Tropicana Corporation Berhad is a no stranger property developer in both the local and foreign market. Dijaya Corporation Berhad came to fame when the group penetrate the market with their "Tropicana" brand name with projects such as Tropicana Golf & Country Resort, Tropicana Indah Resort Homes, Tropicana City, Tropicana Sungai Long, Tropicana Bayou, Tropicana Sungai Buloh Commercial Center and Tropicana Danga Bay. Others residential project includes Casa Kiara I & II, Casa Suites, Fortune Park, Arena Mentari, W Hotel & Condominium, Aston Villa and 10 Island Resort.
Formerly known as Dijaya Corporation Berhad, the group is the founded and helm by Tan Sri Dato Danny Tan Chee Sing, which is the younger brother of well known Malaysia tycoon from the Berjaya Group - Tan Sri Vincent Tan.
Tropicana had been coming to the limelight for the past few years for some corporate dealing involving some land sales and asset disposal as well as some land purchases to consolidate and reposition the group's asset and financial position. How would Tropicana be faring in the coming days with the government policy in the property cooling measure as well as the introduction of GST?
Tropicana had been sliding off the mark from May 2014 onwards, beaten off by the various property cooling measure sentiment as well as a good shake off in the equity market during the 4th Quarter of 2014. While the 1st Quarter of 2015 had saw a slower start in the equity market due to the stronger selling from the foreign fund, things got off better when the Feds had decided on prolonging the hike of the interest rate further rather than the anticipated 2nd half of 2015. The equity market got off with a better start with the beginning of the QE from the ECB, which had started to see hot money flowing back to the ASEAN market.
For Tropicana, at the price range of RM 1.05 to RM 1.10, it can be considered as the strongest base line support price range for the counter.
Tropicana should be able to see a technical run up towards the range of RM 1.40 in the short term outlook should Trop challenges above RM 1.20 with a good supported volume.
Tropicana - A Tropical Storm in the Property Sector
Tropicana had build it's brand name over the years with impressive property launches in Malaysia. The name "Tropicana" definitely put an impression of glamor, status, quality and exclusiveness to any person which is well informed in the property market.
To date, Tropicana had in it's development bag which consist of a mixture of residential and mixed commercial development ranging from medium to high end property. The current on going development includes :
- Tropicana Gardens (Kota Damansara)
- Tropicana 218 Macalister (Penang)
- Tropicana Danga Cove (Johor)
- Tropicana Heights (Kajang)
- Tropicana Metropark (Subang Jaya)
- Tropicana Danga Bay (Iskandar, Johor)
- Tropicana Landmark (Sabah)
- Tropicana Avenue (Petaling Jaya)
- Penang World City (Penang)
- Tropicana Cheras (Cheras)
- Tropicana Residences (Jalan Ampang, KLCC)
(Artist Impression of an overview of a completed Tropicana Gardens in Kota Damansara)
Tropicana property launches is diversified to the Northern, Central and Southern Peninsula Malaysia, as well as East Malaysia.
Property market - Slow Down or Low Down?
While
the market had been in talk with the property market slowing down for
quite sometime, the signs are actually too vague to tell if the slow
down actually hitting the new launches or sub sales market. Lets get
down to the real market outlook from a study conducted from a small
research company.
Edwin
Ng, a 28 years old IT engineer who earns around a take home pay of RM
5k a month had opted to buy a newly launch under construction
condominium at a price tag of around RM 600k. Assuming a 90% loan at an
interest rate of 4.8% per annum and payable for 35 years, Edwin will be
seeing an installment of RM 2656 per month after completion, which will
see half of his take home pay going towards the installment. With this
huge commitment in line, what is the core reason for Edwin to continue
pursuing this purchase?
Edwin
had took the whole picture clearer on his decision by giving a simple
comparison. With the latest market trend which is on going, buying a new
launch property is very easy with a low down payment. Putting it
simple, a new condo which is partially renovated or 75% furnished could
be fully yours with only RM 5k to RM10k down payment, with the rest
going to bank financing. While not all the developer practice such perks
for the purchaser, however, he noted that Tropicana packages which
comes with low down payment along with other perks and rebates and not
too far into the rural area is just what he needs.
