Tropicana Lifted By Massive Fair Value Gains

It is indeed very hard for me to interpret Tropicana's financial result, as there are always a lot of fair value gains.

The figures and information here are not guaranteed to be correct.

Tropicana FY13Q4 Financial Results

TROPICANA	FY13Q4	FY13Q3	FY13Q2	FY13Q1	FY12Q4
Revenue	444.7	363.4	362.1	305.3	234.1
Gross Profit	203.4	130.2	117.7	130.7	98.1
Other Income	181.4	9.0	14.6	1.9	33.5
Finance Cost	18.2	27.7	15.6	16.5	13.9
PBT	325.2	49.3	62.3	66.8	60.8
PBT-FV	117.9	49.3	50.2	67.7	55.0
PBT-FV%	26.5	13.6	17.2	21.9	26.0
PAT	256.5	23.7	38.3	43.8	60.2
Prop Dev Rev	363.4	269.2	312.4	270.1	210.6
Prop Dev PBT	120.2	31.3	45.6	64.2	32.9
Prop Inv Rev	36.6	36.8	33.9	35.1	21.7
Prop Inv PBT+FV	105.0	19.9	25.5	14.0	25.0
Prop Inv PBT-FV	12.2	19.8	13.4	14.9	14.1
Inv Rev	44.7	57.5	15.8	0.0	1.8
Inv PBT+FV	99.9	-1.8	-8.8	-11.4	2.9
Inv PBT-FV	-14.4
Total Equity	2570.3	2345.5	2336.7	2174.5	2061.1
Total Assets	5425.7	5045.4	4990.5	4667.1	4518.4
Trade Receivables	383.3	236.0	214.9	101.2	103.5
Prop dev cost	554.3	370.3	412.8	517.1	417.2
Inventories	67.1	68.8	73.4	30.4	20.3
Cash (useable)	446.7	333.6	372.0	282.9	213.7
Total Liabilities	2691.7	2520.3	2477.8	2362.0	2329.6
T&O Payables	474.9	379.2	366.4	310.6	330.9
ST Borrowings	350.8	315.2	298.2	240.2	223.9
LT Borrowings	1566.8	1613.6	1562.6	1610.9	1642.1
Net Cash Flow	258.9	145.4	139.2	59.0	86.4
Operation	171.4	-98.4	-120.6	-94.7	-16.6
Investment	-48.2	32.3	106.0	105.6	-894.9
Financing	135.7	211.5	153.8	48.1	997.9
EPS	23.18	2.20	4.31	5.50	8.31
NAS	2.32	2.12	2.45	2.54	2.60
D/E Ratio	0.57	0.68	0.64	0.72	0.80

FV = fair value gain

Other income = management fees, rental income, fair value gain on investment properties & marketable securities, gain on disposal of land & PPE.

From the table above, we can see that Tropicana achieves 22.4% QoQ increase and 90% YoY increase in revenue. Its profit attributable to shareholders jumps more than 10x compared to the preceding quarter. This is mainly due to gain from fair value adjustment on its investment properties (RM207.2mil).

Excluding the fair value gain, its PBT for FY13Q4 is still a commendable RM117.9mil, much better than RM55.0mil in FY12Q4 and RM49.3mil in FY13Q3.

It is clear that its core business, property development, contributes significantly in FY13Q4 with a PBT of RM120.2mil, almost 3x higher than FY13Q3's RM31.3mil.

Apart from this, its net debt/equity ratio drops to 0.57 without selling its main investment properties.

Both of these are the main positives that I get from current Tropicana's quarterly result.

Tropicana Historical Financial Results

Tropicana	FY13	FY12	FY11	FY10	FY09	FY08
Revenue	1475.5	630.4	375.2	292.3	311.8	244.1
Revenue growth %	134.1	68.0	28.4	-6.3	27.7
PBT	503.6	224.9	99.2	53.4	72.1	76.7
PBT-FV	286.1	121.5	85.6	42.3
PBT-FV%	19.4	19.3	22.8	14.5
PAT	361.9	171.0	77.0	43.3	50.5	34.4
EPS	34.31	32.48	16.42	9.50	18.80	13.30
NTA	2.32	2.65	2.27	2.14	1.85	2.45
ROE	14.1	8.3	8.1

Tropicana's revenue and PBT (minus fair value gain) improves tremendously every year since FY2010. This shows the aggressiveness of its management towards becoming a prominent player in Malaysia property development scene.

ROE of 14.1% is misleading here as the net profit is hugely affected by fair value gains.

For its FY2013, Tropicana achieves total sales of RM2.2billion. Its unbilled sales so far stands at RM2.2bil as well.

Tropicana plans to launch new projects worth RM3.2bil in FY2014 and targets to achieve RM2bil sales. Earlier this year it has launched Tropicana Macalister in Penang (RM314mil) and first phase Tropicana Heights in Kajang (RM252mil). The take-up rates are at 36% & 62% respectively.

It has just officially launched the first of the 2 towers of Bora Residences at Tropicana Danga Bay yesterday, in which 100 of total 396 units have been taken up during soft launch last year. Its price starts from RM1,100 psf and the second tower is planned to be launched in July this year.

It may as well launch its ex-Canal city development later this year sooner than expected.

       Tropicana Heights Preview: can see leading actress of "The Journey" there

       Crazy double storey house price in Kajang, 62% sold...

To determine the fair value of Tropicana my own way, I'll use PBT-FV less 25% tax as the net profit for FY13. This comes to about RM215mil thus EPS is 19.4sen, and target price RM1.94 (from RM1.63).

I hope that Tropicana's management can find buyers for its investment assets quickly, so that its gearing ratio can remain at 0.50 level and also get rid of those massive fair value gain stuff.