The Edge - Unlocking value of strategic land bank

Tropicana Corp Bhd founder Tan Sri Danny Tan established Tropicana Golf and Country Resort ?a pioneering development that was the first of its kind in the country. After that,he introduced the Ifirst gated and resort-living community concept in Malaysia with Tropicana Indah Resort Homes.Today,the developments continue to thrive and provide a lifestyle that continues to inspire.

The group is also diversifying into hospitality with the recent opening of the first W Hotel in Kuala Lumpur (W Kuala Lumpur), near the iconic Petronas Twin Towers, and the first Courtyard hotel, Courtyard by Marriott Hotel in Penang, which will have 199 rooms and is slated for completion next year.

Despite the current soft property market,Tropicana Corp continues to perform well. New launches are in the pipeline and in the near term, the developer will focus on landed and integrated developments.

Deputy group CEO Datuk Dickson Tan shares what the group has done so far and what it has planned via e-mail.

City & Country: How has Tropicana Corp performed over the last 12 months? Datuk Dickson Tan: During financial year 2018, we continued to be market-driven and focused on unlocking the value of our strategic land bank located in the central, northern and southern regions of Peninsular Malaysia.

For 1H 2018, our prudent financial management and cost-saving initiatives saw profit before tax increase 29.4% to RM150.4 million,on the back of a net profit of RM94.7 million, which rose 22.4% from RM77.4 million in the corresponding first half in FY2017.

Nevertheless, overall revenue for 1H2018 was 9.6% lower than that of FY2017 at RM734.4 million due to slower sales momentum and progress billings in the Klang Valley,and the southern and northern regions from different stages of construction work. Our earnings per share for 1H2018 stood at 5.77 sen against 5.09 sen previously.

During the period under review, we achieved unbilled sales of RM1 billion, anchored on 15 ongoing projects and an existing land bank of 923.1 acres with a total gross development value (GDV) of RM41.4 billion, placing us in a strong position to deliver sustainable earnings performance for FY2018.For 2H2018, we remain focused on strengthening our financial position with the launch of W Kuala Lumpur,on Aug 23, while The Residences, Wc are moving in the right direction towards a buoyant property market as there are clear signs of improvement with property prices.

On Aug 15, Tropicana Metropark reached a new milestone with the opening of the highly-anticipated Tropicana Metropark Link that links the development to the Federal Highway.

Meanwhile, in the central region, plans have been put in place to roll out new phases across our signature developments, amounting to a GDV of more than RM430 million.These will comprise a second commercial shoplot phase at Tropicana Aman, Kota Kemuning, and the fourth landed residential phase at Tropicana Heights, Kajang of which are expected to contribute positively to our earnings for the remainder of FY2018.

What is the group's strategy to weather the soft property market?

Throughout 1H2018, unbilled sales have been on a downward trend as a result of the slow catch-up in new sales recognition given potential buyers' wait-and-see attitude prior to the 14th general election (GEM).

Following the historic conclusion of GE14, the property market witnessed a gentle recovery in 2H2018 as there has been greater clarity in the policies introduced by the newly elected government. This resulted in investors switching away from a wait-and-see approach to genuinely seeking bargains in the market, especially properties in strategic locations.

Despite recording lower unbilled sales, we are optimistic our strategically-located properties put us in a better position to weather the current market conditions and deliver sustainable earnings performance for FY2018 from our key projects such as Tropicana Aman,Tropicana Heights and Tropicana Gardens. sales alone. As long as we are able to maintain commendable sales performance over the next couple of years, it would mean steady earnings trajectory over the next few years as sales may pick up, albeit at a slower pace, moving forward since our new launches are at various stages of construction.

What type of product is the group focusing on developing in the short term?

In the short term,we are focusing on developing landed and integrated developments, including terraced houses,2-storey semi-detached homes, zero-lot bungalows and bungalows fitted with 3S home features ?which stand for Smart, Secure and Sustainable technology ?for connected living. We will also look at developing shopoffices, urban affordable homes,serviced apartments and international schools.

What product innovations can we expect from the group in the future?

Today,guided by our unique Tropicana DNA, which focuses on accessibility, connectivity, amenities, facilities, innovative concepts and designs,generous open spaces,multi tiered security and quality, we have evolved into masterplanners.lt is not just about building houses, but building homes and communities that come complete with quality schools,amenities and facilities that allow family and friends to live in a safe and secure environment. Hence,we ensure our townships exceed the industry practice of 10% greenery. For example, Tropicana Heights and Tropicana Aman have an average green area of more than 20%.

Moving forward, we will see more properties integrating live/work houses and commercial centres, and be in close proximity to amenities and services. For instance,all ourTropicana townships are developed to create that seamless living experience. All the townships have unique features built in to cater for the needs of the community. For example,Tropicana Gardens in Kota Damansara has a direct link to the MRT station, while Tropicana Metropark has a direct link to the Fed eral Highway to shorten commute time by 10 to 15 minutes for its residents. Each township has a central park to promote live/work balance.

Is investment property something the group is looking to expand? As a company that is continuously focused on growing this segment, our investment portfolio has expanded in recent years. It includes three international schools, namely Tenby International School at Tropicana Aman; GEMS International School at Tropicana Metropark; and St Joseph's Institution I international School Malaysia,Tropicana PJ Campus, at Persiaran Tropicana.

The portfolio also has two hotels, the 199-room Courtyard by Marriott in George Town, Penang, and the 150-room W Kuala Lumpur in Kuala Lumpur city centre. And there is a new mall measuring about one million sq ft and office tower at Tropicana Gardens.

We are confident that with the recently launched W Kuala Lumpur and future launches of other properties,our group will see an increase in our recurring income in the next few years.

In the future,we are also looking to place our investment properties into Tropicana's own real estate investment trust,which will further unlock returns to the group.

What are your plans, if any, on expanding overseas?

In FY2019,we are looking to launch a new develop ment on an area measuring about 112 acres in Genting,Pahang, which will further spur our growth in the coming year. Details will be forthcoming.

What is your outlook for the property sector?

We are very positive on the outlook of Malaysia s property sector.We are moving in the right direction towards a buoyant property market as there are clear signs of improvement with property prices remaining stable and more innovative offerings. The country is also expected to have more trans parent housing policies with the new government.

In FY2018,we will continue to be market driven and unlock the value of our strategic land bank in the central, northern and southern regions of the peninsula. Despite the softening consumer outlook, we believe there will be continued demand for our properties in prime locations,given their accessibility, good amenities and attractive pricing