Petaling Jaya, 17 May 2017 : Paramount Corporation Berhad (Paramount) today announced its financial results for the first quarter of 2017, delivering a significantly higher revenue and comparable pre-tax profit from operations for 1Q2017 against the corresponding quarter last year, despite the muted economic environment.
For 1Q2017, the Paramount Group recorded revenue of RM142.9 million, up 26% from RM113.3 million recorded in 1Q2016, with the higher contribution from the property division ameliorating the marginally lower contribution from the education division. The Group’s profit before tax (PBT), however, was lower at RM18.3 million, a decrease of 9% from the corresponding quarter last year (1Q2016: RM20.1 million), as the 1Q2016 PBT had included a gain of RM2.3 million arising from the disposal of apartments that were no longer required.
Announcing the results, Group Chief Executive Officer Jeffrey Chew said that the growth in revenue was primarily spurred by the strong 70% take-up rate of its newly-launched Utropolis Batu Kawan integrated development in Penang.
Paramount Property’s revenue increased by 41% to RM104.9 million (1Q2016: RM74.5 million) attributable to higher sales and progressive billings from the Utropolis Batu Kawan, Sejati Residences and Greenwoods Salak Perdana developments. As a result of the higher revenue, PBT for the division increased by 16% to RM13.9 million (1Q2016: RM12.0 million) with higher contributions from these same three developments offsetting the higher losses from the Utropolis Marketplace retail mall and lower contribution from the construction business, which had finalised all its external project accounts in 1Q2016.
Paramount Property recorded strong sales of 438 units with a sales GDV of RM244 million during the quarter, with its other ongoing developments - Bukit Banyan and Bandar Laguna Merbok in Sungai Petani, as well as Utropolis Glenmarie and Sekitar 26 Business in Shah Alam – also recording steady sales. Unbilled sales as at 31 March 2017 stood at RM506 million (31 December 2016: RM407 million).
To maintain this growth, Chew said that Paramount Property would continue to maintain its successful formula. “Our property development strategy has been to offer a breadth of products at different price points and at different locations; all innovatively conceptualised to have a strong value proposition. This has proven to be effective, and we will continue on this trajectory. Paramount Property launched 725 property units with a GDV of RM354 million in 1Q2017, comprising 61% condominiums, 26% landed residential and the balance in commercial properties.
“Although the strong sales experienced in 4Q2016 had continued into 1Q2017, we expect a cautious property market in 2017, with more homebuyers, upgraders and astute investors looking for properties in good locations, in particular townships or integrated developments that are affordably priced and innovatively conceptualised. Our line-up of products is expected to serve the market well,” he said.
Paramount’s current line-up of property developments include Sejati Residences, anchored by the 2016 FIABCI award-winning Chengal House clubhouse, which boasts of being one of the developments in Cyberjaya offering the “best value for money”. Utropolis Glenmarie, an innovative university metropolis anchored by KDU University College, is currently being enhanced with the opening of a retail centre, a co-working space cum incubator, and a 4-star hotel, which will complete the self-sustaining eco-system of the development.
Other developments include Bukit Banyan and Greenwoods Salak Perdana, both offering affordably-priced homes while Utropolis Batu Kawan mirrors the very successful university metropolis concept in Glenmarie, offering a mix of affordably-priced commercial and residential apartments for those seeking to live in Penang’s third satellite city. This will be further supported by the rolling out of another innovative concept development in 2017, Sekitar26 Enterprise, a neighbourhood community retail centre designed for a myriad of uses, and anchored by Paramount Property’s new development office.
The Group’s education arm, Paramount Education, turned in a satisfactory set of results despite unabated stiff competition in the tertiary sector, underpinned by the stable performance of the primary and secondary school segments and drive for cost efficiencies within the tertiary segment.
Revenue for Paramount Education, comprising the primary and secondary school and the tertiary institutions, was marginally lower at RM38.0 million (1Q2016: RM38.6 million). Revenue from KDU University College in Utropolis, Glenmarie (KDU UC) grew by 7% while the revenues for KDU Penang University College and Sri KDU declined by 10% and 3%, respectively. PBT for the division was lower at RM6.9 million, a decline of 32% compared with 1Q2016’s PBT of RM10.2 million due in part to the recognition of a gain of RM2.3 million recognised on the sale of apartments in 1Q2016.
On the education front, Chew said that Paramount Education will continue to face challenges, particularly in the tertiary segment where competition is intense and highly price-sensitive, with education institutions going into price wars in an attempt to hold their respective market positions and compete for new students. The rapid opening of new primary and secondary schools, the accelerated increase in capacity of new schools, coupled with established schools giving discounts, fee rebates, waivers and scholarships had further aggravated the situation.
Chew said, “Against this scenario, we have to look for opportunities to differentiate and grow, while managing costs. Our recent acquisition of the R.E.A.L Education Group has enlarged our K-12 offering, allowing us to reach a wider segment of the K-12 market by offering both premium and more affordably-priced private national and international curricula. Sri KDU International School has further cemented its reputation for quality by achieving the International School Quality Mark (ISQM) Gold Award this year; the first in Malaysia and third in Asia to procure this award.”
He added that in the tertiary segment, Paramount was stepping up local and international marketing efforts, strengthening relationships with recruitment agencies, while introducing new programmes and articulation into universities worldwide to provide more options for students wishing to continue their studies overseas. Efforts were made to build Unique Selling Propositions (USP’s) for selected flagship schools and placing an increased focus on a structured entrepreneurship programme as a key attribute of KDU graduates.
“We are also continuing our pursuit of an asset-light strategy to improve the utilisation of its real estate assets, which will enhance returns to capital employed and create long term shareholder value,” he concluded.