Kenanga Assigns 10% Fair Value Upside For Paradigm REIT
PARADIGM REIT, made its debut on the Main Market today with an Initial Public Offering (IPO) price of RM1.00 per share, the share opened flat at RM1 despite the much anticipated build up.
However, Kenanga Research, having conducted ground checks on its assets, has assigned a fair value of RM1.10 per share, based on a dividend yield spread of 2.75%.
PARADIGM's initial portfolio comprises three neighbourhood malls: Paradigm JB in Johor Bahru, Paradigm PJ in Petaling Jaya, and Bukit Tinggi Shopping Centre (BTSC) in Klang. While Paradigm PJ faces a saturated market, the REIT's significant income drivers are expected to come from Paradigm JB and potential upside from BTSC.
Portfolio Highlights: Paradigm JB – High Growth Driver (49% of FY24 Net Property Income – NPI) Located beside the Skudai Highway in Johor Bahru, this sizeable mall boasts 1.3 million sq ft of Net Lettable Area (NLA) and a 99% occupancy rate. It is significantly supported by Singaporean shoppers, who account for approximately one-third of its foot traffic and higher spending power, primarily on weekends. Anchors include Parkson, Harvey Norman, and Village Grocer, complemented by entertainment offerings like ice skating and bouldering that differentiate it from larger regional malls. Two key catalysts are expected to drive growth for Paradigm JB: Major Tenancy Renewal in CY26: Covering approximately 50% of its total space, this renewal is anticipated to deliver mid-teens rental reversion, benefiting from a low base set during the pandemic and strong market growth.
RTS Link (expected by end-CY2026): The completion of the Rapid Transit System (RTS) Link is projected to further boost the inflow of Singaporean shoppers, enhancing footfall and sales. Bukit Tinggi Shopping Centre (BTSC) – Strong Earnings Resilience (27% of FY24 NPI) This 1 million sq ft Gross Lettable Area (GLA) asset is fully master-leased to AEON Group and serves as one of AEON's best-performing malls in the Klang Valley, catering to everyday needs with a diverse tenant mix. Kenanga's site visit observed robust footfall, particularly on Sundays, with strong activity across all floors and a predominant mix of local Malay and Chinese shoppers. Upon lease expiry in CY29, the REIT holds the right to raise rent by up to 12%. The upcoming LRT3 station adjacent to the mall, expected to be completed in CY25, will further improve accessibility. AEON Group has also requested additional space from the management, presenting a potential income upside, though additional rental profits would be shared with the Sponsor, who will undertake the construction. Paradigm PJ – Moderate Risk A neighbourhood mall with 680,000 sq ft of NLA and 98% occupancy, located next to the LDP highway. It features mid-tier brands and entertainment tenants, anchored by Lotus's, GSC, and Harvey Norman. While well-maintained, the Petaling Jaya retail market is saturated with intense competition from rival malls like Damen Mall, 3 Damansara, and Subang Parade. Kenanga observed low weekday footfall and moderate weekend activity, leading to a moderate income risk assessment for this asset due to its lower income resilience relative to its size in a highly competitive landscape.
Future Prospects and Valuation: The REIT's sponsor, WCT Holdings Berhad (WCTH), has a pipeline of future assets for potential injection, including Hyatt Place Johor Bahru, Le Méridien Petaling Jaya, Première Hotel in Klang, and Gateway@klia2 at KLIA. Kenanga Research emphasizes the need for PARADIGM to exercise strong vigilance in asset quality screening, valuation assessment, and funding strategy to ensure any future acquisition results in net Distribution Per Unit (DPU) accretion. The group's current gearing stands at a healthy 34%.
Kenanga Research projects PARADIGM's earnings to increase by 9% in FY26, driven by the anticipated rental growth from Paradigm JB and the potential from BTSC. Based on a 6.5% target yield derived from a 2.75% yield spread above their 10-year Malaysian Government Securities (MGS) assumption of 3.75%, they derive a fair value of RM1.10 per share against an FY26F after-tax dividend of 7.1 sen.
