Investment Highlights

• We maintain BUY on Paramount Corporation (Paramount) with an unchanged fair value (FV) of RM1.46/share, based on a 40% discount to our RNAV. We made no changes to our neutral ESG rating of 3-star .

• The FV implies FY25F P/E of 10x, at parity to the average for small-cap property stocks currently.

• Paramount’s 1HFY24 core net profit (CNP) of RM32mil came in within expectations, accounting for 45% of our full-year forecast and 46% of street’s. As a comparison, 1HFY23 accounted for 44% of FY23 net profit.

• In 1HFY24, the group’s revenue decreased 7% YoY while CNP slid 2.9% YoY. This was mainly due to a weak 1QFY24 property development performance from lower work progress and property sales.

• This was caused by delays in securing approvals for the Ashwood luxury high-rise condominium/duplex/villa development at U-Thant, Kuala Lumpur that was subsequently launched with a GDV of RM781mil in May this year as well as RM626mil for Phase 2 of the Atera in Petaling Jaya and RM208mil for final phase of Sejati Residences in Cyberjaya in June 2024.

• In 2QFY24, Paramount’s total launches reached RM1.6bil (67% of its FY24F launch target of RM2.4bil) vs. only RM81mil in 1QFY24. This drove 2QFY24 sales surge of 5.3x QoQ to RM537mil, which raised unbilled sales by 19% QoQ to RM1.4bil - 1.5x FY24F property development revenue.

• Paramount’s 1HFY24 launches of RM1.7bil accounted for 67% of its target of RM2.4bil and already almost double of RM886mil for FY23.

• In 1HFY24, Paramount has secured new sales of RM638mil (+3% YoY), attaining 46% of its target of RM1.4bil. 75% of 1HFY24 sales stemmed from the Klang Valley (The Ashwood alone contributed 61%) with the remainder from Kedah and Penang.

• In 2QFY24, the coworking division just broke even vs. a loss of RM0.5mil in 1QFY24, supported by a 44% increase in revenue to RM5mil with additional tenancies for Tropicana Gardens and new spaces at The Five in January 2024 and Ken TTDI in November 2023.

• QoQ, the group’s 2QFY24 CNP rebounded 3.1x as revenue rose 35% on higher progress recognition and sales, primarily underpinned by The Ashwood.

• In 2HFY24, Paramount plans to launch 4 projects with a GDV of RM0.7bil, which includes semi-detached cluster townhouses at Greenwood Salak Perdana Senna in Sepang in 3QFY24 and commercial components of Atwater development in Petaling Jaya. Meanwhile, the group still have undeveloped land encompassing 417 acres of which 57% resides in Kedah and Penang and the balance in the Klang Valley. These carry a remaining GDV of RM6.3bil.

• Paramount is currently trading at an attractive FY25F P/E of 9x vs. a 4-year peak of 16x. Meanwhile, its FY25F dividend yield is compelling at 6%.

Source: AmInvest Research - 29 Aug 2024