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A MEMBER OF THE TA GROUP
Tuesday, July 29, 2025
FBMKLCI: 1,529.38
Sector: Property
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
Paramount Corporation Bhd: Restructuring Campus Assets Securitisation Agreements
TP: RM1.48 (+36.7%)
RM1.08
Proposes to Restructure and Extend Securitisation Agreements Involving Campus Assets
Paramount has announced a series of proposals involving Dynamic Gates Sdn Bhd (DGSB), the special purpose vehicle holding three university campuses (Glenmarie, Batu Kawan, and George Town) under a 2018 securitisation exercise valued at RM456mn. DGSB is consolidated into Paramount’s financials and operates effectively as part of the group.
Key highlights of the proposals:
- CRNCPS Redemption via RPS Swap
Paramount will redeem its RM126mn cumulative redeemable non-convertible preference shares (CRNCPS) in DGSB through the issuance of new perpetual Redeemable Preference Shares (RPS). This avoids cash redemption, given the absence of distributable profits in DGSB. Unlike the CRNCPS, which carried cumulative dividends, the RPS only offer discretionary dividends subject to profit availability and the settlement of securitisation obligations. The RPS are unlisted and rank above ordinary shares in terms of dividends and capital repayment. - Extension of Key Agreements by 7 Years
The tenure of the CRNCPS subscription agreement, lease, and call/put option arrangements will be extended by seven years to align with DGSB’s planned extension of its Medium-Term Notes (MTN) programme. These MTNs were originally issued in 2018 to partially fund DGSB’s RM294mn acquisition of the campus assets from Paramount as part of a sale-and-leaseback securitisation exercise. - Call/Put Option Repricing Based on Updated Valuation
Paramount’s call and DGSB’s put options to acquire/dispose of the campuses will now reflect updated market valuations. Independent valuer Jones Lang Wootton (JLW) has appraised the Glenmarie campus at RM281mn, Batu Kawan at RM105mn, and George Town at RM70mn, bringing the total to RM456mn. - Master Lease Extension with Step-Up Rent
The lease between Paramount (via subsidiary Janahasil) and DGSB will be extended by 7 years. Monthly lease payments will increase progressively from RM1.35mn to RM1.43mn, translating into a lease yield rising from 3.55% to 3.77% over the term. The campuses remain leased to University of Wollongong Malaysia (UOWM) and its affiliates via subleases.
The proposals are subject to shareholder approval at an upcoming EGM and are expected to be completed by 1Q2026.
Our View
We are neutral on this development, given the lack of material near-term earnings impact. Nonetheless, the proposals reflect prudent capital management, allowing Paramount to preserve its strategic interest in the campus assets while deferring cash outflows. The extension of the lease and option agreements enhances long-term optionality and aligns with the extended MTN maturity.
The move supports Paramount’s asset-light strategy while maintaining recurring lease income and control over strategic assets. We may turn more constructive once there is greater clarity from management on the future income contribution from the RPS and the group’s broader asset monetisation and capital allocation plans.
Forecast
Maintain FY25-27 earnings forecasts.
Recommendation and Valuation
No change to our target price of RM1.48/share, based on CY26 P/Bk multiple of 0.6x. Maintain Buy.
Earnings Summary
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| Revenue | 1,012.3 | 1,040.2 | 1,088.9 | 1,230.2 | 1,403.8 |
| EBITDA | 187.4 | 223.1 | 207.6 | 231.8 | 260.7 |
| Dep. & amortisation | (27.3) | (23.3) | (26.9) | (21.9) | (18.0) |
| Net finance cost | (27.3) | (37.1) | (40.6) | (44.0) | (51.4) |
| El | 8.4 | 16.3 | 0.0 | 0.0 | 0.0 |
| PBT | 130.2 | 156.9 | 137.5 | 163.3 | 188.7 |
| Normalised PBT | 121.9 | 140.6 | 137.5 | 163.3 | 188.7 |
| Taxation | (35.1) | (42.0) | (48.1) | (57.2) | (66.1) |
| Profit after tax | 95.1 | 114.9 | 89.4 | 106.2 | 122.7 |
| Profit from discontinued operations | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| MI & Holders of PDS | 12.2 | 12.5 | 1.9 | 0.3 | 0.3 |
| Core net profit | 74.5 | 86.1 | 87.5 | 105.9 | 122.4 |
| Reported EPS (sen) | 13.4 | 16.5 | 14.1 | 17.0 | 19.7 |
| Core EPS (sen) | 12.0 | 13.8 | 14.1 | 17.0 | 19.7 |
| Normalised PER (x) | 9.0 | 7.8 | 7.7 | 6.4 | 5.5 |
| GDPS (sen) | 7.0 | 7.5 | 7.5 | 8.0 | 8.0 |
| Div Yield (%) | 6.5 | 6.9 | 6.9 | 7.4 | 7.4 |
