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Paramount eyes double-digit earnings growth

PETALING JAYA: Property developer-cum-education group Paramount Corp Bhd is expecting double-digit growth in its top line and bottom line in the next five years, supported by strong property projects in its pipeline with a gross development value (GDV) of RM9.1 billion, and growing recurring income from its education business.

Group chief executive officer (CEO) Jeffrey Chew told a media briefing yesterday that the RM9.1 billion worth of property projects will be delivered over the next 10 years.

“Over the last 10 years our profit after tax compound annual growth rate (CAGR) is about 10% and we hope to achieve double-digit growth annually in the next five years, hopefully a high-end double-digit growth.”

The group reported a net profit of RM64.1 million in the financial year ended December 2014 (FY14), an increase of 19.81% from RM53.5 million in FY13 while its revenue was slightly down year-on-year by 0.4% to RM510 million. It had also proposed a dividend of 7.5 sen per share in FY14 compared with a dividend of eight sen in FY13.

Additionally, Chew said Paramount (fundamental: 1.6; valuation: 3.0) has been consistent in paying dividends to reward its shareholders and the group will continue to maintain its dividend payout of between 40% and 50% of its net profit.

The group has been consistently giving out dividends of at least 40% of its net profit since 2008. 

Most of its property projects will focus on landed townships utilising its land bank in Selangor and Penang, said Chew.

The profit margin of its projects in the pipeline and future projects are estimated to range between 17% and 26%, which Chew deemed to be “quite good” from a former banker’s point of view.

Commenting on the outlook for the property market, Chew, who is the former CEO and former director of OCBC Bank (M) Bhd, said the property market is unlikely to go back to the time before Bank Negara Malaysia started implementing responsible lending practices for key credit providers.

“But the demand is still there, given the growing population, especially in the mid-range properties price range of RM400,000 to RM800,000,” he added.

On the impact of the goods and services tax (GST) which will be implemented next month, Chew said the 6% GST will be translated into 2% to 3% increase in its costs for property business and about 1% to 2 % additional cost in its education business.

Paramount’s education portfolio includes Sri KDU International School, KDU College and KDU University.

Currently, 30% of Paramount’s revenue comes from its education business, with the rest from property development.

Chew said the group plans to maintain the current ratio between the two core businesses in the future.

Paramount closed up one sen to RM1.49, giving it a market capitalisation of RM629.17 million.

 

This article first appeared in The Edge Financial Daily, on March 20, 2015.

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