KUALA LUMPUR: Having announced major disposals in the first half of the year, Tropicana Corp Bhd will continue its de-gearing programme for the time being, where it will divest non-core landbank and property investment assets to trim borrowings and strengthen its balance sheet.
According to chief executive officer, Datuk Yau Kok Seng (pic), the group has identified assets worth in excess of RM2 billion which are up for sale to the “right parties at the right price”.
For instance, early this year, the group entered into a deal to sell 128ha out of the 474ha in the Tropicana Aman township, near Kota Kemuning, to Eco World Development Group Bhd for RM470.7 million.
It then sold a 1.3ha tract of prime land in Bukit Bintang in May to Offshore Triangle Sdn Bhd, a 30:70 joint venture between Tropicana and Hong Kong-listed Agile Property Holdings Ltd, for RM448 million.
“It (sale of the assets) has to be opportunity driven. If there are assets which we believe can enhance shareholders’ value, we will consider divesting.
“Our undeveloped landbank has a potential gross development value [GDV] of RM70 billion. There are a lot of opportunities to unlock value,” Yau told a press conference after Tropicana’s annual general meeting.
According to him, the group aims to trim its net gearing to around 0.3 times by 2016, from 0.6 times currently. As at March 31, 2014, the group’s total net borrowings amounted to RM1.42 billion, against shareholders funds of RM2.63 billion.
Besides the sale of its non-core assets, Tropicana’s two-pronged growth strategy in 2014 also involves property development launches worth RM3 billion in GDV this year with a greater emphasis on landed residential and township developments.
“In order for us to sustain our last year’s turnover, we have to be extremely innovative and able to differentiate ourselves from the rest of the competitors. This year, many developers are focusing on landed properties. So we are also targeting 50% of our launch on landed properties. For high rise, we need to differentiate ourselves,” Yau said.
The group has a sales target of RM2 billion this year but has already achieved a sizeable RM1.3 billion to date. Its Tropicana Collection campaign two months ago recorded sales of RM648 million.
“If you look at the sales that we have achieved, I cannot say that we are unhappy. We are quite pleased with sales we have achieved so far. We are quite confident that we can sustain our sales for 2014,” said Yau.
This article first appeared in The Edge Financial Daily, on June 27, 2014.