Review

• Paramount Corporation Bhd (PCB) reported normalised net profit to ordinary equity holders of RM26.3mn in 9M22, which accounted for 59% of our full-year forecast. We deem the results to be in line with expectations, as we expect 4Q22 performance to come in substantially stronger due to 1) a pick-up in construction activities, and 2) a reduction in distribution to private debt securities holders due to a redemption in Sep-22.

• We derive our normalised net profit after excluding a gain of RM53.7mn from the disposal of KDU DJ Campus and adding back the impairment loss of RM38.7mn in respect of the sale of the remaining 20% equity interests in the pre-tertiary education business.

• 9M22 normalised net profit to ordinary equity holders surged to RM26.3mn, more than 6 times the RM4.2mn achieved in 9M21. All three business segments have reported improved financial performance, with the property division being the most significant contributor.

• The property division posted a 9M22 PBT of RM70.3mn, which was significantly higher than the RM42.9mn recorded in 9M21, on the back of higher revenue and a revision of project costings.

• The Co-Working division’s loss before tax narrowed to RM159k in 3Q22 and to RM483k in 9M22. The improvements can be largely attributed to the higher contributions from the Tropicana Gardens outlet and Scalable Malaysia, a one-stop customised-workspace solutions provider.

• PCB’s 3Q22 property sales jumped nearly 6 times to RM266mn (-1.5% QoQ), bringing 9M22 sales to RM691mn (+95% YoY). Latest unbilled sales increased to RM1.3bn from RM1.2bn a quarter ago, which was also a new milestone achieved.

Impact

• No change to FY22-24 earnings forecasts.

Outlook

• In 9M22, the group only launched properties worth RM291mn comprising Bukit Bayan (shop offices and landed residential, GDV: RM93mn) and Arinna Kemuning Utama (high-rise, GDV: RM198mn). In Nov-22, PCB launched Sejati Lakeside 2 in Cyberjaya (non-strata double storey semidetached homes: GDV: RM191mn) and The Atera in Petaling Jaya (high-rise, GDV: RM534mn). Although 9M22 property sales accounted for only 69% of the group's full-year sales target, we believe the sales target is attainable considering the majority of the new projects were only launched in 4Q22.

• PCB completed the sale of the DJ Campus for RM60mn in Oct-22 while the sale of its remaining 20% equity interest in pre-tertiary education business for RM120mn is expected to be completed by the end of 2022. Of the total proceeds of RM180mn, RM85mn will be used to pare down borrowings while RM74.6mn (or 12sen/share) has been earmarked for distribution of special dividend.

Valuation

• We maintain Buy on PCB with an unchanged target price of RM0.78/share, based on 0.35x CY23 BPS (price upside: 9% and dividend yield: 22%).

Source: TA Research - 29 Nov 2022