Review

• Excluding exceptional items totalling RM8.4mn, Paramount Corporation Bhd (PCB) reported normalised net profit to ordinary equity holders of RM74.5mn in FY23. Results came in above ours but below consensus estimates, accounting for 120% and 94% ours and consensus’ full-year forecasts, respectively. The positive deviation from our earnings projections was largely driven by lower-than-expected finance costs, as EBIT was broadly in line at 105% of our forecasts.

• A second interim dividend of 4.0sen/share was announced, bringing the FY23 total dividend declared to 7.0sen/share (FY22: 18sen/share, comprising ordinary and special dividends of 6sen and 12sen, respectively).

• YoY: FY23 net profit to ordinary equity holders surged 65%YoY to RM74.5mn, primarily due to notable improvements in the property division.

• The property division demonstrated a strong performance, achieving a profit before tax (PBT) of RM140mn in FY23, representing a 34% increase compared to the RM105mn recorded in FY22. This growth was driven by higher revenue recognition from ongoing projects. On top of that, stronger performance was also driven by savings from the finalisation of some project costings.

• The Co-Working division recorded a PBT of RM2.0mn in FY23 compared to a loss before tax of RM0.6mn in FY22. The improvement can be largely attributed to higher revenue from all six Co-labs Coworking spaces.

• QoQ: The net profit to ordinary shareholders in 4Q23 experienced a 59% increase compared to the previous quarter. This increase can be primarily attributed to the lower distribution to private debt securities holders (-62% QoQ).

• PCB's new property sales in 4Q23 declined by 49% YoY and 28% QoQ to RM211mn, bringing FY23 sales to RM1.12bn (+1% YoY), slightly below the management's sales target of RM1.2bn. This was mainly due to the deferment of certain projects. In FY23, the group launched new properties with a GDV of RM886mn, reflecting a 27% decrease from FY22's RM1.2bn GDV launch and a 41% reduction from the initially planned RM1.5bn launches. Unbilled sales remained stable at RM1.5bn.

Impact

• Maintain earnings forecasts pending an analyst briefing to be held next week.

Outlook

• PCB has set a sales target of RM1.4bn for FY24, underpinned by seven projects (including new phases of existing projects) with an estimated gross development value of RM2.4bn.

• PCB anticipates improved performance in its Co-Working division amid the ongoing recovery of the Malaysian economy. In 4Q23, Co-labs Coworking expanded its presence at Ken TTDI in Taman Tun Dr Ismail, Kuala Lumpur, and opened a new space at The Five in Damansara Heights, Kuala Lumpur, in Jan-24. Aside from this, it also expanded its Tropicana Gardens space in 4Q23. With this expansion, PCB currently has seven locations totalling 167,000 sq ft in the Klang Valley.

Valuation

• We maintain our Buy recommendation on PCB with an unchanged TP of RM1.17/share, based on 0.5x CY24 P/Bk.

Source: TA Research - 29 Feb 2024