Foolish Face-Off: Genting Singapore Ltd Versus Straco Corporation Ltd
With a myriad of companies to choose from in Singapore’s stock market, it might be hard to make the right choices.
In this article, I will compare two companies operating in the leisure industry, Genting Singapore (SGX: G13) and Straco Corporation Ltd (SGX: S85), to determine which might give you more bang for your buck.
Introducing the Contenders
Genting Singapore became the first operator of an integrated resort in Singapore when Resorts World Sentosa opened for business in 2010. The destination resort offers a casino, a water park, an aquarium, the signature Universal Studios Singapore theme park, hotels, and many more.
Straco, on the other hand, owns and operates tourism attractions in China and Singapore. In China, the company owns the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions. In our country, Straco has a majority stake in the iconic observation wheel, Singapore Flyer.
The table below shows the market capitalisation and revenue of the two firms. Market capitalisation is as of the closing prices on 5 December 2018. Do note that all figures quoted in the tables that follow are for the full year ended 31 December 2017 (FY2017) for both companies, unless otherwise stated.Round 1: Profitability
In the first round, we will analyse the profitability of the companies in terms of net margin and return on equity (ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.Straco’s net margin of 37% and ROE of 18% are better than that of Genting Singapore.
Round 2: Growth
In the second round, we will compare the compounded annual growth rate of revenue, net profit and dividend of the two firms for the past five financial years. Companies that can grow their sales and profits steadily over time should also see their share price rise.Straco has a far superior revenue and net profit growth compared to Genting Singapore. However, Genting Singapore has rewarded shareholders more handsomely than Straco has. To know more about Straco’s dividend and whether it can rise in the future, you can head here.
Winner: Straco, due to its better revenue and net profit growth.
Round 3: Valuation
As Foolish investors, it is essential to focus on the value of the business and not on the daily changes in the stock price. We will now compare the price-to-earnings (PE) ratio, price-to-sales (PS) ratio and dividend yield of the two companies. The values below are as of the closing prices on 5 December 2018.Straco has a better valuation than Genting Singapore due to its lower PE and PS ratios. Both companies offer the same dividend yield.
The Foolish Bottom Line
Final Score: 3-0 to Straco, since it won Genting Singapore in all three rounds.
Even though Straco has emerged as the clear winner, we have not investigated other important aspects of the company such as its balance sheet strength, free cash flow situation, future growth prospects, and so on. Potential investors interested in Straco should research more on the company before investing their money. This simple exercise covers the basics and should help to take some heavy-lifting off your back though.