Ioi Properties Acquiring Tropicana Gardens Mall Is An Opportunistic Move - Kenanga

KUALA LUMPUR, July 25 (Bernama) -- Kenanga Investment Bank Bhd believes IOI Properties Group Bhd's acquisition of the loss-making Tropicana Gardens Mall from Tropicana Indah Sdn Bhd is an opportunity for the property developer.

The investment bank said IOI Properties is acquiring the mall for RM680 million, a 28 per cent discount to book value or replacement cost of RM943.6 million.

Tropicana Indah Sdn Bhd is a 70 per cent-owned indirect subsidiary of Tropicana Corp Bhd.

Tropicana Gardens Mall was only profitable for one year following its opening in March 2020.

"It only made RM500,000 in the financial year 2021 (FY2021) but was in the red in FY2020 (-RM30.1 million), FY2022 (-RM11.9 million) and FY2023 (-RM16.0 million)," said Kenanga Investment Bank.

In a research note, Kenanga Investment Bank said the intention to turn the loss-making mall around was backed by the IOI Properties'  multi-decade experience in developing and managing shopping malls.

"The acquisition will increase the group's net gearing of 0.73 times as at end of March 2024 to 0.76 times, which is still manageable.

"While we expect the mall to remain in the red over the immediate term, it is unlikely to put a significant dent in IOI Properties's profits," it said.

Kenanga Investment Bank also maintained its "underperform" call on IOI Properties, with a target price of RM1.75.

"Maintaining revalued net asset value - target price (RNAV-TP) of RM1.75 based on a 60 per cent discount to its RNAV, in line with its assumption for the property sector," it added.

-- BERNAMA