[MARC] MARC Ratings revises Tropicana’s ratings outlook to positive

MARC Ratings has revised its ratings outlook on Tropicana Corporation Berhad’s RM1.5 billion Islamic Medium-Term Notes (IMTN) (Sukuk Wakalah), RM1.5 billion IMTN (Sukuk Wakalah), and RM2.0 billion Perpetual Sukuk programmes to positive from stable. Concurrently, the ratings on the programmes have been affirmed at AIS, AIS and A-IS.

The positive outlook is premised on the marked improvement in Tropicana’s balance sheet strength in recent years from undertaking deleveraging initiatives involving asset disposals, proceeds of which were utilised to pare down its borrowings. Total group borrowings declined to RM2.7 billion, easing adjusted gross debt-to-equity (DE) ratio to 0.56x as at end-March 2025 (2022: RM4.4 billion; 0.87x). The rating agency understands that ongoing non-core land disposals would lead to further reduction in borrowings to about RM2.0 billion and projected adjusted DE ratio of 0.41x by end-2025. Over the near term, MARC Ratings would consider upgrading the ratings if Tropicana continues to maintain a moderate leverage ratio and register steady earnings.

Tropicana’s well-established track record in property development and its sizeable unbilled sales amounting to RM2.1 billion as at end-March 2025 (1Q2025) remain key rating drivers. The unbilled sales provide strong earnings visibility. Ongoing property development projects, largely in the Klang Valley, Johor, Langkawi, and Genting Highlands, carried a total gross development value (GDV) of RM5.7 billion with an overall take-up rate of 67%. During 7M2025, Tropicana launched projects with a total GDV of RM3.6 billion: Lido Waterfront Phase 1 serviced apartments (GDV: RM1.3 billion) in Johor, and new phases under the existing Tropicana Cenang in Langkawi and Tropicana Avalon in Genting Highlands (total combined GDV: RM2.3 billion). Over the next few months, Tropicana has earmarked an additional RM1.4 billion worth of projects. MARC Ratings views that the sales prospects for Tropicana’s Johor projects will benefit from their proximity to the Rapid Transit System (RTS) and the growth potential from the Johor-Singapore Special Economic Zone (JS-SEZ).

Tropicana recorded lower revenue and operating profit of RM260.4 million and RM33.8 million in 1Q2025, mainly due to reduced recurring income following the asset disposals (1Q2024: RM291.3 million; RM56.4 million). Core operating profit margin has remained in the teens despite some construction cost concerns in recent years, underscoring the group’s cost management initiatives in sustaining profitability. Cash flow from operations is expected to improve on higher progress billings and receivables to be recognised on land disposals. Tropicana’s unrestricted cash balances of RM254.5 million as at end-March 2025 provide liquidity to part support working capital requirements with the remaining to be funded by additional borrowings. In this regard, MARC Ratings expects Tropicana to adhere to a disciplined balance sheet approach to meet its funding requirements.

Cyndy Goh, +603-2717 2941/ cyndy@marc.com.my
Chong Wat Son, +603-2717 2929/ watson@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my