Here is another appealing 6% yield offering from Tropicana

Since our previous update in March this year, Tropicana has returned to the market with another issuance.

Previous Article Update 

Financial Highlights – Earnings Remained in the Red

Tropicana recently released its latest quarterly results for the period ended 30 March 2026 (1QFY2026). In the quarter under review, the group continued to demonstrate resilient growth in revenue, which increased by 20.5% YoY to RM313.7 million compared with RM260.4 million in the corresponding period of the previous financial year. The stronger revenue performance was mainly driven by higher progress billings arising from the completion of several projects within the Klang Valley and Northern regions.

In 1Q2026, the operating profit margin increased to 6.8% from 1.6% in 1Q2025, despite lower operating profit for the quarter. The improvement was mainly due to the margin being measured on a TTM (trailing twelve-month) basis, benefiting from the Group’s stronger operating profit performance throughout FY2025.

Nevertheless, despite the stronger top-line performance, the group’s bottom line remained in the red, largely attributable to a mark-to-market loss on quoted shares amounting to RM16.7 million, which was a non-cash item. Excluding this, the group would have recorded a profit before tax of RM3.9 million.

Overall, despite the reported loss stemming from the unrealised loss on quoted shares, we believe the group’s operations remain healthy at present, supported by its ability to continue delivering organic growth from its core business operations.

Table 1: Profitability

Source: Company Reports, iFAST Compilations. Data as of 31 March 2026

Credit highlights

There have been limited fluctuations in terms of Tropicana’s credit profile since our last update covering its FY2025 financials. The net gearing ratio edged up marginally to 58%, mainly attributable to the issuance of RM200 mil debt in March 2026. Meanwhile, the interest coverage ratio eased slightly to 0.71x following weaker operating profit recorded during the quarter.

Operating cash flow remained negative, although it improved significantly to negative RM95.5 million compared with negative RM487.7 million as at Dec 2025. This was largely within our expectations, as highlighted in previous articles, given the temporary mismatch arising from the 30–90 day cash conversion cycle amid strong project completion and take-up rates.

In summary, we view the group’s credit position remains healthy, with credit risk still manageable. This is underpinned by the group’s robust unbilled sales of RM1.7 billion as at March 2026, alongside its sizeable landbank, which continues to provide refinancing opportunities and a stronger buffer to the group’s liquidity position.

Table 2: Credit Metrics (in RM 000)

Source: Company Reports, iFAST Compilations. Data as of 31 March 2026.

Earnings Visibility Underpinned by Robust Unbilled Sales and  Sizeable Landbank

As at 31 March 2026, Tropicana maintained a robust unbilled sales balance of RM1.7 billion, compared with RM2.0 billion recorded at the end of FY2025. The decline was mainly attributable to higher progress billings achieved during the quarter.

In addition, the group possesses a sizeable landbank of 1,336.1 acres across Malaysia, of which 470.4 acres are located in the southern region, with an estimated GDV of RM97 billion as at 31 Dec 2025. Given the landbank’s proximity to the RTS Link and the Johor-Singapore Special Economic Zone, we believe this provides significant potential for future developments and refinancing opportunities, which could further strengthen the group’s liquidity position as these projects are progressively monetised through sales.

Risks

Sizeable project launches – A large number of developments are currently ongoing. If the group does not manage its working capital properly, it could potentially face a capital shortfall.

Change in government policy – If the government adjusts the minimum purchase threshold (current threshold: RM1 million) for foreign property buyers in Malaysia, it could potentially soften demand for the Lido Waterfront project, as its primary target market is foreign buyers. This may also dampen demand for other high-end projects priced around RM1 million.

Upcoming issuance –   Tropicana June2031

Key characteristics of the proposed issuance:

Tenure: 5 years

Indicative yield guidance: 6.00%

 Issue Rating: “A” (positive) by MARC

 Issue Size: Up to a Nominal Amount of RM350 million

Security Cover: 1.5x (see Table 3)

 Target Book Open: Week of 15 June 2026 (Subject to market conditions)

Table 3: Indicative Market Value of assets pledged to the issuance

* Adjusted Market Value for Johor Land, ie Lido Waterfront, is based on 80% of the indicative market value

We are of the view that the proceeds will primarily be utilised to retire the existing perpetual issuance, which carries a call date in Sep 2026. The remaining proceeds are expected to be allocated towards the group’s ongoing CAPEX requirements.

Our view

Although the group’s earnings remained in the red during the latest quarter, we continue to maintain a positive stance on the credit. Our view is primarily supported by the group’s ongoing developments in strategic locations such as Genting, Johor, and the Klang Valley. In addition, the group possesses a sizeable landbank, which provides considerable flexibility for future development opportunities as well as potential refinancing exercises.

We understand that past liquidity concerns may still linger among certain investors. However, it is important to recognise the extent to which the group’s position has improved. In our view, the “current Tropicana” is in a stronger position compared with the “Tropicana of 2024”. Through its consistent focus on debt reduction and improving its gearing profile, the group’s financial position has strengthened considerably. As such, we believe the group’s credit profile is now on a more stable and promising footing.

Overall, we anticipate continued improvement in the group’s profitability and balance sheet position, with the potential economic expansion in Johor serving as a key catalyst for future revenue growth. With regard to the upcoming issuance, we view the 5-year sukuk, with an indicative yield guidance of 6.0%, as an attractive proposition within the current market environment. In our opinion, the risk-reward profile remains well justified, particularly given the approximately 270bps yield pickup over the 5Y MGS.

Table 4: Recommended Bond

Source: BSM, iFAST Compilations. Data as of 29 May 2026.