Paramount-Mitsui JV set for long-term growth

PETALING JAYA: Paramount Corp Bhd’s joint venture (JV) with Japanese property developer Mitsui Fudosan Co Ltd is viewed positively for the longer-term prospects of the RM1.34bil The Ashbourne project in downtown Kuala Lumpur’s prestigious Jalan U Thant neighbourhood, says TA Research.

However, the research house noted that the delayed launch could constrain near-term sales momentum.

It cautioned that Paramount could face challenges in meeting its sales target for the financial year ending Dec 31, 2026 (FY26), as The Ashbourne accounted for most of its planned RM1.6bil launch gross development value (GDV) for the second half of FY26 (2H26).

Although management has maintained its RM1.2bil sales target and expects the project to launch in the fourth quarter of FY26 (4Q26), the late launch leaves limited time for bookings to convert into confirmed sales, despite Mitsui’s involvement in planning and marketing.

Paramount recorded RM413mil in sales in the 1H26 and needs another RM787mil in 2H26 to meet its target, almost twice its 1H26 sales.

In view of the delayed launch, TA Research cut its FY26 sales forecast to RM860mil from RM1.06bil, removing RM200mil in previously assumed sales from The Ashbourne.

However, the lower sales forecast does not affect its FY26 core earnings estimate, as the research house had not factored in any earnings contribution from the project, with construction only expected to begin in 2027.

TA Research also excluded the RM43.9mil one-off disposal gain from its core earnings forecast for the company.

Following completion of the transaction, Paramount will equity-account for the JV company, Meridian Kuasa Sdn Bhd (MKSB), and recognise its 51% share of the JV’s profits.

This revised accounting treatment has resulted in TA Research lowering its FY27 and FY28 core net profit forecasts by 5.7% and 9.5%, respectively.

It retained an assumption of RM300mil in gross sales from The Ashbourne in each of those years.

To recap, Paramount formed a 51:49 joint venture with Mitsui Fudosan (Asia) Malaysia, with the Japanese partner acquiring the 49% stake in the JV company, MKSB, for RM23.1mil.

MKSB will develop The Ashbourne, a 458-unit serviced apartment project, with a GDV that has increased to RM1.34bil from RM1.1bil previously.

The project is targeted for launch after obtaining the necessary approvals in the 4Q26, with completion expected by 4Q30.

The disposal is expected to be completed by the end of December, subject to approval of the amended development order and building plan.

Management attributed the higher GDV to higher selling price expectations and refinements to the development plan following Mitsui’s entry.

The disposal is also expected to generate a one-off pro forma gain of RM43.9mil upon completion.

TA Research said Mitsui’s involvement could strengthen the project’s positioning amid intensifying competition in the high-end residential market in the Kuala Lumpur City Centre.

Upcoming supply includes Avaland’s Taman U-Thant project, Mah Sing’s Corus Hotel redevelopment, UEM Sunrise and Exsim’s Jalan Ampang site, as well as Sime Darby’s planned UniRazak redevelopment.

“Mitsui’s involvement could support faster take-up and provide upside to our forecasts. The disposal also reduces reported borrowings through the deconsolidation of MKSB debt, resulting in our FY26 net gearing forecast falling to 0.22 times from 0.4 times previously,” it said.

TA Research maintained its “buy” recommendation on Paramount with an unchanged target price of RM1.25 per share, based on 0.5 times its calendar year 2027 price-to-book.