Tropicana’s 9M13 earnings were in line, coming in lower q-o-q due to the absence of land sales profit in 3Q13. Nonetheless, future growth prospects remain strong, underpinned by its total new sales of MYR1.85bn and strong unbilled sales of MYR2.2bn. The company expects to launch about MYR1.8bn worth of projects in 4Q13. Maintain BUY, with our FV unchanged at MYR2.19.

• In line.Tropicana’s 3Q13 net profit of MYR23.7 m (-59.0% y-o-y; -38.1% q-o-q) brought 9M13 net profit to MYR105.9m (-2.9% y-o-y). Although this only made up 62% of our full-year forecast, we consider this to be in line, as we expect 4Q13 earnings to be boosted by the profit from land sales and higher progress billings. Net profit declined from an absence of land sales profit in 3Q13. Nonetheless, the company’s future prospects remain positive, underpinned by new sales amounting to MYR1.85bn in 9M13 (1H13: MYR1.1bn) and record-high unbilled sales of MYR2.2bn. Tropicana declared a DPS of 4.5 sen, in line with our forecast.
• Aggressive launches to continue.Tropicana is targeting to launch another MYR1.8bn worth of products in 4Q13, bringing total FY13 launches to MYR3.4bn. Key projects include Tropicana Metropark (GDV: MYR465m) and Tropicana Danga Bay (GDV: MYR495m). For its strategy going forward, the company will launch more landed property projects, as the appetite for high-rise units is expected to decline following the announcement of recent cooling measures.
• Degearing effort to continue. The company’s net gearing stands at 0.66x. However, land sales will still be a major source of income in the future and help to lower its gearing. It has announced the proposed disposal of a 1.45-acre land plot in Jalan Kia Peng to Singapore-based GSH Corp (GSH SP, NR) at a total consideration of MYR132m (or MYR2,100 psf), and is scheduled for completion in 3Q14. Meanwhile, management has also found a new potential buyer for Tropicana City Mall and Office Tower after the recent fallout from the deal with CMMT(CMMT MK, SELL, FV: MYR1.35).
• Maintain BUY.We make no changes to our forecasts and maintain a BUY and an unchanged FV of MYR2.19. We note that Tropicana’s management is not too concerned over its recent exclusion from the revised list of Shariah-compliant stocks, given that institutional investors currently account for less than 10% of its total shareholding.

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Company Profile 
Tropicana Corporation is a developer in Malaysia. The company is known for its flagship developments, Tropicana Golf and Country Resort and Tropicana Indah, in Petaling Jaya

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Source: RHB