Paramount advances after 4Q strong earnings, boost from Jerneh Insurance sale
KUALA LUMPUR: Shares of Paramount Corp Bhd was among the top gainers in the morning on Friday, Feb 25 after it announced a strong set of earnings, which were boosted by the 20% equity in Jerneh Insurance Bhd and higher margins achieved in property development.
At 11.28am, Paramount rose 34 sen to RM4.85 with 345,200 shares done.
The FBM KLCI rose 2.98 points to 1,492.85, off the early high of 1,499. Turnover was 522.46 million shares valued at RM620.44 million. There were 386 gainers, 278 losers and 248 stocks unchanged.
On Thursday, Paramount said while 4QFY10 revenue was at RM102.9 million, a slight decline from RM104.5 million a year ago, profit before tax of RM87.1 million was substantially higher compared with RM22.0 million a year ago.
This 296% increase was attributed to a gain of RM60.8 million recognized on the disposal of the Group’s 20% equity in Jerneh Insurance and higher margins achieved in property development.
It also said FY10 revenue grew by 7% to RM432.3 million from RM404.9 million recorded in FY09 the previous year while profit before tax grew by 123% to RM177.1 million from RM79.3 million in FY09.
Discounting the gain from the disposal of Jerneh Insurance, it said the group’s core businesses, that is property development, contruction and educational services contributed to 47% of the growth in profits.
Paramount Corp - Dividend + Bonus issue + Share split
By RHB Research
Friday, 25 February 2011 12:30
Corporate Highlights
Paramount Corp
♦ Above expectation.
Paramount’s 4Q10 core net earnings of RM21.6m (+50.4% yoy; 0% qoq) beat our estimate by 12% on a full year basis. Sequential turnover was flat (+4.7% qoq), mainly attributed to slightly higher revenue from the property development and education divisions, due to seasonal intake. Headline 4Q10 net profit of RM85.2m was skewed by a oneoff gain on disposal of Jerneh Insurance Berhad amounted to RM60.8m. A 20 sen final dividend was declared for the quarter, bringing full year DPS to 75 sen, including the 40 sen special dividend. This represents an impressive yield of 17% for the year.
♦ Bonus issue and share split.
On a side note, Paramount also announced its proposed bonus issue exercise on a basis of 2 shares for every 5 existing shares, as well as share split of 1 share into two shares (the bonus shares and split shares will not be entitled to the proposed final dividend). We are positive on this as the exercise is a form of reward to shareholders and is expected to improve the stock liquidity in the future. Note that, share base will be increased to 337.8m from the current 120.6m upon the completion of
the exercise by 2Q2011.
♦ Risks and concerns.
The risks include: 1) regulatory risk; 2) delay in approvals and launches; 3) competition from peers; and 4) country risks.
♦ Forecasts.
In view of the better-than-expected results for FY10, we raise our FY11-12 forecasts by 11-13%. Estimated earnings growth for the next two years is decent at 8.4% and 15.1%.
♦ Maintain Outperform.
While Paramount is not as aggressive as other big property players in property development, we continue to like the stock for its dividend angle. Over the intermediate term, we think the company could undertake some corporate exercise for its education division, either by listing the KDU College or JV with some reputable partners, which should continue to benefit shareholders. No change to our indicative fair value of RM5.92 for now, based on a 30% discount to RNAV. Maintain Outperform.