Imagine
if I had took a subsale purchase around the area which I would want at
the same price, the barrier of entry for me is just too high and
unaffordable to me. The total cost for a subsales property with a price
tag of RM 600k will come with
- 10% payment upon the signing of SPA, which is RM 60k
- Fees for MOT (Memorandum of Transfer / Stamp Duty) which is RM 12k
- Fees for Sales and Purchase Agreement, which is RM 4650
- Fees for Facility Agreement (Loan Agreement), which is 2700
- Fees for valuation approx RM 1000
The
total entry amount needed for a same value purchase in a subsale market
will take Edwin roughly RM 80,350, which had not inclusive of Insurance
(MLTA/MRTA), possible cash top up should valuation doesn't met the
purchasing price, renovation as well as furniture and fittings cost as
well. The amount could just balloon to more than RM 120k upfront,
compared to a low down payment of RM 5k to RM 10k to secure a unit which
is new, while the other cost is taken care by developer or factored
into a 35 years loan tenure. The unit which comes renovated and well
furnished with a bit of designer taste will also save a bit of hassle
into thinking what to buy during handover.
These
are the feedback from serious home purchaser who are buying for own
stay. Most of the purchaser bear the similar feedback towards the rising
living cost and the escalation of prices that put them to compete with
time to secure what they need in the future.
It
is a whole new property game, quoted Charissa, a 30 year old auditor.
By the time you save up RM 120k, you might end up buying somewhere
further away from the city, or the amount you need is not enough, or you
might be buying an "old" house.
With
the trend of younger millennial opting to secure a place to stay as
fast as possible, the buying trend is still towards the new launches
instead of the subsales market. However, things does got spiced up when
good things are exploited when speculation took a note higher. But
demand is definitely rising with in a developing country like Malaysia
where population is still growing at an commendable rate.
Tropicana
package and offering spans towards a rich high end target market, and
also offer a chance for the younger millennial a chance to secure their
property at prime area with a bit of taste on the luxury side through
their low down payment scheme.
Top & Bottom Realignment in Tropicana
Tropicana
balance sheet had always been a yellow or red flag in the investor
mind. Although the group had an impressive land bank that are situated
in prime area, their overwhelming debt level had always keep a handbrake
to the investor decision making.
However,
with the current on going realignment of their land and assets which
includes significant disposal of their land in Tropicana Alam to
Ecoworld and their Tropicana City Mall to CMMT Reits.
The
disposal of Tropicana City Mall is expected to complete by 3Q 2015,
will effectively reduce the the gearing level of the group to 0.52x. The
group will continue to dispose small land parcel in 2015, and will look
to put it's gearing level below 0.5 to the FYE 2015 balance sheet.
Tropicana currently is sitting on a NTA of RM 2.14 with unbill sales amounting to approximate RM 3 billion from it's highly sought after launches like Tropicana Gardens and Tropicana Bay Residence at Penang World City.
A Stronger Push Before GST Implementation
With
GST effectively taking off at 1st April 2015, the property construction
segment is hotter than a volcano lava with non stop 24/7 working that
tries to push as much as possible during the 4Q 2014 and 1Q of 2015 to
reduce the exposure of incomplete progress that will be subjected to the
billing of GST.
With
a higher billing rate in the overall property sector, we expect to see a
stronger 1Q 2015 result that will be going to see most of the result
announcement in the month of May 2015, a movement that could take the
property sector for a good ride. While some are still consolidating, there are significant property counter which had started to move up.
With an unbilled sales of approximately RM 3 billion in hand, Tropicana definitely had hopped in to join this bandwagon as well.
Tropicana
had seen much changes in their effort to rebalance their portfolio and
balance sheet. With the strong unbilled sales of approx RM 3 billion
with the ongoing easy rosy sales packages for home buyers, at the
current price of RM 1.09 which is a discount of almost 50% towards it's
NTA of RM 2.14, Tropicana is just about to start a Tropical Storm
towards a higher ground.
Ride on the Tropical Storm? You decide
Bone's short term TP: RM 1.40
Cheers and have a nice day
Regards,
Bone
Bone
http://bonescythe.blogspot.com/
