MARC has assigned a rating of AIS to Tropicana Corporation Berhad’s (Tropicana) RM2.0 billion existing Perpetual Sukuk programme with a stable outlook. The Perpetual Sukuk is rated one notch lower than Tropicana’s corporate credit rating of A+/stable to reflect its features and is in line with MARC’s methodology on subordinated instruments. No equity credit has been given to the Perpetual Sukuk issuance as it ranks pari passu with the senior obligations.
As at end-June 2021, the outstanding of the Perpetual Sukuk programme stood at RM248 million. The company expects to issue an additional RM330 million from the Perpetual Sukuk programme by 3Q2021, proceeds of which will be mainly used to refinance Tropicana’s existing borrowings and working capital requirement. As at end-March 2021, borrowings stood at RM3.7 billion including the outstanding under the Perpetual Sukuk with the adjusted debt-to-equity (DE) ratio standing at 0.71x which is expected to increase to about 0.74x over the near term.
For 1Q2021, Tropicana recorded y-o-y increases in both revenue and operating profit to RM240.5 million and RM54.0 million, attributable to higher progress billings. Nonetheless, the tough property market conditions would weigh on the group’s sales performance and remain a key moderating factor to the rating. The rating agency also views with concern the increase in the group’s inventory level to RM300 million at end-March 2021 and a further potential increase in inventory build-up over the near term. The group has an ongoing gross development value of RM3.9 billion with the majority of its projects located in the Klang Valley. Tropicana’s established market position in the domestic property industry, coupled with large unbilled sales of about RM1.1 billion that provides earnings visibility through 2023, remain key rating drivers.