Paramount Corporation (KLSE:PARAMON) had recently turned in excellent quarterly and full-year results for the financial year ended 2016.
Net profit almost doubled from RM16.5 million to RM31.9 million, on the back of a 21.4 percent revenue growth from RM148.1 million to RM179.7 million. The remarkable achievements can be attributed to higher contributions from both its property and education divisions.
Paramount Property has seen strong sales momentum across most of its developments, with revenue climbing by 28 percent to RM140.6 million while profit before tax (PBT) jumped 62 percent to RM29.9 million.
Meanwhile, revenue and PBT for Paramount Education rose 3 percent and 118 percent respectively. We made further study into this company to see if it is a worthy portfolio-stock.
Paramount’s Biz Profile
Paramount first started out under the name Malaysia Rice Industries when it was incorporated in 1969.
It was principally involved in the business of rice milling before restructuring itself into a property development company after acquiring a real estate company before it evolved into one of Malaysia’s oldest property developers today.
On the other hand, the group’s education division has its beginnings in the early 80’s at a time when spaces in Malaysia’s public universities were limited. Hence, Kolej Damansara Utama (later known as KDU College) was established to cater to young Malaysians who wished to pursue tertiary education locally.
Today, property and education formed the two main segments of Paramount’s core business, under the Paramount Property and Paramount Education brands. According to the group’s latest report, the former contributed around 62.5% of FY16 revenue while the latter 22.7% respectively.
Financial Highlights
Paramount has managed to post modest growth in its top and bottom line steadily over the years. From FY12 to FY16, the group’s revenue expanded from RM450 million to RM573.1 million, growing at a compounded annual growth rate (CAGR) of 6.2% . Similarly, its PBT also rose in tandem from RM76.2 million to RM112.5 million at a CAGR of 10.2%.
Apart from the consistent profitability, Paramount also maintained a healthy balance sheet.
As of 31 December 2016, its debt-to-equity ratio stood at a comfortable 0.8 times, while interest coverage ratio is robust at 18.1 times.
Source: Company’s Annual Reports
Ambitious Expansion
In January this year, Paramount announced that it had acquired a 66 percent controlling stake in K-12 education group, REAL Education Group, from Character First at a cash consideration of RM183 million.
The investment allows Paramount to penetrate into the kindergarden, primary and secondary education segments, thereby accelerating the group’s growth plans to establish itself as one of the largest full-spectrum education services providers in Malaysia.
On the property front, Paramount’s results are going to be underpinned by the variety of its portfolio, ranging from affordably-priced properties to innovatively conceptualised developments.
Some of the highlights include Utropolis Glenmarie’s and Utropolis Batu Kawan’s innovative university metropolis concept.
Moreover, projects in the pipeline that will be launched in 2017 include Section 13 in Petaling Jaya with senior living concepts, as well Sekitar26 Enterprise, both of which will further complement the group’s current product portfolio.
Valuation
Paramount’s share price has climbed up from RM1.38 from 3 January 2017 to RM1.66 as of 28 February 2017, giving its shareholders a year-to-date return of 20.3 percent in less than two months.
At current market price, its shares are valued at a price-to-earnings ratio of 9.6 times and price-to-book ratio of 0.8 times respectively. These put the group in a slightly more attractive position in terms of valuation as compared to the other Malaysian developers.
Moreover, Paramount’s management has proposed a final dividend of RM0.06. Together with the interim dividend of RM0.025 announced earlier, the total dividend payout for FY16 amounts to RM0.085 per share. This is equivalent to a pretty decent dividend yield of around 5.1 percent per annum for income investors.
This article first appeared on Sharesinv.com.
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