RHB Research Institute said although the management did not officially indicate their plans for utilisation of the proceeds from the sale of Jerneh Insurance, it believed that the proceeds, which translate into RM1.12 per Paramount share, will provide scope for a special dividend.
“In addition to our FY10 (FY ends Dec 31) dividend per share forecast of 29 sen, assuming another 30 sen in special dividend, this (59 sen) would translate into a generous yield of 15% (or 13.9% based on Paramount’s closing price of RM4.23 last Wednesday),” said the research house.
Paramount’s share price closed nine sen or 2.2% higher at RM4.23 last Wednesday.
On Tuesday, Paramount announced that the Finance Ministry has approved the proposed disposal by Paramount and Jerneh Asia Bhd of their respective 20% and 80% equity interest in Jerneh Insurance Bhd to ACE INA International Holdings. The proposed disposal for the combined 100% stake was for a total cash consideration of RM654 million.
“We opine that a special dividend of at least 30 sen is reasonable, both to reward shareholders as well as to (keep some of the proceeds to) fund Paramount’s expansion plan for the education division and acquisition of land bank,” said RHB, adding that Paramount’s current cash position will enable the company to gear up for capital expenditure.
Paramount had RM231.64 million cash as at June 30, 2010, versus RM56.27 million in borrowings. The RM130.8 million proceeds from the sale of Jerneh Insurance would increase its net cash position to RM306.2 million, or RM2.61 per share.
RHB said in its report that Paramount is in the midst of setting up an international school (British syllabus) in Damansara where construction is about 70% completed. The school which is scheduled to open in Sept 2011 will have capacity for 600 students with estimated fee of RM25,000 to RM30,000
annually.
RHB also said that a new KDU College campus will be constructed in Glenmarie, which will double the capacity to 10,000 to 12,000 students.
“As for its property development division, the acquisition of Cyberjaya and Glenmarie land is pending completion, tentatively by end 2010 or early 2011,” said RHB.
Paramount reported a net profit of RM41.41 million for the six months ended June 30, 2010, on a turnover of RM231.06 million. The net profit and turnover increased 53.9% and 22.4%, respectively, year-on-year.
The company attributed the better performance to strong sales and higher progressive billing from lock-in sales by the property development division, mainly the Kemuning Utama and Surian Industrial Park projects. The construction and educational services businesses also contributed positively to the better performance.
This article appeared in The Edge Financial Daily, September 17, 2010.
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