What’s Driving Paramount’s Share Price Gains?
Paramount Corporation Berhad is a property developer with established townships in Klang Valley, Kedah and Penang. It also ventured into co-working space, owns a hotel in Kuala Lumpur as well as a fine dining restaurant Dewakan, which was recently awarded a Michelin Star. On the education side, the divestment has paved the way for a 12 sen special dividend or a one-off yield of more than 10%. YTD, the stock has done well, up 16%. With all this mind, what sort of growth trajectory is Paramount on in the coming years? We speak to Jeffrey Chew, CEO of Paramount Corporation Berhad.
Paramount Remains Upbeat on Market Outlook
PETALING JAYA: Demand in the local property market has seen a recovery since the start of last year with an increase in sales volume and lower overhang units, says Paramount Corp Bhd.
Hence, group chief executive officer Jeffrey Chew said the group has a higher launch target of RM1.5bil this year from RM1.2bil worth of launches last year.
Paramount has seven projects in the pipeline, spanning across the Klang Valley, Penang, and Kedah, he said.
“Apart from residential properties, the group is also moving towards the industrial property sector because of the demand there. However, this will not be the main core of our business,” he said in a briefing yesterday.
Chew added one of the main growth strategies of Paramount is to reduce the turnaround time for its project for higher efficiency.
“We plan to do this by sourcing new land within the vicinity of the group’s successful projects. In this way, we will not have to redo our marketing initiatives.
“Our familiarity with the approval levels and demand in these locations will also help us to be more efficient in our delivery,” he said.
With an average take-up rate of 71% and unbilled sales of RM1.4bil for the financial year ended Dec 31, 2022 (FY22), the group plans to buy RM200mil worth of land yearly to replenish its land bank.
“The RM1.4bil of unbilled sales will provide the group with cash flow visibility for the next two to three years, which will help us to purchase more land for new developments. In the past, we intended to buy RM500mil worth of land every five years.
“However, that was when our property sales were at RM500mil to RM600mil. At present, as we have achieved RM1bil in sales, we have increased our targets to purchase RM200mil worth of land on a yearly basis,” said Chew.
For FY22, Paramount’s revenue rose by 24% year-on-year (y-o-y) to RM847.5mil. Pre-tax profit also increased by 50% y-o-y to RM105.1mil. The group’s property division was the key contributor followed by its co-working division.
“Our outlets for our Co-Labs co-working business recorded an improvement in terms of revenue given the reopening of the economy from the Covid-19 pandemic.
“The average occupancy rate is 70% as at Dec 31, 2022. We are still monitoring whether or not this segment will be a core business for the group or will it be complementary to the property division,” said Chew.
Moreover, he also noted the overhang issue in the property industry is a thing in the past.
“For the residential segment, the country’s property sales in the third quarter of 2022 (3Q22) grew by 53% y-o-y. Total overhang for the period dropped by 2.3% y-o-y while unsold units under construction declined by 16.7% y-o-y.
“This shows that there are a lot more transactions in the property market and people are buying at a faster rate. In fact, the incoming supply of residential property in the country for 3Q22 has decreased by 5%,” Chew said.
Paramount Corp to Launch RM1.5 bil Worth of Projects in 2023
KUALA LUMPUR (March 1): On the back of achieving record sales of RM1.1 billion in the financial year ended Dec 31, 2022 (FY2022), Paramount Corp Bhd has set out to launch RM1.5 billion worth of projects in FY2023.
Speaking at the property developer’s financial results briefing on Wednesday (March 1), Paramount chief executive officer Jeffrey Chew Sun Teong shared his optimism on the group’s outlook for the current year, citing signs of the property market’s recovery last year.
Chew highlighted that the total number of property transactions grew 12.56% to 105,204 in 3QFY2022, from 93,466 in 2QFY2022, saying it illustrates a recovery in sentiment.
Meanwhile, he also underlined a year-on-year decrease in the sector’s unsold units under construction as well as overhand units in 3QFY2022.
Amid the property sector’s recovery, Paramount has targeted to launch seven projects worth RM1.5 billion in FY2023 — namely Savana Utropolis Batu Kawan, Bukit Banyan, Sejati Lakeside 2, Paramount Palmera, Jalan Ampang Hilir, Bukit Banyan 2 and Greenwoods Amaria Salak Perdana.
Notably, Chew said the group will move into the industrial property sector on the back of received demand with Paramount Palmera in Bukit Minyak, Penang, which will account for RM157 million or 11% of the RM1.5 billion launch target.
22% slump in 4Q net profit, full-year net profit doubles
For 4QFY2022, Paramount’s net profit fell 22.4% to RM18.89 million from RM24.35 million a year prior, as quarterly revenue dropped 22.72% to RM245.24 million from RM317.34 million.
However, for FY2022 as a whole, Paramount’s net profit surged over two folds to RM60.2 million from RM28.53 million in FY2021, on the back of revenue improvements across the group’s three segments — property, investment and others, and coworking.
