Paramount plans more launches after missing 2016 target

KUALA LUMPUR (Dec 13): It has been a relatively quiet year for Paramount Corp Bhd, which initially targeted some RM770 million worth of property launches this year but only achieved RM90 million of that so far as most of its projects were deferred, not surprisingly, due to the soft property market.

Some were also delayed due to processes involving regulatory approval, according to group chief executive officer Jeffrey Chew (pictured) in an interview with The Edge Financial Daily recently.

But it is playing catch-up in the final quarter of the year with more launches after the slow nine months, which should raise the value of its launches to about RM450 million, said Chew, though that would still be short of its initial target.

Whatever that is not launched this year will go into next year, when it targets RM800 million worth of launches — a mix of residential and commercial properties — as the group feels more “positive” about the coming year.

However, the company is targeting sales of RM450 million for next year, the same quantum it is aiming for this year, which is a little higher than the RM430 million sales it achieved last year.

“I think even if the market is soft, we can expect to achieve the sales number which is quite close or even better than last year’s, which was RM430 million in sales,” said Chew, adding that there is still good demand in certain property segments, which is the reason behind Paramount’s planned launches next year.

Notable among its deferred projects this year is the new integrated development in Section 13 Petaling Jaya comprising corporate offices, retail components and serviced apartments. The project will be launched in stages beginning next year, starting with a portion of commercial section and a residential block.

The group will also be launching the next four phases of its 8.09ha tract project in Batu Kawan, which carries a gross development value of RM1.3 billion over a 10-year period.

On the projects it has rolled out or is rolling out before the year ends, they include the new phases of the Paramount Utropolis@Glenmarie, Shah Alam, and Batu Kawan, Penang, as well as launches in Sejati Residences in Cyberjaya.

On its joint venture hotel development in Paramount Utropolis with a Singaporean firm, Chew said the purpose of the hotel is to complete the ecosystem created for Paramount Utropolis, where there is currently a mall, residences and a university college.

Paramount has no intention to venture into hotel chains, he said, though he does not rule out the possibility of more collaborations with hotel operators in the future. For example, he said Paramount may consider adding a hotel to its Batu Kawan development, though he did not confirm anything.

As for Paramount’s education segment, which makes up 30% of its group revenue and posted a rise in top-line contribution in its third financial quarter, Chew said the improved performance was due primarily to the K12 segment that is the primary and secondary schools.

“Sri KDU is doing extremely well. It is very profitable and reaching full capacity of more than 3,000 students from both national and international streams.”

Paramount’s net profit was down 28% at RM11.15 million for its third quarter ended Sept 30, 2016 (3QFY16) compared with RM15.53 million in the same quarter last year; revenue declined 9% to RM134.77 million.

Considering that Sri KDU has reached full capacity, Paramount is now planning to expand in this area. In 2017 it plans to begin building a new international school in the Klang Valley with the capacity for 1,500 students, mostly secondary. It aims to complete the school by 2019.

Chew said while the K12 segment has contributed to increased revenue for the education business, what has proven to be more challenging in the education sector was the tertiary segment, with increased competition from foreign players as a main factor.

“We want to be more aggressive in the education sector, more so in the K12 segment. [As part of this], we hope to come up with an initiative to improve our product offering prices,” said Chew, but declined to confirm if it means cheaper prices or more value-adding to its current proposition.

He also said its education business has a strong synergy with its property development and hopes to count on that to boost sales for its properties in the future, like what it is counting on for in its Batu Kawan development, where it has planned a new KDU campus that is expected to be ready by 2019. The same has been done at its Utropolis Glenmarie project in Shah Alam, which is anchored by a new KDU university college.

Paramount shares closed up three sen or 2.2% at RM1.40 last Friday, with a market capitalisation of RM592.1 million.

This article first appeared in The Edge Financial Daily, on Dec 13, 2016. Subscribe to The Edge Financial Daily here.