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Paramount sees near-term positive impact from GST removal

SUBANG (May 30): The zero rating of the goods and services tax (GST) that is to take effect from June 1 is seen as a positive for the property market as it would encourage people to buy properties, said Paramount Corp Bhd.

"For commercial property, we believe that it would encourage buyers to buy property now. If they buy the property later when the sales and services tax (SST) has been introduced, there could be other costs that could come out, so it's a very good time now," Paramount group chief executive officer Jeffrey Chew told reporters after the group's annual and extraordinary general meeting today.

Chew added that while residential properties are exempted from GST, the group anticipates for the GST zero-rated policy to have a positive impact on overall costs.

"There may be a bit of a cost saving for us on our projects, it could be within 2% to 4% of our cost. We believe we could potentially translate that into lower price for our new launches," Chew said.

Chew noted, however, that while there would be some cost savings with the zero-rating of GST, the introduction of the SST too soon, depending on the percentage, may or may not impact the cost savings incurred after June 1.

"In a way we are concerned that if we reduce the prices of the properties too fast in the next few months, and then suddenly SST gets implemented at 10%, ultimately it could cost just as much and then we would experience lower profits.

"We hope that the government would be cognizant to the fact that we (property players) have absorbed the GST in the past. As such the profit margin for property players in the past have also been coming down — even for us, we used to have a margin of between 19%-20% but now it's about 16%," he said.

Regardless, Chew remained confident that the group is on track to perform better this year, and is set to achieve its sales target of RM1 billion for FY18.

Last week, the group said it had achieved sales of RM227 million in the first quarter ended March 31, 2018 (1QFY18), while its net profit dropped slightly to RM6.96 million from RM6.98 million a year ago, on lower progressive billings recorded from the property division.

Revenue, however, was up 12.6% to RM162.25 million from RM144.1 million in 1QFY17, on higher contribution from the education division due to consolidation of R.E.A.L. Education Group of RM27 million from April last year, coupled with the higher student enrolment at KDU University College in Glenmarie and Penang.

At Bursa Malaysia, Paramount Corp is trading down one sen or 0.5% to RM1.99 at 2.39pm, for a market capitalisation of RM847.98 million. — theedgemarkets.com

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