KUALA LUMPUR (Apr 15): Tropicana Corp Bhd is disposing of its entire 73% stake in Tenaga Kimia Sdn Bhd to Austin Powder Asia Pacific for RM194.7 million cash, which will be used to repay debt and for working capital.

The property developer expects to record a net gain of RM48.5 million for its current financial year ending Dec 31, 2015 (FY15) arising from this proposed transaction.

"Tropicana will also benefit from interest savings as a result of the utilisation of the sale proceeds to lower borrowings," the group said in a statement today.

Tropicana's wholly-owned unit Tropicana Tenaga Kimia Sdn Bhd today signed an agreement with Austin Powder Asia Pacific for the proposed disposal.

"This proposed transaction is in line with Tropicana’s strategy to dispose non-core assets and heighten its property focus, as well as part of the group’s ongoing de-gearing exercise to reduce its borrowings," said Tropicana (fundamental: 1.3; valuation: 2.4) in the statement.

"Taking into account the sale of 308.72 acres Canal City land to Eco World Development Group Bhd for RM471 million, which was completed on March 31, 2015, and the impending completion of the sale of 3.14 acres Bukit Bintang land to a joint venture led by Agile Property Holdings Ltd for RM448 million and the sale of Tropicana City Mall and Office Tower to Capitamalls Malaysia Trust for RM540 million, Tropicana’s potential net gearing could fall to approximately 0.3 times," said the group.

"This will put Tropicana in a stronger financial footing while it continues to further strengthen its balance sheet via unlocking value of its landbank," it added.

Tenaga Kimia and its group of companies are involved in the manufacturing and supply of emulsion explosives and technical blasting services supporting various industries including construction, mining, and oil and gas. The group has presence in Malaysia, Indonesia, the Philippines, Hong Kong, Taiwan and Indochina.

Austin Powder Asia Pacific is a subsidiary of US-based Austin Powder Holdings Co, which is involved in the full line supply of civil explosives and blasting services to the global mining, stone quarry, construction, and oil and gas industries.

Tropicana shares closed one sen down at RM1.12 today, bringing a market capitalisation of RM1.6 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)