New Straits Times, 21 March 2014 - Tropicana's fair value higher at RM2.27

New Straits Times, 21 March 2014

RHB Research has maintained its "buy" call on Tropicana Corporation Bhd after the latter announced on Wednesday the disposal ofl24.9ha in Tropicana Aman (or Cantil City) to Eco World Development Group Bhd for a total consideration of RM471 million.

The research house said it made no changes to Tropicana's eamings estimates.

However, RHE slightly revised the fair value of Tropicana to RM2.27 (from RM2.19) after factoring in the proposed land disposal into its revalued net asset valuation calculation.

"We are not surprised by this news, as the management has indicated its intention to dispose of some of its landbank as part of Tropicana's de-gearing exercise," the research house said in a note to investors yesterday.

The disposal for cash consideration of RM4707 million translates into RM3S per sq ft, given Tropicana's land cost of RM18 psf. The disposal will result in a significant RM170 million net gain.

Post-disposal, Tropicana will still hold net developable areas of 178ha.

The deal will see Tropicana and Eco World sharing the land's primary infrastructure, such as main roads and sewerage treatment plants. The disposal will accelerate the unlocking of Tropicana's asset value.

Its net gearing is likely to stay at the current 0-55x level even after the land disposal-.