Paramount mulls venture into property management, proptech segment amidst margin erosion

KUALA LUMPUR (March 3): Paramount Corporation Bhd is mulling to establish footprint in the property management and property technology (proptech) segment with the proceeds from the divestment of its education operations.

The sale of its controlling equity interest in its pre-tertiary education business to Prestigion Education Sdn Bhd is expected to yield net cash of some RM250 million for Paramount after deducting dividend to be paid to its shareholders and related expenses, the company's CEO Jeffrey Chew told reporters and analysts at a media briefing today.

"The divestment of the education business will give us cash for growth going forward and we are now looking at a few potential growth areas, of which is property management and proptech to cater to the growing number of strata property in the country," he said.

He noted that the new property management business can complement its existing property development segment by providing a pool of potential customers for new projects in the future.

"If we are managing 100,000 units of properties, we can send out the information of our new projects to the owners using proptech.

"On top of that, we are able to control the quality of the property we built while building and maintaining our brand," he added.

Apart from property management and proptech, Paramount is also exploring the idea of setting up or acquiring a construction company to undertake the jobs internally while bid for external contracts.

"We are also exploring the plan of investing or setting up a REIT (Real Estate Investment Trust) for our education or commercial properties," he said.

Looking ahead, Chew expects the profit-before-tax margin for Paramount's property development segment to be under pressure as the cost of business remains high.

In 2019, the margin stood at 18%, a slight increase from 17% in 2018, but lower than 21% in 2016.

"The margin could still drop by one or less than one percentage point every year and eventually hovering at 12% or 13% in the next few years.

"There is not much room for cost reduction. Unless land and interests cost decline, the margin will be going down," he elaborated.

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