New Straits Times Online, 8 May 2014 - Tropicana marks assets for sale

New Straits Times Online, 8 May 2014

WORTH MORE THAN RM2B:, Disposals can help firm achieve target gearing level of below 0.3 times

TROPICANA Corp Bhd has identified assets worth more than RM2 billion, which it wants to dispose of over the next two years to unlock value.

Group chief executive officer Datuk Yau Kok Seng said the assets include raw development land, properties and other non-core assets.

“We have RM2 billion debt and our gearing ratio is 0.8 times. We want to dispose of the assets to achieve our target gearing level of below 0.3 times and strengthen our balance sheet,” Yau said.

This was part of Tropicana’s transformation business strategy and aim to become a top five developer in Malaysia within the next few years.

Tropicana is currently the ninth largest property developer in Malaysia by market capitalisation. In terms of sales, it is the fifth biggest company after SP Setia Bhd and UEM Sunrise Bhd.

“We want to be a top five premier developer by focusing on core assets and developments in strategic areas with strong emphasis on our DNA,” he said recently.

The DNA refers to the company’s focus on accessibility, connectivity, innovative concepts and designs, generous open spaces, amenities, facilities, multi-tiered security and quality.

Tropicana has undeveloped land with gross development value (GDV) of RM70 billion in the Klang Valley, Iskandar Malaysia and Penang.

In March, it sold 128ha near Kota Kemuning, Selangor, to Eco World Development Group Bhd for RM470.67 million. Tropicana is expected to announce a new land deal soon. CIMB Research said in a report in March that the company’s market capitalisation of only RM1.9 billion puts its GDV to a market-cap ratio of 41 times, the highest in the property sector.

It also said the company’s valuations are very attractive due to a selldown in its share price on perceived conflict of interest issues.

“Applying a 30 to 40 per cent discount to its fully diluted revaluated net assets of RM5.11, the lower end of our discount range, and in line with discounts accorded to smaller-cap property stocks, we get a valuation range of RM3.07 to RM3.58 for Tropicana. This would offer investors substantial upside of 121 per cent to 158 per cent,” it said.