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| PBT | 130.2 | 156.9 | 137.5 | 163.3 | 188.7 |
| Adjustments | 16.1 | 18.8 | 43.1 | 46.6 | 54.0 |
| Dep. & amortisation | 27.3 | 23.3 | 26.9 | 21.9 | 18.0 |
| Changes in WC | 69.9 | 141.7 | 219.6 | (79.7) | (132.8) |
| Operational cash flow | 243.6 | 340.7 | 427.1 | 152.1 | 127.9 |
| Capex | (53.2) | (67.6) | (405.0) | (55.0) | (55.0) |
| Others | 1.8 | (205.7) | 0.0 | 0.0 | 0.0 |
| Investment cash flow | (51.3) | (273.3) | (405.0) | (55.0) | (55.0) |
| Debt raised/(repaid) | (196.8) | 143.9 | 200.0 | 200.0 | 200.0 |
| Equity raised(repaid) | 0.0 | (149.9) | 0.0 | (50.0) | 0.0 |
| Dividend | (111.5) | (46.7) | (46.7) | (49.8) | (49.8) |
| Others | (38.8) | (33.6) | (1.6) | 0.0 | 0.0 |
| Financial cash flow | (347.1) | (86.4) | 151.7 | 100.2 | 150.2 |
| Net cash flow | (154.9) | (18.9) | 173.8 | 197.3 | 223.1 |
Balance Sheet (RMm)
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| Fixed assets | 1,472.9 | 1,064.0 | 1,442.1 | 1,475.2 | 1,512.2 |
| Others | 116.4 | 234.4 | 231.9 | 229.4 | 226.8 |
| Total fixed assets | 1,589.4 | 1,298.4 | 1,674.0 | 1,704.6 | 1,739.0 |
| Cash | 202.7 | 216.1 | 389.9 | 587.2 | 810.3 |
| Others | 1,185.1 | 1,548.8 | 1,361.1 | 1,349.2 | 1,416.8 |
| Total current assets | 1,387.9 | 1,764.9 | 1,751.1 | 1,936.4 | 2,227.1 |
| Asset held for sale | 0.0 | 10.3 | 10.3 | 10.3 | 10.3 |
| Total assets | 2,977.2 | 3,073.6 | 3,435.4 | 3,651.3 | 3,976.5 |
| ST debt | 259.7 | 356.7 | 206.7 | 206.7 | 166.7 |
| Other liabilities | 452.5 | 540.4 | 661.1 | 670.6 | 722.9 |
| Total current liabilities | 712.2 | 897.1 | 867.8 | 877.3 | 889.7 |
| Shareholders’ funds | 1,429.7 | 1,431.0 | 1,472.1 | 1,528.5 | 1,601.3 |
| MI | 1.2 | 1.4 | 1.4 | 1.4 | 1.4 |
| PDS | 199.6 | 50.0 | 50.0 | 0.0 | 0.0 |
| LT borrowings | 568.4 | 633.6 | 983.6 | 1,183.6 | 1,423.6 |
| LT liabilities | 66.1 | 60.5 | 60.5 | 60.5 | 60.5 |
| Total long term Liabilities | 634.6 | 694.1 | 1,044.1 | 1,244.1 | 1,484.1 |
| Total equity and liabilities | 2,977.2 | 3,073.6 | 3,435.4 | 3,651.3 | 3,976.5 |
Ratio
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| Profitability ratios | |||||
| Core ROE (%) | 5.1 | 6.0 | 6.0 | 7.1 | 7.8 |
| Core ROA (%) | 2.4 | 2.9 | 2.7 | 3.0 | 3.2 |
| EBITDA Margins (%) | 18.5 | 21.4 | 19.1 | 18.8 | 18.6 |
| PBT Margins (%) | 12.0 | 13.5 | 12.6 | 13.3 | 13.4 |
| Liquidity ratios | |||||
| Current ratio (x) | 1.9 | 2.0 | 2.0 | 2.2 | 2.5 |
| Quick ratio (x) | 1.7 | 1.7 | 1.6 | 1.5 | 1.6 |
| Leverage ratios | |||||
| Total liabilities / equity (x) | 0.9 | 1.1 | 1.3 | 1.4 | 1.5 |
| Net debt / Equity (x) | 0.4 | 0.5 | 0.5 | 0.5 | 0.5 |
| Growth ratios | |||||
| Revenue (%) | 19.4 | 2.8 | 4.7 | 13.0 | 14.1 |
| Pretax Profit (%) | 35.3 | 15.3 | (2.2) | 18.8 | 15.6 |
| Core net earnings (%) | 64.9 | 15.6 | 1.6 | 21.0 | 15.6 |
| Total assets (%) | (4.6) | 2.9 | 11.8 | 6.3 | 8.9 |
Assumptions
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| New Sales (RM mn) | 1,120.0 | 1,389.0 | 1,463.0 | 1,550.0 | 1,574.0 |
| Prop Dev PBT Margins (%) | 14.4 | 14.8 | 12.9 | 13.5 | 13.6 |
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY: Total return of the stock exceeds 12%.
HOLD: Total return of the stock is within the range of 7% to 12%.
SELL: Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★ | ★★★ | ★★★ | ★★★ |
| Remark | It has established environmental policies to mitigate the environment impact and minimise pollution | PCB places great focus on training its employees to ensure safety and it encourages its suppliers, vendors, contractors and other business partners to follow the same standards. | Adequate transparency practices to ensure stakeholder engagement and management efficiency. |
★★★★★ (≥80%): Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. +5% premium to target price
★★★★ (60-79%): Above adequate integration of ESG factors into most aspects of operations, management and future directions. +3% premium to target price
★★★ (40-59%): Adequate integration of ESG factors into operations, management and future directions. No changes to target price
★★ (20-39%): Have some integration of ESG factors in operations and management but are insufficient. -3% discount to target price
★ (<20%): Minimal or no integration of ESG factors in operations and management. -5% discount to target price
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Tuesday, July 29, 2025, the analyst, Thiam Chiann Wen, who prepared this report, has interest in the following securities covered in this report:
(a) nil
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