Wednesday, 30 October 2013

Trop: Double-Blow Or Blessing In Disguise?

Both Tropicana and CMMT has mutually agreed to terminate discussion of the sale of Tropicana City Mall and Office Tower, as both parties are unable to conclude the terms of sale and purchase agreement.

Surely the de-gearing plan of Tropicana will take a slight setback. However, this may also indicates that Tropicana is not in a desperate situation to dispose its assets cheaply to cut down its debt.

The collapse of this deal surely breaks a lot of people's glasses, as Tropicana City Mall is regarded as a good fit to CMMT's portfolio. Anyway, CMMT may save its resources to acquire Queensbay Mall in Penang, which is not inferior to Tropicana City Mall.

From Tropicana's 2012 annual report, its shopping mall and office tower give a yield of 5.25-6.5% in 2012. Its long term vacancy rate stands at 5% while its long term growth in rental rates is 5-10%.

This announcement comes soon after the Budget 2014 speech. How will it affect Tropicana's share price?

At this point of time when I'm writing this post, Tropicana's share price has gone up 3 sen to RM1.44. Is it a blessing in disguise?

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