PETALING JAYA: Tropicana Corp Bhd’s disposal of land in Gelang Patah will reduce the group’s exposure in Johor and lock in a net gain of RM55.5 million, said Affin Hwang Capital.
“We are positive on the proposed land disposal premised on Tropicana recognising a net gain on disposal of RM55.5 million (net of tax payable) and net proceeds of about RM218.4 million (after repayment of bank borrowings, taxes and related expenses from the disposal) that will be utilised for working capital and/or repayment of bank borrowings,” it said in its research report.
Last Friday, Tropicana announced that its wholly-owned subsidiary Tropicana Desa Mentari Sdn Bhd had entered into an agreement with Tiarn Oversea Group Sdn Bhd for the disposal of 251.6 acres of freehold land in Gelang Patah, Johor.
The total cash consideration of RM569.9 million works out to RM52 per square foot and payment will be made in stages over five years until the second half of 2022.
Tropicana had acquired the land from Lee Pineapple Co (Pte) in September 2013 for RM366.6 million, or RM33 psf. Its initial plan was to develop an integrated eco-lifestyle residential and commercial development (Tropicana Gelang Patah) with an estimated gross development value (GDV) of RM6.4 billion. The land is currently vacant.
Post disposal, the group’s landbank will be reduced to 1,363 acres from 1,615 acres as at March 2016. Its land bank in the southern region will make up 23% of its total land bank, down from 35% previously. The disposal will also reduce its remaining GDV to RM53.3 billion from RM59.8 billion previously. As at March 2016, the group’s net gearing was 0.36 times.
Tropicana has maintained its property sales target of RM1.5 billion this year despite the disposal. Sales will be driven by new launches of close to RM1.8 billion, the bulk of which will be in the central region (73% of planned launches), 18% in the southern region (Danga Cove) and the remaining 9% from Penang World City.
Meanwhile, unbilled sales stood at RM3 billion as at March 2016, of which 68% are from central region followed by 24% from the northern region and rest from the southern region.
“We have lowered our 2016 EPS by 15.6% on lower margins given the challenging market. However, we expect earnings to improve in 2017 and 2018 on higher margins as well as stronger progress billings,” said Affin Hwang Capital.
It maintained its “buy” call on the stock with a lower target price of RM1.73 (from RM1.95 previously) after updating the remaining GDV of its landbanks and 2015 figures.
– the Sun