We maintain our  NEUTRAL  rating and MYR1.71  FV.  Paramount’s 3Q13 results  came  in  within  our  expectations.  9M13  new  property  sales amounted  to  MYR330m,  with  Phase  1  Utropolis  being  the  key contributor.  Meanwhile,  the  Batu  Kawan  deal  is  still  in  negotiations. Moving forward, its education division is expected to improve next year, as the University College saw better enrolment numbers in 2H13.

• Within  expectations.  Paramount’s  3Q13  results  came  in  within  our expectations.  Net earnings during the quarter were  largely lifted by the construction  division  due  to  the  near  completion  of  external  projects. Meanwhile,  progress  billings  from  some  property  projects,  such  as Utropolis,  were  weaker  due  to  slow  construction  works.  Sequential performance of the education division remained steady.
• Decent new sales.  9M13 new property sales increased to  MYR330m, from  MYR285m  in  1H13.  Phase  1  Utropolis  was  the  key  contributor,while  Phase  1A  of  Sekitar  26  Shah  Alam  –  the  12-unit  semi-detached multi-purpose building  –  achieved a take-up rate of 60%. The properties are priced at MYR5m-6m  each, with a GDV of MYR66.5m.  Phase 2 of Utropolis,  which  comprises  418  SOHO  units,  is  slated  for  launch  in 1Q14.  Despite Government’s cooling measures,  we believe demand will remain  intact  in  view  of  the  decent  pricing,  location  and  future  student catchment in the new KDU campus.
• Batu Kawan deal still ongoing. Recall that in end-Sept, it was reported that Paramount would  acquire 30 acres of land at Batu Kawan to set up a KDU University College,  together with some mixed developments. We have yet to factor this into our forecasts and valuations, as the  deal has yet to be finalised. We understand that negotiations are still ongoing with Penang Development Corp (PDC) on terms and conditions.  We expect the agreements to be signed within the next three months.
• Forecasts.  We  make  no  changes  to  our  earnings  forecasts.  Unbilled sales remained steady at MYR363m (vs MYR 366m in 2Q).
• Maintain  NEUTRAL.  While  sector valuations have largely priced in the negative impact from the cooling measures, given the current negative sentiment, we maintain our  NEUTRAL  rating  on Paramount.  Our  FV is kept at MYR1.71, based on an unchanged 55% discount to RNAV.

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SWOT Analysis

Company Profile
Paramount has both property development and education business divisions. Its Kemuning Utama township is its flagship project, while KDU is one of the well-known education brands in Malaysia. Management has plans in place to grow both businesses.

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Source: RHB