Review

• Paramount Corporation Bhd’s (PCB) 1H24 net profit to ordinary equity holders of RM31.9mn came in within expectations, accounting for 48% and 46% of ours and consensus’s full-year estimates, respectively.

• A first interim dividend of 3.0sen was announced, matching the amount declared in the corresponding period last year.

• YoY: Net profit attributable to ordinary equity holders for 1H24 saw a slight YoY decline of 3.5% to RM31.9mn, primarily due to weaker performance in the property development division and increased interest expenses.

• The property segment reported revenue of RM382.5mn and a PBT of RM64.0mn in 1H24, reflecting a 9% decrease compared to RM418.1mn and RM70.3mn, respectively, in the same period last year. This decline was primarily due to slower work progress and the completion of several sizable projects.

• Co-labs Coworking division's revenue rose 49% YoY to RM9.2mn in 1H24, driven by higher earnings from existing space in Tropicana Gardens, as well as contributions from the two new spaces at Ken TTDI (opened in Nov- 23) and The Five (opened in Jan-24). Despite the revenue growth, the division reported a loss before tax of RM0.2mn, compared to a profit before tax of RM0.6mn in the same period last year, primarily due to startup losses from the new spaces recorded in 1Q24.

• QoQ: In 2Q24, the net profit to ordinary shareholders surged by 214% to RM24.2mn, from RM7.7mn in 1Q24. This sharp increase was driven by a 35% rise in revenue and a 64% reduction in distributions to private debt securities holders. The revenue growth was primarily fuelled by improved work progress and higher sales in the property segment, with The Ashwood being a key contributor. The Coworking segment experienced a significant turnaround in 2Q24, achieving a PBT of RM0.3mn, compared to a LBT of RM0.5mn in 1Q24, due to an increase in occupancy for the new spaces.

• PCB's 2Q24 new property sales increased 65% YoY and 432% QoQ to RM537mn, bringing 1H24 sales to RM638mn (+3% YoY). The latest unbilled sales rose to RM1.4bn from RM1.2bn a quarter ago.

Impact

• Maintain FY24-26 earnings forecasts.

Outlook

• Building on strong sales momentum in the first half of 2024, PCB plans to launch properties with an estimated GDV of RM700mn in 2H24. With positive responses from recent launches, management remains confident in achieving the RM1.4bn sales target, having already secured 46% of it in 1H24.

• Co-labs Coworking has expanded its footprint by 45% YoY to 167,000 sq ft across seven locations in the Klang Valley. The focus will remain on increasing occupancy rates, especially for the two new spaces. In the next two years, PCB aims to expand its co-working space beyond Klang Valley and double its total space under management to 300,000 sq ft across Malaysia.

Valuation

• We maintain our Buy recommendation on PCB with an unchanged TP of RM1.68/share, based on an CY25 P/Bk multiple of 0.7x.

Source: TA Research - 29 Aug 2024