Paramount Corp’s 2Q net profit up 70% on higher contribution from property division

KUALA LUMPUR (Aug 17): Paramount Corp Bhd’s second quarter net profit soared 70% to RM23.9 million or 5.65 sen per share, from RM14.06 million or 3.33 sen per share a year earlier, on higher contribution from its property division.

Revenue for the quarter ended June 30, 2016 (2QFY16) grew 26.06% to RM145.3 million, from RM115.26 million in 2QFY15, the property developer told Bursa Malaysia in a filing today.

An interim single tier dividend of 2.5 sen was declared for the financial year ending Dec 31, 2016 (FY16), to be paid on Sept 28.

The property division’s revenue increased 39% to RM107.6 million, from RM77.7 million in 2QFY15, due to higher progressive billings from all its developments and higher sales recorded on the Sejati Residences, Sekitar26 Business and Greenwoods Salak Perdana developments.

As a result of higher revenue, pre-tax profit for the division rose 43% to RM24.6 million.

The group, which is also involved in the education sector, said revenue from that division (comprising primary and secondary schools, and tertiary education units) was maintained at RM37.4 million from 2QFY15.

However, the pre-tax profit of RM13 million was higher by 112%, as compared with RM6.1 million posted in 2QFY15, due to a gain of RM6.4 million recorded on the sale of apartments.

For the first six months of the year (6MFY16), Paramount’s net profit fell 9.8% to RM33.6 million or 7.95 sen per share, from RM37.2 million or 8.82 sen per share a year ago, because of lower contribution from its property division.

Revenue dropped 7.7% to RM258.6 million, the group said, adding that revenue from the property division was RM182.1 million, down 12% compared as with the RM206.1 million recorded a year earlier, resulting from lower sales from Utropolis and Sekitar26 business developments.

Paramount chief executive officer Jeffrey Chew was pleased with the 2QFY16 results, attributing it to the property segment’s improvement and higher student enrolment at the group’s KDU University College.

The results were also boosted by realised gains on the sale of student accommodation in Petaling Jaya, following the university’s relocation to Glenmarie.

Looking forward, he said the prospects for the property segment was improving in the commercial properties area where investors were looking to make long-term strategic investments.

“Planned launches for commercial developments such as Sekitar26 Enterprise shop lots, Greenwoods Salak Perdana shop houses and Paramount Utropolis Batu Kawan shop lots, are expected to meet with favourable demand,” he said.

It would be complemented by several residential developments to maintain its business strategy of products with different pricing and locations.

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

However, Chew said the education division would continue to face challenges, due to intense competition in the tertiary segment, where many private higher education providers are offering 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 opening with more in the pipeline scheduled for 2016 to 2018.

“Sri KDU’s excellent reputation, its strong value proposition, and its consistent enrolment which is on track with budget, is expected to drive the performance of Paramount education in 2016,” he said.

At 2.36 p.m., Paramount’s share price was up six sen or 4.41% at RM1.42, with 374,400 shares transacted, for a market capitalisation of RM575.2 million.