The Edge Online - HIGHEST RETURNS TO SHAREHOLDERS OVER THREE YEARS: PROPERTY (RM3 BILLION AND ABOVE MARKET CAPITALISATION): Tropicana Corp Bhd - Leveraging sales initiatives, marketing campaigns to boost

The share price of property developer Tropicana Corp Bhd, controlled by its founder, group executive vice-chairman and major shareholder Tan Sri Danny Tan Chee Sing, is down about 5.5% year to date, underperforming both the benchmark FBM KLCI (-4%) and Bursa Malaysia’s Kuala Lumpur Property Index (+32%).

However, over a three-year period, Tropicana still outshone a number of its peers in terms of shareholder returns. While Tropicana’s market capitalisation was hovering at the RM2.7 billion level at the time of writing, it stood at RM3.1 billion at the March 31 membership cut-off date of The Edge Billion Ringgit Club (BRC) Awards, ranking the developer among those with a market cap of above RM3 billion for the 2023 BRC awards.

During the awards evaluation period, total return of Tropicana shares saw a compound annual growth rate over three years of 23.9%, with the developer’s share price rising from 76.7 sen on March 31, 2020, to RM1.46 on March 31 this year. An investor who bought one million Tropicana shares worth RM767,000 in March 2020 would have pocketed RM693,000 in profits if he or she had sold those shares at RM1.46 apiece, or RM1.46 million in total.

The stellar gains bagged Tropicana this year’s The Edge BRC award for the highest returns to shareholders over three years in the property sector among companies with a market cap of RM3 billion and above.

And things are looking up for the group. It achieved RM664.2 million in property sales in the first six months of 2023, netting high sales bookings of over RM1.3 billion.

Its management said Tropicana is on track to hit its RM1.3 billion target for annual property sales as it focuses on rolling out market-centric developments while selling completed stocks to drive significant cash flows. Apart from the positive sales achievements, Tropicana’s unbilled sales stood at RM2.3 billion, providing sustainable earnings for the group.

“We are confident that the group will continue to strengthen its market presence and contribute to its future earnings, supported by our high unbilled sales of RM2.3 billion and strong take-up for our ongoing projects. This is complemented by our four newly-launched or upcoming developments with a gross development value (GDV) of RM1.1 billion in 2023,” it said in an Aug 29 statement.

For the financial year ended Dec 31, 2022 (FY2022), the group’s net loss widened to RM435.59 million from RM52.17 million in the preceding year, mainly due to losses incurred on the disposal of two parcels of development land. Despite the loss for the period, the group’s property investment, recreation and resort operations showed a significant improvement in performance as a result of the reopening of borders for travellers from all countries from April 2022. The group recorded positive cash inflow of RM239.7 million generated from operations, which was 201.4% higher than that in the preceding year.

Tropicana managed to narrow its losses in the first half of 2023, posting a net loss of RM4.93 million from RM94.95 million the year before. Revenue for 1HFY2023 was also 66% higher year on year, standing at RM721.24 million. The increase was mainly attributed to higher progress billings across key projects in the Klang Valley, southern and northern regions as well as higher sales achieved, coupled with the cost rationalisation measures carried out by the group.

“The strong sales performance for 1HFY2023 is on the back of generally improved local market sentiment. The group has also seen an uptick in tourist arrivals, evidenced by the higher occupancy rates at hotels owned by the group. This has also resulted in higher revenue and profit for the group’s property investment, recreation and resort segment,” said Tropicana, when announcing its 2QFY2023 results on Aug 29.

The group plans to continue leveraging its various sales initiatives and marketing campaigns to secure more sales, and remains positive and confident about the long-term prospects of its property development business. In addition, the group will continue to develop and market its properties located at various strategic locations which will, in turn, translate to higher sales and positive contributions to the future earnings of the group.

In 2022, Tropicana launched up to RM1.7 billion worth of properties, buoyed by the reopening of international borders. The new launches included Tropicana WindCity in Genting Highlands; Tropicana Aman’s Hana Residences and Gemala Residences in Kota Kemuning, Shah Alam; Aster Heights in Tropicana Uplands, Iskandar Puteri, Johor; and Merissa Serviced Suites in Tropicana Cenang, Langkawi. The group also secured development rights to 363 acres of land for the construction of affordable, quality homes in Puncak Alam, Selangor.

Tropicana’s total land bank stands at 2,091 acres, with a total potential GDV of RM203.7 billion, putting the group in a good position to unlock the value of its strategic land bank and deliver sustainable performance in the next few years.