Full-year revenue improved 24.38% to RM847.46 million from RM681.35 million, mainly due the property division’s stronger showing.
Paramount proposed a final dividend of 3.5 sen per share and a special dividend of 12 sen per share for FY2022. The special dividend has an ex-date of March 17 and is payable on March 29.
Paramount’s property division’s revenue improved by 23% year-on-year to RM823.4 million from RM672.1 million, due to FY2021’s low base.
Notably, the group ended FY2022 with RM1.1 billion in sales, eclipsing its full-year sales target of RM1 billion. Unbilled sales stood at RM1.4 billion.
Meanwhile, Paramount’s coworking division posted a 62% rise in revenue to RM9.4 million from RM5.8 million in FTY2021, carried by higher contributions across all Co-labs coworking outlets and Scalable Malaysia. The coworking division currently operates five outlets around the Klang Valley with an average occupancy rate of 70%.
The coworking division’s loss before tax also contracted 93% to RM600,000 in FY2022, versus RM4.1 million in FY2021.
Coworking division to turn profitable in 2023
While property development remains Paramount’s core business accounting for 97% of the group’s revenue in FY2022, Chew noted that its coworking division is set to turn profitable in 2023.
“We (the coworking division) will turn around into profitability this year for sure, and we are also looking at expanding the space,” he said.
“This could be a strategic option for a new business for us, if we seriously believe this is a good business, we have a good brand, then we will probably accelerate really quickly and it has to be not just organic but probably through acquisition as well,” he added.
Paramount’s deputy CEO Benjamin Teo added that the group is already in talks with Tropicana to expand its capacity at Tropicana Garden, as well as looking at other expansion opportunities around the fringes of Kuala Lumpur.
However, Teo noted that the group does not plan to turn its coworking business into one of its new core businesses in the near term given its small size compared with the group’s property division as well as its inadequate growth rate.
“I think at this juncture the business is very small compared with our core [property business], we don’t believe [the coworking division] is growing at a rate for it to be a core business within the next five years unless we go on a big acquisition strategy.
“But at this juncture, this is something we are exploring, but it is still a few years off. So if anything, we are trying to establish a strong base within our capabilities, expanding within our means at this moment” he said.
Touching on Budget 2023’s hint of a potential implementation of a capital gains tax on non-listed shares down the line, Teo said that details on the matter are still scarce, but added that it will definitely be a point of consideration if the group intends to grow the coworking division through acquisitions.
Shares in Paramount ended unchanged at 89.5 sen, giving the group a market capitalisation of RM556.62 million.
Paramount Proposes 3.5 sen Final Dividend on Top of 12 sen Special Dividend
KUALA LUMPUR: Paramount Corp Bhd has proposed a final dividend of 3.5 sen for the financial year ended Dec 31, 2022 (FY22), on top of the 12 sen special dividend to be paid on March 29, as a reward to its shareholders.
In a statement, the developer said the total dividends for FY22 would be 18 sen if the proposed final dividend is approved by shareholders at its forthcoming annual general meeting.
“Paramount had already paid an interim dividend of 2.5 sen for FY22 in September. The 12 sen special dividend will be paid from the proceeds of the divestment of Paramount’s remaining equity in its pre-tertiary education business in 2022,” it said.
In the fourth quarter ended Dec 31, Paramount’s net profit fell 22.4% to RM18.9mil, or earnings per share of 3.04 sen against RM24.3mil, or 3.93 sen achieved a year prior.
Revenue for the quarter stood at RM245.2mil, down 22.7% from RM317.3mil previously.
For the full year, it posted a net profit of RM60.2mil, up 111% from RM28.5mil a year earlier, while revenue jumped 24.4% to RM847.5mil versus RM681.3mil previously.
Group chief executive officer Jeffrey Chew said the property division’s strong performance in 2022 coupled with the improvement in the financial performance of its other businesses showed the ability of the group’s businesses to thrive in the year of recovery.
“The full reopening of the economy in the second quarter of 2022 had led to a surge in sales and we are happy to say that the momentum has been sustained. By the first nine months, we had already exceeded the financial results of the full year 2021,” he said.
Chew said: “The group achieved two new milestones in FY2022. Firstly, it achieved its highest ever sales of RM1.1bil, surpassing its record in 2018.”
“Secondly, it launched RM1.2bil properties, of which RM900mil was launched in the final quarter of 2022, including Phase 1 of Sejati Lakeside 2 in Cyberjaya (non-strata double storey semi-detached homes), The Atera in Petaling Jaya (a transit-oriented development) and Greenwoods Seraya in Sepang (townhouses).”
He also said these three projects were expected to contribute positively to the group’s sales performance in 2023, given the good response they had received.
Chew is confident with its property division’s ability to achieve a sales target of RM1.2bil given that demand for residential properties has always been resilient on the growth of the Malaysian economy.
Its unbilled sales of RM1.4bil as at Dec 31 will provide some visibility of cashflow in the near term, contingent on construction progress.