Declining property sales pulls Paramount Corp’s 1Q net profit down 58%

KUALA LUMPUR (May 11): Property developer Paramount Corporation Bhd saw its net profit plunge 58.21% to RM9.69 million in the first quarter ended March 31, 2016 (1QFY16), from RM23.19 million a year ago, due to dented sales in its property division.

For the same reason, its revenue declined 31.22% to RM113.33 million in 1QFY16, from RM165 million in 1QFY15, its bourse filing today showed.

Paramount said its property division’s profit before tax (PBT) dropped 58% to RM12.1 million in 1QFY16, due to a significant fall in revenue, as a result of lower progress billings and sales of its Sejati Residences in Cyberjaya, its Utropolis in Glenmarie, Shah Alam; as well as its Sekitar26 Business development in Shah Alam.

Lower sales were also seen at the group’s Bukit Banyan development in Sg Petani.

The company’s education division, on the other hand, recorded a 67% jump in PBT to RM10.2 million, from RM6.1 million in 1QFY15, on higher student enrolment and a RM2.3 million gain from the sale of apartments offered as student accommodation, after KDU University College moved to its new campus in Glenmarie, Shah Alam.

The education division, comprising the primary and secondary school and the tertiary institutions, recorded a 7% increase in revenue to RM38.6 million in 1QFY16, from RM36.1 million in 1QFY15.

On prospects, it said the property market will likely not recover any time soon, from its current slump.

As such, its property division is moving to broaden its offering of affordable homes, in addition to current developments in Greenwoods Salak Perdana in Selangor and Bukit Banyan in Kedah, where demand remains positive.

It is also finalising plans for the roll out of its new development in Batu Kawan, Penang, which will mirror its Utropolis Glenmarie project, which is anchored on the concept of a university metropolis.

Its education division, meanwhile, will continue to experience intense competition in the tertiary business, as the muted economic environment is driving many private higher education providers to offer significant reductions in tuition fees, by way of discounts and promotions.

“In the primary and secondary segment, competition is also stepping up, due to new schools’ openings, with more in the pipeline scheduled for 2016 to 2018,” it said.

“Barring any unforeseen circumstances, the group is expected to deliver a satisfactory set of results for 2016,” it added.

Paramount shares closed 2 sen or 1.27% lower at RM1.56 today, for a market capitalisation of RM664 million.