Singapore Flyer operator wins $8.2m in financial arbitration case
Award arises from dispute over claim against insurer for losses due to Flyer's breakdown.
Mainboard-listed tourism player Straco Corp, which operates the beleaguered Singapore Flyer, has won a financial arbitration case that could have a significant impact on its bottom line for the current financial year.
In an announcement to the Singapore Exchange a few days ago, Straco said it had been awarded some $8.2 million with interest at 5.33 per cent per annum from April 26, 2018, until the date of payment.
The award arises from a dispute over its claim against its insurer for losses it suffered from the breakdown and subsequent shutdown of the Singapore Flyer for several months in 2018.
Its insurer - which cannot be named - had refused to pay for the cost of repairs and loss of profit arising from the breakdown.
Straco said the insurer had "denied claims... on the grounds that the reason for the breakdown and the principal reason for the loss of profit fall under certain exclusions set out in the Property Damage & Business Interruption (Industrial All Risk) Insurance Policy".
Straco then pursued its claim early this year through arbitration via the Singapore International Arbitration Centre (SIAC). The four-day arbitration hearing took place in January this year.
The company was notified of its successful claim by the SIAC on June 2.
The insurer has three months from this date to launch an appeal on the decision at the courts. But legal experts tell The Straits Times that this rarely happens as participants would have generally agreed to abide by the SIAC's decision.
"The award of the insurance claim is likely to have a positive material financial impact on the group's financial results for the year ending Dec 31, 2021," the company said in its announcement.
This is good news for Straco, which has been going through a tough 18 months as the Covid-19 pandemic forced the closure of all its tourism attractions in China and Singapore, and subsequent reopening with capacity restrictions.
Besides the Singapore Flyer, it owns and operates the popular Shanghai Ocean Aquarium, Underwater World Xiamen and Lintong Lixing Cable Car. It also has development rights to cultural site Chao Yuan Ge in China.
The company's revenue plunged from $109 million in financial year 2019 to $30 million in FY2020, while net profit of $38.1 million for FY2019 turned into a loss of nearly $1 million last year.
Despite the headwinds of last year, Straco's fundamentals and balance sheet remain strong.
Even amid challenging times, the company still managed to build up net cash of some $155 million at the end of Dec 31.
Straco was founded and is controlled by Singaporean entrepreneur Wu Hsioh Kwang, and its other big shareholder is China's state-linked agency China Poly, with a 22 per cent stake.
Given the recovery in China economy and the pick-up in tourism, the company expects FY2021 to be a better year.
Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.