Review

• Paramount Corporation Bhd’s (PCB) FY22 normalised net profit to ordinary equity holders of RM45.2mn came in within expectations,  accounting for 101% of our full-year forecast.

• 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.

• In addition to the 12sen special dividend that would be paid on March 29,  2023, PCB has recommended a final dividend of 3.5sen for FY22. This brings the total dividends for FY22 to 18sen. Note that, the special dividend, which represents an attractive yield of 14%, will be paid from the proceeds of the divestment of PCB’s remaining equity in its pre-tertiary education business in 2022.

• FY22 normalised net profit to ordinary equity holders surged 79% YoY to  RM45.2mn. All three business segments have reported improved financial performance, with the property division being the most significant contributor.

• The property division posted a FY22 PBT of RM104.7mn, which was 33%  higher than the RM78.6mn recorded in FY21, on the back of higher revenue and cost savings realised from certain completed projects.

• The Co-Working division’s loss before tax narrowed to RM114k in 4Q22  and to RM0.6mn in FY22 as compare to a core loss before tax of RM4.1mn  recorded in FY21 (excluding impairment loss of RM4.6mn). The improvement can be largely attributed to the higher contributions from the Tropicana Gardens outlet and Scalable Malaysia, a one-stop customised-workspace solutions provider.

• QoQ, 4Q22 normalised net profit grew 55.4% to RM18.9mn largely due to a reduction in distribution to private debt securities holders following the redemption of the securities in Sep-22.

• PCB reported new property sales of RM413mn in 4Q22 (-8.6% YoY,  +55.3% QoQ), bringing FY22 sales to RM1.1bn (+37% YoY). Notably, PCB  not only exceeded its sales target of RM1.0bn, but its sales in FY22 were the highest ever, breaking the previous record set in 2018. Latest unbilled sales increased to RM1.4bn from RM1.3bn a quarter ago, which was also a  new milestone achieved.

Impact

• We factor in actual property sales secured in FY22 and adjust progress billings for its on-going projects. We raise our FY23 and FY24 property sales assumptions higher to RM1.2bn and RM1.3bn, respectively, from  RM1.1bn and RM1.2bn previously. Correspondingly, our FY23 and FY24  earnings forecasts are adjusted higher by 6% and 7% respectively.

• We introduce our FY25 net profit forecasts of RM82.1mn (+7.0% YoY),  underpinned by new property sales of RM1.3bn.

Outlook

• For FY23, it has set a sales target of RM1.2bn, underpinned by seven projects (including new phases of existing projects) with an estimated gross development value of RM1.5bn, as well as other on-going projects.  The management is confident that the sales target will be met in light of the positive response to recent launches.

• Meanwhile, management expects Co-Working division to perform better this year, supported by the continuing recovery of the Malaysian economy.

Valuation

• Following the change in earnings, we raise PCB’s target price to RM0.87  (previously RM0.80), based on unchanged 0.35x CY24 BPS. We maintain our Buy recommendation for its attractive dividend yield.

Source: TA Research - 28 Feb 2023