Paramount Corporation Berhad – Looking Forward to Another Record Year
2023 was a Remarkable Year
In 2023, PCB celebrated a year of remarkable achievements. The group achieved a historic FY23 revenue of RM1.01bn, crossing the RM1.0bn threshold for the first time, positioning it as a milestone year. Despite FY23 sales slightly falling short at RM1.12bn (+1% YoY), compared to the targeted RM1.2bn, this was primarily due to the deferment of two projects, namely Savana @ Utropolis, Batu Kawan Penang, and The Ashwood, Kuala Lumpur, with a combined GDV of approximately RM800mn, owing to approval delays. If these projects had proceeded as planned, FY23 sales could have soared to RM1.4bn. To recap, PCB launched new properties with a total GDV of RM886mn in FY23, reflecting a 27% decrease from FY22 and a 41% reduction from the initially planned RM1.5bn launches.
Highlighting the group’s consistent sales resilience over the past years (see Figure 1), FY23 stands out as the second consecutive year where sales exceeded RM1.0bn. This underlines a positive trajectory for PCB, indicating that the challenges faced since the onset of Covid-19 are behind the group. Notably, FY23 represents the third consecutive year in which the group achieved doubledigit growth in both revenue and core PBT, as depicted in Figure 2.
RM1.4bn Sales Target for FY24
The management is optimistic about the market outlook and has set a higher sales target of RM1.4bn for FY24. This is supported by seven new launches, including new phases of existing projects, with an estimated GDV of RM2.4bn, as well as other ongoing projects. PCB is commencing the year with The Ashwood, a luxury high-rise residential development located within the Taman U-Thant neighbourhood in Kuala Lumpur. With a GDV of RM758mn, The Ashwood constitutes 32% of the total FY24 launches. Leveraging the sell-out success of the adjacent project launched by PCB in 2021 (the Atrium) and an appealing selling price of RM1,100-1,200 psf compared to neighbouring projects priced at RM1,400 psf, we anticipate a positive reception for this project.
Co-working Division on Expansion Drive
The Co-working division achieved profitability in FY23, posting a core PBT of RM0.6mn (excluding the reversal of an impairment loss of RM1.4mn), a significant improvement from the FY22 loss before tax of RM0.6mn. This positive shift is primarily attributed to increased revenue across all Co-labs Coworking spaces. As of December 31, 2023, the average occupancy rate was 66%, down from 70% the previous year, largely due to a 37,000 sq ft expansion
in 4Q23. Excluding the new space, Co-labs’s average occupancy would have stood at 75%. In 4Q23, Co-labs Coworking expanded at Ken TTDI and opened a new space at The Five in Damansara Heights, Kuala Lumpur, in Jan-24. Additionally, it expanded the Tropicana Gardens space in 4Q23, bringing the total locations in the Klang Valley to seven, with a combined space of 167,000 sq ft.
The rise of remote work and flexible schedules has made co-working an ideal solution for adapting to the evolving demands of the post-Covid office environment. This shift is evident in the encouraging occupancy rates of two new locations; Co-labs Coworking Ken TTDI reports a 50% occupancy rate, while Co-labs Coworking The Five stands at 40%. Additionally, management revealed that negotiations for the eighth location, situated in the Klang Valley within a transit-oriented development, are in the final stages. In the next two years, the company aims to expand its co-working space beyond Klang Valley and double its total space under management to 300,000 sq ft across Malaysia.
Impact
Incorporating the FY23 actual results and refining our model, we adjust our earnings forecasts for FY24 and FY25 by +1.4% and -2.1%, respectively. We introduce FY26 net profit of RM101.5mn (+5.8 % YoY).
Valuation & Recommendation
We reiterate our optimism in PCB’s earnings growth in FY24-26F, backed by sizable unbilled sales of RM1.4bn and robust property sales. With a record planned launch of RM2.4bn, we anticipate PCB to achieve record sales and net profit levels for FY24. Additionally, the healthy net gearing level of 0.4x positions the group well for strategic land acquisition initiatives. The group’s target of acquiring RM200mn worth of land annually underscores its commitment to sustaining annual sales of no less than RM1.0bn.
Rolling forward our valuation base year to CY25, we arrive at a new TP of RM1.47/share (previously RM1.17/share) based on a higher P/Bk multiple of 0.6x (previously 0.7x). Maintain Buy.