In comparison to peers, Kenanga's target yield for PARADIGM reflects a slight premium against Capitaland Malaysia Trust (CLMT) (OP; TP: RM0.75; 6.75% target yield) due to more optimistic organic growth prospects. It also represents a slight discount against Pavilion REIT (PAVREIT) (6.3% target yield on FY26F after-tax dividend) to reflect PARADIGM's smaller asset sizes and lower profitability. The research house reiterated that it does not assign a valuation premium solely based on the existence of a Rights of First Refusal (ROFR) unless future acquisitions are demonstrably beneficial to minority unitholders.
Related
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
33 minutes ago
- The Star
BAuto anticipates challenging year ahead
PETALING JAYA: Bermaz Auto Bhd (BAuto) anticipates its performance for the financial year ending 30 April 2026 to be challenging. For the fourth quarter ended April 30, 2025 (4Q25), the group's net profit saw a 77% drop year-on-year (y-o-y) to RM21.20mil or earnings per share of 1.82 sen. Revenue, on the other hand, fell by 44% y-o-y to RM528.65mil largely due to drop in sales volume from its Mazda and Kia domestic operations as they were mainly impacted by the continuous influx of Chinese-made vehicles into the market, which are competitively priced. For the financial year ended April 30, 2025, the group's net profit declined by 55% y-o-y to RM155.91mil or earnings per share of 13.35 sen. Revenue also decreased by 33% y-o-y to RM2.6bil. The company said the automotive sector is expected to register lower growth due to factors such as inflationary pressures, weaker global growth from uncertainties in geopolitical conflicts and outcomes of negotiations on trade tariffs imposed by the US, which will have an adverse impact on the overall local economy. Moreover, the continuous influx of Chinese marque vehicles had also impacted the sales of other marques in the country. The group said the launching of new and / or new facelifts models of its existing and new vehicle marques are still very much dependent on the market sentiments and economic conditions then. BAuto also said according to the Malaysian Automotive Association, the total industry volume (TIV) in April 2025 of 60,527 units was 16.8% lower (12,177 units) than in March 2025 (72,704 units) as a result of the short working month in April 2025 due to the Hari Raya festive holidays and high festive deliveries in March 2025. The year-on-year TIV for the first four months of 2025 was 248,730 units, a decline of 14,320 units (down by 5.4%) compared to the same period last year of 263,050 units. Meanwhile, in the Philippines, the Department of Finance had reported in May 2025 that the country's gross domestic product (GDP) registered a growth rate of 5.4% for the first quarter of calendar year 2025 (4Q24: 5.3%). The Philippines economic outlook for 2025 is expected to remain positive with an expected GDP growth rate of around 6.0% in the coming quarters. BAuto said the Board has approved and declared a fourth interim dividend of 1.50 sen single-tier dividend per share in respect of the financial year ended April 30, 2025 (previous year's corresponding quarter ended April 30, 2024: 4.75 sen single-tier dividend per share and a special dividend of 7.00 sen single-tier dividend per share) to be payable on Aug 5, 2025. The entitlement date has been fixed on July 18, 2025.
