Review

• Excluding the RM2.5mn impairment loss on its tertiary education associate in 3Q24, Paramount Corporation Bhd's (PCB) 9M24 core net profit of RM50.8mn was in line with expectations, representing 76% of our full-year estimate and 73% of the consensus forecast.

• The board has declared a second interim dividend of 3 sen/share, bringing the YTD dividend to 6 sen/share.

• YoY: Core net profit attributable to ordinary equity holders for 9M24 rose slightly by 4% YoY to RM31.9mn, despite a 3% drop in revenue to RM679.1mn, supported by margin improvements in the investment and others segment.

• The property segment recorded revenue of RM642.5mn and PBT of RM103.3mn, down 5% and 4% YoY, respectively, due to slower work progress and the completion of major projects in the prior period.

• Co-labs Coworking's revenue surged 54% YoY to RM14.8mn in 9M24, boosted by strong earnings from Tropicana Gardens and contributions from new spaces at Ken TTDI (opened Nov-23) and The Five (opened Jan24). However, PBT declined to RM0.02mn (9M23: RM1.1mn) due to startup losses from the new spaces and higher depreciation and amortisation expenses for Naza Tower.

• QoQ: In 3Q24, core net profit to ordinary shareholders fell 22% QoQ to RM18.8mn (2Q24: RM24.2mn), mainly due to 1) a 26% QoQ rise in net interest expenses, 2) share of losses from its 21.5% stake in EcoWorld International, and 3) a 185% QoQ increase in distributions to private debt securities holders.

• PCB's 3Q24 new property sales grew 22% YoY but declined 34% QoQ to RM355mn, bringing 9M24 sales to RM993mn (+9% YoY). The top contributors to 9M2024 sales were The Ashwood at U-Thant in Kuala Lumpur, The Atera in Selangor, and Bukit Banyan in Kedah. Unbilled sales increased to RM1.5bn, up from RM1.4bn in the previous quarter.

Impact

• Maintain FY24-26 earnings forecasts.

Outlook

• Management remains optimistic about sustaining the sales momentum, supported by a record property launch totalling RM2.0bn GDV in the first nine months of 2024. In 4Q 2024, PCB plans to launch Uptown Residences 2 at Berkeley Uptown Klang, featuring serviced apartments and park villas designed for multigenerational living, with a projected GDV of RM163mn. With positive responses from recent launches, management is confident of achieving the RM1.4bn sales target, having already secured 71% in 9M24.

• Co-labs Coworking will focus on boosting occupancy rates, particularly for its two new spaces. Over the next two years, PCB plans to expand its coworking operations beyond Klang Valley and double its managed space to 300,000 sq ft nationwide, up from 167,000 sq ft currently.

Valuation

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

Source: TA Research - 28 Nov 2024