PARAMON: Strategic Growth Initiatives and Asset Optimization Underpin Positive Outlook, Analysts Reiterate ‘Buy’

A leading investment bank has reaffirmed its optimistic stance on the company, citing strong growth strategies, a robust development pipeline, and effective asset management as key drivers for future performance. Management’s guided property sales targets for the upcoming fiscal year, coupled with strategic diversification into new income streams, are expected to significantly bolster earnings and return on equity.

Robust Property Development Pipeline

For the fiscal year 2026, management has set an ambitious property sales target of RM1.2 billion, representing an approximate 20% increase from the RM1.03 billion recorded in FY25. While the investment bank maintains a slightly more conservative forecast of RM1.06 billion, it deems management’s target broadly achievable, supported by RM1.1 billion in planned launches and an additional RM1.5 billion from ongoing projects ready for sale. The majority of these launches (94%) will be residential, with landed homes making up about 65%, aligning with sustained demand for such properties. Notably, 62% of launches are strategically located in the central region, which exhibits resilient demand fundamentals. However, it is anticipated that sales momentum will be back-end loaded, with approximately 88% of launches slated for the second half of 2026.

Long-term growth is further underpinned by a significantly expanding Gross Development Value (GDV) pipeline. As of end-2025, the company had RM4.8 billion in remaining GDV. This is set to be augmented by an additional RM2.9 billion from announced land acquisitions pending completion and a further RM2.0 billion GDV replenishment target for 2026. Cumulatively, this could elevate the group’s development pipeline to approximately RM9.7 billion, offering roughly eight years of development visibility and a solid runway for sustained medium-term growth.

Diversifying Earnings Base and Capital Efficiency

Beyond its core property development, the company is actively diversifying its earnings base through strategic investments and new business platforms. In August 2025, it acquired a 28% stake in Singapore-listed Envictus International Holdings for RM126.3 million, providing exposure to the consumer defensive sector through F&B brands. This investment is projected to contribute RM10-11 million to earnings in FY26 on a full-year basis, up from RM4 million in FY25, providing a steady non-property income stream.

The company is also scaling up its Co-labs flexible workspace segment, which currently operates nine locations. Plans include adding approximately 80,000 sq ft across four new locations in 2026, representing a 40% expansion. While occupancy stood at 72% at end-2025, down from 80% a year prior due to the ramp-up phase of new centres, management is introducing “enterprise solution centres” to secure 100% occupancy from day one and expects the segment to reach breakeven by end-2026.

Capital efficiency is a key focus, with management exploring the potential monetisation of approximately RM900 million of low-yielding, non-core or underutilised assets currently yielding about 1% returns. Redeploying these proceeds into development projects (generating 6-7% returns) could potentially increase profit contribution by RM45-54 million. While asset monetisation is opportunistic and dependent on market conditions, the initiative is part of a broader capital recycling strategy.

Future Outlook and Analyst Recommendation

Management targets an increase in group Profit Before Tax (PBT) by RM100-150 million by 2030, alongside lifting Return on Equity (ROE) towards 10%. The investment bank views these targets as achievable, driven by property sales growth, asset recycling, and contributions from diversified ventures.

The investment bank maintains its “BUY” recommendation with an unchanged target price of RM1.25 per share. This valuation is based on a CY27 P/Bk multiple of 0.5x. The stock is considered undervalued, trading at a significant discount to the developer sector average, with a superior dividend yield of over 7% compared to the sector average of 4%.

Key downside risks highlighted include slower-than-expected asset monetisation, weaker property sales momentum, slower ramp-up in Co-labs occupancy, and potentially higher-than-expected leverage from landbank expansion. Despite these risks, the overall outlook remains positive, underpinned by a clear strategic direction for growth and capital efficiency.