Review

• Paramount Corporation Bhd’s (PCB) 1Q23 net profit to ordinary equity  holders of RM11.6mn came in below expectations, accounting for 16% of  our full-year forecasts. The negative variance was largely due to slowerthan-expected progress billings.

• YoY: 1Q23 net profit to ordinary equity holders more than doubled to  RM11.6mn, primarily due to notable improvements in the property  division.

• The property division demonstrated a strong performance, achieving a  profit before tax (PBT) of RM29.3mn in 1Q23, representing a 42% increase  compared to the RM20.7mn recorded in 1Q22. This growth was driven  by higher revenue recognition from ongoing projects.

• The Co-Working division recorded its maiden PBT in 1Q23 at RM0.1mn  compared to a loss before tax of RM0.3mn in 1Q22. The improvement  can be largely attributed to the higher average occupancy rates.

• QoQ: The net profit to ordinary shareholders in 1Q23 experienced a  39% decline compared to the previous quarter. This decrease can be  attributed primarily to the lower contribution from the property division,  as the performance in 4Q22 was positively boosted by the completion of  several projects.

• PCB’s 1Q23 new property sales grew 88% YoY to RM292mn, driven  mainly by launches in the third and fourth quarters of 2022 (Sejati Lakeside  2 & The Atera). Additionally, PCB unveiled RM426mn worth of new  projects in 1Q23, comprising serviced apartments in Utropolis Batu Kawan  and landed homes in Bukit Banyan Sungai Petani. The current unbilled sales  remained steady at RM1.4bn.

Impact

• After adjusting our progress billing assumptions for PCB's ongoing  projects, we reduce our FY23 and FY24 earnings projections by 14% and  6%, respectively, but increase our FY25 earnings projections by 4%.

Outlook

• Building on the strong sales momentum achieved in 1Q23, PCB has set its  sights on launching properties with an estimated GDV of RM1.1bn over  the remaining nine months of 2023. With the positive response garnered  from recent launches, the management is confident in meeting the sales  target of RM1.2bn.

• With the ongoing recovery of the Malaysian economy, it is anticipated that  the Co-Working division will deliver improved results this year. Management will prioritise increasing occupancy rates in the Co-Working  division while exploring expansion opportunities.

Valuation

• Following the change in earnings, we arrive at a new TP of RM0.94/share  for PCB (previously RM0.95/share), based on an unchanged CY24 P/Bk  multiple of 0.4x. Maintain Buy.

Source: TA Research - 30 May 2023