Tropicana fair value lower at RM2.15



RHB Research is maintaining its “buy” call on Tropicana Corp Bhd despite its earnings being hit by slower contribution from southern region projects.

RHB Research said it has reduced financial year 2014-15 net profit forecasts by nine per cent and three per cent, respectively, as it factored in slower progress billings from Iskandar Malaysia projects and lowered sales forecast to RM1.7 billion from RM2 billion.

“Our fair value for Tropicana is lowered to RM2.15 from RM2.30, based on a wider discount to revalued net asset value of 30 per cent,” said RHB in its research notes.

According to RHB Research, Tropicana’s first quarter results this year were below expectations and is believed to be due to slower contribution and higher expenses.

Tropicana’s RM7.6 million first-quarter 2014 net profit came in below consensus estimates at five per cent of full-year forecasts.

The lower-than-expected earnings for the quarter were due to slower contribution from Iskandar Malaysia projects, as well as higher finance cost and administrative overheads.

RHB Research, however, pointed out that last year’s first-quarter earnings had been boosted by one-off land sale revenue.

“We expect earnings to pick up in the upcoming quarters, underpinned by strong unbilled sales of RM2.4 billion. The disposal of a plot of land in Jalan Kia Peng, which should result in gross proceeds of RM132 million, is expected to be completed in June or July. This should be a future earnings booster.”

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