MARC Ratings has affirmed its ratings on Tropicana Corporation Berhad’s RM1.5 billion Islamic Medium-Term Notes Programme (Sukuk Wakalah) and RM2.0 billion existing Perpetual Sukuk programme at A+IS and AIS.
The ratings outlook remains negative pending completion of the group’s ongoing plans of asset disposals and equity raising, expected to be completed by end-2022, to strengthen its balance sheet. Cash proceeds of about RM300 million from the proposed exercises will be utilised to pare down borrowings which currently stand at RM4.39 billion (including Perpetual Sukuk). Its gross leverage position is expected to reduce to below 0.75x by end-2022 from 0.81x as at end-March 2022. Notwithstanding the expected improvement in debt metrics, any outlook revision would also consider the group’s financial performance. Conversely, the rating could be lowered if there is no material development to reduce its borrowings and/or its financial performance weakens due to the challenging property market conditions.
Tropicana’s established track record in the domestic property industry and earnings visibility from unbilled sales remain key rating drivers for the rating affirmation. The group has ongoing projects with a combined gross development value (GDV) of RM4.4 billion as at end-March 2022. The projects recorded an average take-up rate of 70%, excluding the projects launched during 2021 which were impacted by pandemic-induced closures. Unbilled sales of about RM1.5 billion provides earnings visibility through 2024. Inventory level was lower at RM259 million (end-2021: RM275 million). For 1Q2022, Tropicana recorded y-o-y lower revenue of RM223.3 million and operating profit of RM4.5 million. Tropicana’s unrestricted cash of RM255 million as at end-March 2022 provides some financial flexibility.