PARAMON: Property Developer’s Earnings Fall Short Amid Soft Sales, Valuation Revised

A leading property developer reported a core net profit of RM73.6 million for the fiscal year 2025 (FY25), falling short of both TA Securities’ forecast (90%) and consensus estimates (76%). The earnings miss was primarily attributed to weaker-than-expected property sales and a slower pace of progress billings throughout the year. The company declared a second interim dividend of 4.5 sen per share, bringing the total FY25 dividends to 7.5 sen per share, consistent with FY24, translating into an attractive dividend yield of 7.1% based on the latest closing price.

Performance Review

On a year-on-year (YoY) basis, core net profit saw a 14.5% decline, largely due to a weaker performance in property development earnings, which fell 12.8% YoY. This was exacerbated by newly launched projects not yet reaching significant billing stages and a higher earnings base in FY24 that included a non-recurring dividend income from an investment. Quarter-on-quarter (QoQ), core net profit for 4Q25 plunged 50.5% to RM12.4 million. This steep decline was influenced by a 6-percentage point contraction in property development margins, start-up losses from two new Co-labs ventures which pushed the segment into a RM0.4 million loss, and a 19% QoQ increase in finance costs.

New sales in 4Q25 decreased by 34% YoY, although they saw a 4% QoQ rise to RM260 million. This brought total FY25 sales to RM1.03 billion, a 26% YoY drop, falling short of both TA Securities’ forecast and management’s RM1.2 billion target. The shortfall was mainly due to fewer project launches than initially guided, with total launches for the year amounting to RM808 million against an earlier plan of RM1.0 billion. Unbilled sales stood at RM1.5 billion at the end of FY25, a slight decrease from RM1.6 billion in the preceding quarter.

Future Outlook and Valuation

In light of the weaker FY25 performance and a more conservative launch pipeline and sales outlook, TA Securities has revised its new sales assumptions for FY26 and FY27 downwards to RM1.06 billion and RM1.15 billion, respectively (from RM1.4 billion and RM1.5 billion previously). Consequently, earnings forecasts for FY26 and FY27 have been cut by 14% and 16%. The investment bank has introduced an FY28 net profit forecast of RM97.9 million, based on a new sales assumption of RM1.22 billion.

Looking ahead, the developer targets RM1.1 billion in new launches for FY26 across seven projects in Selangor, Kedah, and Penang. Key projects include Phase 3 of The Atera, a transit-oriented development in Petaling Jaya, and Paramount Embun Hills, a mixed-use project in Penang. Additionally, the Group plans to roll out two new projects, a 48.5-acre residential scheme and a 295.6-acre mixed-use township, pending the completion of land acquisitions. The Co-labs segment is also expanding, with a new Johor Bahru outlet and a flagship space at Sunway Square, Selangor, set to increase total footprint to approximately 220,000 sq ft across 10 locations.

Rolling forward its valuation base year to CY27, TA Securities has derived a revised target price (TP) of RM1.25 per share (previously RM1.46). This adjustment is based on a lower target P/B of 0.5x (from 0.6x) to reflect slower earnings realisation amidst weaker sales execution. Despite the lower TP, the stock still offers an attractive 19.5% upside from its last traded price of RM1.05. TA Securities maintains its Buy recommendation on the stock.