Tropicana Corp Bhd (May 12, RM1.10)
Maintain buy with an unchanged target price (TP) of RM1.95: In the first quarter of the financial year ending Dec 31, 2015 (1QFY15), Tropicana Corp Bhd’s core net more than doubled to RM19.3 million year-on-year (y-o-y) on the back of a 55% increase in revenue to RM390 million, as well as a small gain from the sale of land amounting to RM5.9 million.
We expect earnings to come in stronger in the subsequent quarters on the back of land sale as well as stronger property sales.
For now, Tropicana has total asset sales of RM1.2 billion with a net gain of RM205 million pending completion, and hence we deem the results to be in line with our expectations.
The higher revenue y-o-y was mainly attributed to higher billings from its Klang Valley projects, namely Tropicana Gardens, Metropark and Heights, as well as its Johor project, Tropicana Danga Bay.
Sequentially, core net profit fell 90% due to the huge gain from land disposal in 4QFY14 — Canal City land amounting to RM168 million.
In 1QFY15, Tropicana achieved RM176 million in property sales (down 55% y-o-y due to softer market condition and soft launch).
The bulk of the sales (80%) was still from the central region (Gardens, Metropark and Heights townships), followed by 10% from the southern region (Danga Cove and Danga Bay) and 9% from the northern projects (Penang World City and Macalister).
Tropicana targets an ambitious RM1.4 billion of new property sales in 2015 on the back of new launches and existing projects. As at end of March 2015, total unbilled sales remain high at RM2.6 billion.
We make no changes to our FY15 to FY17E (estimates) earnings per share forecast.
Also unchanged is our revised net asset value (RNAV)-based TP of RM1.95, still based on an unchanged 50% discount to the RNAV.
We continue to like Tropicana for its strategic land bank, undemanding valuation and ongoing asset monetisation exercise. Risk to recommendation includes delays or hiccups in its asset monetisation exercise. — Affin Hwang Capital, May 12
This article first appeared in The Edge Financial Daily, on May 13, 2015.