RAM Ratings has reaffirmed the ratings of Tropicana Corporation Berhad’s (Tropicana or the Group) Bank-Guaranteed CP/MTN Programme of up to RM500.0 million (2012/2019).

Published on 26 March 2015

The enhanced ratings reflect the unconditional and irrevocable bank guarantees extended by RHB Bank Berhad and AmBank (M) Berhad, which enhance the credit risk profile of the debt issue beyond Tropicana’s stand-alone credit strength.

Leveraging on the branding created by its maiden project, Tropicana Golf and Country Resort, Tropicana has established a strong presence in Malaysia’s upper-middle and upscale property segment. Despite a softer market, Tropicana was still able to chalk up about RM2.0 billion of new sales in 2014, pushing up its unbilled sales to a record-high RM2.7 billion as at end-December 2014. The Group also boasts a land bank of 1,900 acres strategically located in the Klang Valley, Johor and Penang – sufficient to sustain its property development activities at least over the medium term.

In spite of the management’s commitment to de-gear, the Group’s balance sheet remained burdened by a large debt load. Tropicana’s borrowings had risen further to RM2.5 billion as at end-December 2014 (as at end-December 2013:RM2.3 billion), attributable to heavy funding needs for its enlarged property portfolio and land acquisitions. On a more positive note, the Group’s gearing had eased substantially to 0.81 times as at the same date, as a result of the conversion of its redeemable convertible unsecured loan stocks. In addition, coupled with improved profitability, Tropicana’s debt-coverage ratio had risen over the past 2 years. Going forward, we expect its debt level to be contained by proceeds from a de-gearing exercise, and its gearing and debt coverage ratios to improve on the back of better profit and cashflow generation from its property projects. That said, the success of the de-gearing exercise remains to be seen in light of the still-challenging outlook on the property market in 2015.

Tropicana is principally involved in property development and property investment, reputed for the Tropicana brand of middle- to upper-scale properties.

Media contact

Jason Tan

(603) 7628 1030

Jasontan@ram.com.my