The Edge, 19 May 2014 - Tropicana Corp Bhd

The Edge, 19 May 2014

UOB KAY HIAN RESEARCH (MAY 12): Tropicana's 1Q14 results were below expectations mainly because most of its projects that are currently billed are still in the early stages of construction. However, we expect subsequent quarters to record positive earnings growth. This quarter, the company managed to register RM395 million in sales. It is maintaining its 2014 sales target of RM2 billion, backed by launches worth RM3 billion and unbilled sales of RM2.4 billion.

This year, about 40% of its new products will consist of landed residential properties. One of the proposed launches is the Tropicana Aman (Canal City) development, which will feature about RM770 million worth of landed homes.

We believe this development will enjoy a good take-up rate, given its affordable price of RM75O,O00 per unit, based on our estimates. We reduce our 2014 and 2015 forecasts by 12% and 11% respectively to reflect the shrinking margins for certain developments after the recent rise in construction material cost..