Oriental Daily, 12 January 2014 – Tropicana Corporate Berhad to cash out RM18 billion for company's prime land

Oriental Daily, 12 January 2014

Recommend by: Affin Investment

Follow by the recent property tightening measures, the sentiments on the property market has become weaker, but the demand for prime land bank is remained strong, partly fuelled by the recent entrance of Singapore and China developers in a large way.

We believed that with the attractive price of the land, there will draw more Chinese and Singaporean developers to invest in Malaysia, which there were news speculating that some of the lands were acquired by foreign developers in the past few months. Hence, we think now is the good time for Tropicana to sell of their assets.

In year 2013, the company sold RM506m worth of land. Moving into year 2014, the management has identified RM1.8 billion worth of assets that has good potential to be monetized, including Tropicana City Mall and Office, Dijaya Plaza, W KL Hotel & Residences and some land bank. We understand that the monetisation plans are in various stages and some could be materialised as early as 1H2014. Seeing into this, the management is yet to have any specific target, and the assets monetization will depend on market condition.

The company has achieved sales of RM1.9 billion sales in the first 9 months of year 2013, and it is expected to achieve the sales of RM1.9 billion as forecast. Moving into year 2014, we expect the group will achieve lower property sales of RM1.2-RM1.3 billion due to weaker property market condition.

Saying that, we still project the group to attain a respectable net profit of RM195-196 million in year 2014-2015, which anchored by its current high unbilled sales of RM2.2 billion.

At its current valuation, we believe that the market has largely priced in the negatives, yet overlooked on Tropicana's positive attributes. We maintain BUY in for Tropicana and price target at RM1.60.