Sale of land nets Tropicana RM55.5 million

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PETALING JAYA: Tropicana Corp Bhd stands to make RM55.5 million with the disposal of land in Gelang Patah.

It will also reduce the group’s exposure in Johor, according to Affin Hwang Capital.

“We are positive on the proposed land disposal premised on Tropicana recognising a net gain on disposal of RM55.5 million (net of tax payable) and net proceeds of about RM218.4 million (after repayment of bank borrowings, taxes and related expenses from the disposal) that will be utilised for working capital and/or repayment of bank borrowings,” it said in its research report.

The Sun Daily reported that last Friday, Tropicana had announced that its wholly-owned subsidiary Tropicana Desa Mentari Sdn Bhd had entered into an agreement with Tiarn Oversea Group Sdn Bhd for the disposal of 251.6 acres of freehold land in Gelang Patah.

The total cash consideration of RM569.9 million works out to RM52 per square foot and payment will be made in stages over five years until the second half of 2022.

Tropicana had acquired the land from Lee Pineapple Co (Pte) in September 2013 for RM366.6 million, or RM33 psf, said the report. The land is currently vacant.

Post disposal, the group’s landbank will be reduced to 1,363 acres from 1,615 acres as at March 2016, the Sun Daily report said.

Tropicana has maintained its property sales target of RM1.5 billion this year despite the disposal, the report said.

Sales will be driven by new launches of close to RM1.8 billion, the bulk of which will be in the central region (73 per cent of planned launches), 18 per cent in the southern region (Danga Cove) and the remaining 9 per cent from Penang World City.

The report said Affin Hwang maintained its “buy” call on the stock with a lower target price of RM1.73 (from RM1.95 previously) after updating the remaining GDV of its landbanks and 2015 figures.

It expects earnings to improve in 2017 and 2018 on higher margins as well as stronger progress billings.