio as I firmly believe that it's a dividend growth stock compared to my REITs which are higher yielding but yield growth might be very limited.

Straco Corp is a developer and operator of aquatic-related facilities and tourism-related assets in China. It owns and runs Shanghai Ocean Aquarium (SOA), Underwater World in Xiamen (UWX) and also a cable car service in Xian. Over the past few years, revenue has been increasing as more domestic tourists visits Straco’s flagship attraction, the Shanghai Ocean Aquarium strategically situated in the New Pudong Area just next to Shanghai’s landmark Oriental Pearl Tower. One of the biggest plus point is that it has a cash balance of S$108.1 million, without any debt as of 30 Dec 2013. To add on, it has been debt free since 2008. Straco’s Executive Chairman, Mr Wu Hsioh Kwang, commented on the year’s results, “FY2013 saw another record performance for our Group, with revenue of $72.8 million and net profit of $34.1 million. Visitor numbers to each of our three attractions saw double digit growth ranging from 10% to 33%. Our operating cash flow reached $35.7 million for FY2013, an increase of 29.6% over FY2012. Our net asset value also increased 22.5% to 19.07 cents per share.”

(Screenshot of Shanghai Ocean Aquarium Website)
I believe in China's domestic tourism market as the country's people is slowly becoming more affluent and are beginning to travel more often than before. Furthermore, China's government have been introducing new incentives to promote domestic consumption and travel. Globally, more foreigners are setting their eyes on China as their next holiday destination so all bodes well for Straco. Overall, I see Straco as a defensive play with a strong balance sheet, strong cashflow generation with assets requiring low maintenance. A decent dividend yield (roughly around 4%) which is likely to grow at 5-10%  annually matching its earnings growth.
  
Right now, Straco is working on their Chao Yuan Ge project in Xi'an which will be completed in 2015/2016. When this project is up and running at Mount Lishan, it will also boost the number of users of Straco's cable car operation there. It will also be one of the attractions in Xi'an alongside with the Terracotta warriors and Qing ShiHuang Mausoleum. In the near future, I hope to see Straco acquire or develop another tourism-related asset as it's currently sitting on top of a huge cash pile.