Monday, 10 July 2017

(The Star) Tanco rebrands as resort-based developer

PETALING JAYA: A property developer known for projects such as Bandar Country Homes in Rawang and Duta Vista in Damansara, Tanco Holdings Bhd is now actively rebranding itself as a resort-based developer.

As Tanco embarks on the transition of its business focus, its massive 400-acre land bank in Port Dickson will be the key game changer for the company.

Tanco’s main project at present is the Dickson Bay development in Port Dickson, which is being developed by its wholly-owned subsidiary Palm Springs Development Sdn Bhd.

Dickson Bay, which was previously known as Palm Springs Resort City, is a 400-acre sea-fronting integrated resort development located in Port Dickson.

The project received a boost last year following the signing of a memorandum of understanding between Tanco and Evergreen Offshore Inc, a Hong Kong based private equity (PE) firm.

Evergreen which last year launched the Asia Pacific One Belt One Road (Obor) Tourism Industry Fund in Malaysia, has expressed an interest in participating in the development of a Double Tree Hilton Hotel, theme park, spa village and service suite and convention hall which are expected to be part of the Dickson Bay project.

Tanco group managing director Andrew Tan Jun Suan (pic) says that apart from its main Dickson Bay project, Tanco also plans to develop a resort in Kuantan.

“We are looking at the feasibility of that project. Our plans are to develop a resort there with about 300 rooms,” says Tan, adding that Tanco has no plans to develop residential and commercial property units in the near term.

Moving forward, Tanco is banking on the touristic appeal of Port Dickson and Kuantan to successfully market its property units. Note that Dickson Bay’s first phase of the development, Splash Park has seen a take-up rate of about 70%, with a total sales value of over RM90mil to date.

“Our tourism industry has been improving well. While the weak ringgit could be detrimental to several sectors, it has benefited the domestic tourism industry.

“Resort-based businesses will do well, supported by the depreciation of the ringgit. With the current state of our currency, Malaysia is seeing more foreigners visiting and at the same time, some Malaysians prefer to travel domestically,” adds Tan.

A penny stock listed on the Main Market of Bursa Malaysia, Tanco has a market capitalisation of RM72.8mil at press time. Tan who is a substantial shareholder of Tanco, controls an equity interest of 39.53%.

Tanco’s transition into a resort-based player is expected to pull the group back into the black in the near future. The property developer has been in the red since 2013, but has gradually narrowed its net loss over the years to RM8.72mil in the financial year 2016 (FY16).

As for the first nine months of financial year 2017 (9M17) ended March 31, Tanco posted a net loss of RM8.67mil which widened by 21.6% year-on-year (y-o-y). This was on the back of a lower top line, followed by higher administrative expenses and finance costs.

Tan however is sanguine that the loss-making property developer will be back into the black by next year.

“I think we can look at being profitable by next year,” he says.

In further streamlining its cash flow and balance sheet, Tanco is actively looking at paring down its debt level. In an attempt to improve its gearing level and operation cash flow, Tanco has proposed to dispose its Duta Vista Executive Suites which is located on a prime land of 1.14ha, for a total sum of RM50mil.

The proposal received unanimous approvals from Tanco’s shareholders in the extraordinary general meeting held last week.

“Some RM20mil of the disposal proceeds will be used to pay back our obligation to the timeshare members and the rest will be used as working capital for our project in Port Dickson,” says Tan.

Tanco’s obligation towards the timeshare members refers to the Duta Vista Vacation Ownership scheme, which has since been dissolved.

Post-disposal of the property, Tanco’s gearing ratio is projected to drop to 0.26 times as the proceeds will be partly used to repay bank borrowings. As at June 30, 2016, the property player’s gearing ratio stood at 0.35 times.

This would mark a trend reversal as Tanco’s gearing ratio has been increasing over past few years, from 0.24 times in 2012 to 0.41 times as of last year.

Moving forward, the group remains cautiously optimistic on its prospects, underpinned by the current economic outlook.

“The Group’s ongoing endeavours for more strategic tie-ups and joint-ventures with branded local and foreign labels will provide the Group’s projects with further enhanced branding. Tanco’s performance in FY17 will make it well positioned to prudently progress with its goals while constantly reviewing market conditions that more business opportunities may be developed.

“While we are on the look-out to diversify into new business segments moving forward, we are not aggressively into it in the near future,” says Tan.