Tropicana Corp Bhd has announced that it will not be calling its 6.6% Perpetual Sukuk on the first call date of 15 September 2026. As a result, the coupon will step up by 2% from 16 September 2026 (Year 6), and thereafter by a further 1% p.a. each year until it reaches the maximum rate of 15% p.a.
The step-up adds an estimated RM5.4 million to the Group's annual interest burden from Year 6 onwards. Should the bond remain uncalled in subsequent years, the coupon will keep rising by 1% p.a. [capped at 15% p.a].
The reason cited by management for the non-call is that there is a delay in land sales. That said, there are several factors that lead us to believe that the credit risk remains manageable at this juncture:
i. Earnings remain healthy despite softer 1H2026 revenue quality
Tropicana's latest results show revenue rising 97% YoY to RM1,164.4 million in 1H2026, largely driven by a one-off gain on the disposal of three land parcels, together with stronger progress billings.
However, a RM23.1 million unrealised loss on quoted shares, combined with higher finance costs, weighed on profitability. Profit before tax (PBT) fell to RM9.1 million; excluding the unrealised loss, PBT would have been a healthier RM32.2 million.
The Group's loss after tax of RM33.6 million was largely a function of tax distortion: tax expense rose to RM42.7 million, against a tax credit of RM6.5 million a year earlier (which had reflected an overpayment in prior years).
Table 1: Profitability indicators (RM million, unless otherwise stated)
| 1H2025 | 1H2026 | YoY change | |
| Revenue | 590.5 | 1,164.4 | 97% |
| Operating profit | 75.8 | 81.8 | 8% |
| Profit before tax | 16.0 | 9.1 | -43% |
| (Loss)/profit after tax | 22.4 | (33.6) | -250% |
| Operating profit margin (%) | -3.4% | 5.8% |
Source: Company Reports, iFAST Compilations. Data as of 30 June 2026.
ii. Credit profile stable, deleveraging remains on track
The trailing-twelve-month (TTM) interest coverage ratio remains under pressure at 0.8x, mainly due to lower operating profit. That said, we believe Tropicana's overall credit profile is stable compared to FY2025, with a marginal improvement. This is evidenced by the lower net gearing ratio of 50% as the group continues to monetise its assets to pare down borrowings.
Table 2: Credit metrics(RM million, unless otherwise stated)
| 2025 | 1Q2026 | |
| Cash and bank balances | 657 | 735 |
| Short-term borrowings | 1087 | 981 |
| Long-term borrowings | 1668 | 1664 |
| Net gearing ratio (%) | 56% | 50% |
| Interest coverage ratio (x, TTM) | 0.82 | 0.80 |
| Operating cash flow | -488 | 313 |
Source: Company Reports, iFAST Compilations. Data as of 30 June 2026.
iii. Unbilled sales remain supportive in the near term
As at 30 June 2026, Tropicana's unbilled sales stood at around RM1.4 billion, providing near-term earnings visibility.
However, this represents a significant decline from approximately RM2.0 billion as at end-FY2025 and is worth flagging. The falling unbilled sales balance could signal softer sales conversion on existing projects.
iv. A sizeable landbank remains the last line of defence
Tropicana holds a sizeable landbank of approximately 1,349.7 acres across the central, northern and southern regions.
Based purely on the land value of its flagship Lido Waterfront project, the Group’s landbank could be worth approximately RM2.6 billion* (representing approximately 99% of the group’s total borrowings), providing the group with a meaningful pool of assets for potential land monetisation as part of its ongoing deleveraging strategy.
*Using the median land price as a reference point
v. Issuances are backed by 1.5x security cover
Given that Tropicana's issuances are backed by physical assets (mainly land), bondholders should have some additional comfort. In other words, even in a worst-case scenario where Tropicana defaults or loses its repayment capacity, investors should still be able to recover some value through land sales.
Taking this case as an example, the non-called bonds are secured by three parcels of land in Johor and one parcel of land in Damansara, District of Petaling (the “TGCR Land”), as follows:
- HSD 578204, PTB 24592; (The Johor land is valued at 0.75x its appraised market value.)
- HSD 578205, PTB 24593; (The Johor land is valued at 0.75x its appraised market value.)
- HSD 578208, PTB 24623; (The Johor land is valued at 0.75x its appraised market value.)
- PN 20291, Lot 1003, situated in the Town of Damansara, District of Petaling, State of Selangor (the “TGCR Land”).
Our View
It is undeniable that Tropicana's profitability quality is weak and the decline in unbilled sales is worth flagging. That said, we believe the credit risk over the next four to five years should remain manageable, supported by ongoing developments in key growth areas such as Genting, Johor and the Klang Valley.
Overall, we would frame the credit as “stable, with a constructive bias” rather than outright positive, given that the deleveraging initiatives are progressing at a commendable pace, while the sizeable landbank could provide a meaningful downside buffer. That said, investors should continue to closely monitor the company’s financial performance, the sales progress of its existing projects, and its borrowing levels.
At this juncture, we believe the company’s credit risk remains manageable, with its repayment capacity intact.
However, we would like to remind investors that the current non-call event for DJCMK 6.600% Perpetual Corp (MYR) could be a warning sign of tightening cash flows and may increase the risk of non-call and coupon deferral. While we believe the Group's repayment capacity remains intact, investors should note that the issuer has the right to defer coupon payments indefinitely, particularly when the group runs into cash flow tightness.
This view is also supported by a precedent, where the group launched an exchange offer to swap its higher-coupon perpetual securities for lower-coupon fixed-duration bonds. While the Group did not explicitly attribute this to cash flow tightness, we note that the exchange itself could be read as a signal that the Group lacked the avenue to redeem the perpetuals via cash at the time.
Against this backdrop, we recommend that investors consider the Group's fixed-duration bonds, particularly DJCMK 6.100% 31Mar2031 Corp (MYR) and DJCMK 6.000% 15Jul2031 Corp (MYR), which offer a modestly higher yield of 5.42% and 5.47% respectively on top of a fixed maturity date.
As for perps, existing perpetual holders may continue to hold their positions, supported by the sizeable landbank, which offers meaningful downside protection with an estimated 1.5x land cover. That said, we caution that any new investors considering the perpetuals should be aware that non-call and coupon deferral remain live risks in a cash flow tightness scenario, as evidenced by the DJCMK 6.600% Perpetual Corp (MYR), which is currently experiencing this outcome.
Table 3: Existing bonds
|
Bonds |
Years to call / maturity |
Yield to call / maturity |
|
0M / - |
5.87% / - |
|
|
- / 1Y7M |
- / 4.65% |
|
|
7M / - |
4.36% / - |
|
|
- / 2Y2M |
- / 4.84% |
|
|
- / 2Y2M |
- / 4.84% |
|
|
- / 4Y6M |
- / 5.42% |
|
|
- / 4Y10M |
- / 5.47% |
Source: BSM, iFAST Compilations. Data as of 08 September 2026.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in DJCMK 5.800% 14Nov2028 Corp (MYR) and the analyst who produced this report hold a NIL position in the abovementioned securities.
