KUALA LUMPUR: RHB Research has maintained its "buy" rating on Paramount Corp Bhd despite earnings coming in below expectations as new property sales in the first half of FY17 have already surpassed total sales in 2016.
Q2FY17 new property sales reached RM176mil as compared to RM244mil in Q1FY17, bringing total sales so far this year to RM420mil. THis exceeds 2016 sales of RM402mil and would likely surpass management's sales target of RM500mil for 2017.
"Earnings from the newly acquired REAL Education Group have started kicking in from April, with a revenue and profit before tax contribution of RM22.9mil and RM3.4mil, respectively. In addition, Ebitda for KDU University College in Glenmarie has started turning positive in 2Q17.
"However, this was not enough to lift the group’s earnings, as its property development earnings were affected by slower progress billings. Construction progress for many property projects was affected due to the clamp down of illegal workers in 1H.
"Meanwhile, the retail component in Utropolis Marketplace continued to incur higher start-up losses," said RHB Research in its review.
The research house cut its FY17 earnings forecast by 14% as the construction works for Paramount's property projects have been affected by the clamp down on illegal workers. It also noted that the billings for its Batu Kawan Utropolis project may take a while to be reflected as the substructure stage typically requires a longer period.
In addition to its "buy" rating, RHB Research is also maintaining its targer price of RM2.37.
"While the special dividend of MYR0.075 after the disposal of Sri KDU campus would likely support the share price, the effort to unlock asset values further, potential listing of the education division, as well as strong property sales would be the key share price catalysts," it said.
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