Straco Corporation

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Straco recently did a 3Q2021 update of its results and the 3rd quarter is the most important quarter of each year. The results are pretty disappointing with a 30% reduction in operating/net profit compared to FY20, due to the various closures and tightening of measures.

We can expect that these actions will stay around for some time as China continues to adopt zero Covid. One may also suspect due to their effective zero covid policy, the local chinese population will continue to be immunologically naive in coming years (2022 and beyond). After been ravaged by Covid-19 delta cases in 2021, the rest of the world, whom adopted a "living with covid" strategy may actually much more equipped and hence in a better situation than China in 2022 and beyond.

There will probably be more bad news for Straco in time to come.

In the meanwhile, Straco's current market cap is ~400-420mil. Chairman and family owns 55% and anything it doesn't own costs ~180mil. It currently has net cash of 173mil and that is pretty close to been sufficient to doing a MBO (Management Buy Out) at current prices. Putting price aside, it reminds to be seen whether it can buy out its SOE shareholder, China Poly who owns 22% (or is it wise to do so?) Or both the founder family and China Poly can combine to delist the company?

3Q2021 update:

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