New Straits Times
40 minutes ago
- New Straits Times
BAuto's Q4 earnings fall to RM21mil on weaker car sales
KUALA LUMPUR: Bermaz Auto Bhd (BAuto) reported a lower net profit of RM21 million for the fourth quarter (Q4), weighed down by weaker vehicle sales. The net profit dropped 76.5 per cent from RM90 million in the same quarter last year, according to a bourse filing. BAuto's revenue for the quarter ended April 30, 2025 fell 43.6 per cent to RM937.5 million from RM528.6 million previously. The company said the sales volume from its Mazda and Kia domestic operations was impacted by the continued influx of competitively priced Chinese-made vehicles in the market. BAuto declared a fourth interim dividend of 1.50 sen per share that will be paid on Aug 5. Culmulatively, BAuto posted a weaker full-year earning for the financial year 2025 (FY25) with its net profit dropping more than half to RM155.9 million from RM345.58 million a year ago. Its revenue stood at RM2.6 billion, 32.9 per cent lower than RM3.9 billion recorded last year. Recognising the the dissapointing total industry volume (TIV) for the first four months of 2025, BAuto expects a challenging performance in the financial year ending April 30, 2026. The TIV for the first four months of 2025 was 248,730 units, a 5.4 per cent decline from 263,050 units a yyear ago. BAuto said the automotive sector is expected to register lower growth due to inflationary pressures, weaker global growth from uncertainties in geopolitical conflicts and outcomes of negotiations on US trade tariffs, which will have an adverse impact on the overall local economy. "The continuous influx of Chinese marque vehicles had also impacted the sales of other marques in the country. "The launching of new and/or new facelifts models of the group's existing and new vehicle marques are still very much dependent on the market sentiments and economic conditions then," it said in a statement.
The Star
an hour ago
- The Star
Asia sees ‘concerning' rise in long payment delays amid turbulence: report
Companies across the Asia-Pacific region – and especially those in China – are becoming more cautious about selling on credit, as a turbulent global economy leads to a 'concerning' rise in long payment delays, a new report has found. Two-thirds of Asia-Pacific firms expect payment terms to shorten over the next six months, which suggests 'caution and higher priority for cash preservation amid heightened uncertainty', global trade credit insurer Coface found in its latest Asia Payment survey released on Wednesday. Though payment terms edged up slightly in 2023, rising from 64 days to 65 days, they remained well below the 2018-2022 average of 69 days, reflecting tighter credit conditions, according to the survey of 2,600 companies conducted between December 2024 and March 2025. Mainland China recorded the steepest drop in the share of firms offering sales on credit among the nine economies surveyed, which also included Australia, Hong Kong, Taiwan, Japan, Malaysia, India, Singapore and Thailand. Some 65 per cent of Chinese firms said they offered payment terms in 2024, down 14 percentage points from a year earlier, the report said. India followed with a nine-point drop, while Hong Kong posted the biggest increase – up 10 points to 91.4 per cent. The share of Asian companies reporting payment overdues fell to a record low of 49 per cent last year, from 60 per cent in 2023, which the report attributed to 'longer payment terms in most markets [that] provided more time for companies to settle payments and avoid overdues'. But what Coface called a 'concerning trend' was the sharp rise in Asian firms reporting ultra-long payment delays – lapses of over 180 days – on fees exceeding 2 per cent of their annual turnover, which jumped to 40 per cent in 2024 from 23 per cent a year earlier. The company said this signalled 'a sharp deterioration in credit risk', adding that based on its experience 80 per cent of those ultra-long payment delays eventually led to defaults. Competition in the domestic market is extremely fierce, with the payment cycles becoming longer and delayed payments widespread A similar pattern was seen in China, where 49 per cent of affected firms reported such overdues in 2024 – up sharply from 33 per cent a year earlier. Wang Jie, the owner of a footwear factory in southern China's Guangdong province, is one of many Chinese suppliers suffering from long payment delays. Wang is still waiting to receive an overdue payment of more than 260,000 yuan (US$36,200) from the subsidiary of a large Shenzhen-based clothing company, even after winning a lawsuit related to the delayed payment in 2023. 'Competition in the domestic market is extremely fierce, with the payment cycles becoming longer and delayed payments widespread,' Wang said. The current economic uncertainty – mainly driven by slower demand, excessive competitive pressure and rising costs – has made Asian companies pessimistic about their future prospects. According to the report, 33 per cent of respondents expected their business activity to worsen this year, up from just 14 per cent in 2023. 'The economic outlook for 2025 continues to weaken on mounting trade risks amid high uncertainty over global economic policy,' the report added. Over the next six months, 57 per cent of respondents in the Asia-Pacific region anticipated deteriorating payment behaviour, while just 32 per cent expected any improvement. Additional reporting by He Huifeng - SOUTH CHINA MORNING POST
