MARC has affirmed its A+_IS rating on Tropicana Corporation Berhad’s (Tropicana) RM1.5 billion Islamic Medium-Term Notes Programme (Sukuk Wakalah) with a stable outlook. 

Tropicana’s established position in the domestic property industry and its moderate financial risks remain key rating drivers. The tough property market conditions have continued to weigh on the group’s sales performance and remains a key moderating factor of the rating. The group achieved an overall take-up rate of 53.2% for its ongoing projects at end-2020, an improvement from 43.1% at end-2019. The rating agency views Tropicana’s moderate sales performance could risk a further increase in its inventory level from RM286 million at end-2020, as it has an ongoing gross development value (GDV) of RM3.9 billion. Its large unbilled sales of about RM1.0 billion provides earnings visibility through 2023.

For 9M2020, Tropicana recorded a 7.0% y-o-y decline in revenue to RM702.4 million on lower sales and slower construction progress. However, operating profit was higher at RM186.2 million (9M2019: RM140.6 million) as more projects neared completion. Its cash flow from operations, however, was negative mainly due to a large payment for a major land acquisition in Genting Highlands. Nonetheless, the group maintains a healthy liquidity position. The group’s borrowings have risen to RM3.4 billion, leading to an increase in its adjusted debt-to-equity ratio to 0.66x (end-2019: RM2.5 billion; 0.51x). Over the near term, the group’s leverage position could increase to about 0.73x to fund its property development cost. 

Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my; 

Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my