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Paramount on track to sell Jerneh

PETALING JAYA: Paramount Corp Bhd is on track to dispose of its 20% stake in Jerneh Insurance Bhd pending approval from Bank Negara Malaysia (BNM), said its executive deputy chairman Datuk Teo Chiang Quan.

“We are very pleased that we have done it (selling Jerneh Insurance). We have this legacy of insurance company that is purely investment. There will be no more management responsibility on our side after this.

“We have a chance to dispose of it together with the other substantial shareholder and unlocking the value of our 20% investment. We have achieved our desire, if the (BNM) approval is obtained,” Teo said after Paramount’s AGM here on June 3.

Paramount owns 20% of Jerneh Insurance through its investment arm Paramount Global Assets Sdn Bhd, while Jerneh Asia Bhd owns the remaining 80%. They are selling the insurance outfit to an unidentified foreign buyer.

While Paramount did not disclose the sale price, the transaction would substantially boost its already strong cash and cash equivalents of RM207.5 million as at Dec 31, 2009.

A report earlier this month had said the deal could reach as high as RM700 million, which translates to RM140 million for Paramount’s 20% stake. However, both Teo and Paramount CEO Ong Keng Siew would not talk about the potential proceeds.

They also declined to say what the proceeds would be used for. Teo said it was premature for them to talk about it. “One of the things asked at the AGM by shareholders is if they would get any special dividend. We will make the decisions as we go along. I can’t say much but we are taking notes about the questions from the shareholders,” he said.

This year, Paramount will continue to focus on its property development and education divisions, the two areas, which Teo believed it could deliver the results expected by shareholders.

“I would like to say from our group revenue numbers, (contribution from) the property division will continue to be about three-quarters and a quarter will be from education,” Teo said.

Revenue from its property division was RM305.5 million out of its total revenue of RM404 million in 2009. The education sector contributed RM98.5 million. Net profit grew 30.6% to RM57.5 million from RM44 million in 2008.

Paramount is focusing on acquiring more land as two of its biggest development projects — Bandar Laguna Merbok in Sungai Petani and Kemuning Utama in Shah Alam — will near completion within three to five years.

“Our gearing is zero and we have something around RM200 million cash in our balance sheet. Obviously we can also gear up in acquiring land.

“The acquisition of the landbank will be part of our responsibility to shareholders, helped by the fact that bankers have confidence to give us borrowings; we do have ample war chest to do the acquisition plan. We are very interested in the Klang Valley and continue to see very strong demand from residentials,” said Teo.

Paramount’s total landbank stood at about 977 acres as of last year, including Bandar Laguna Merbok and Kemuning Utama.

The gross development value (GDV) for both flagship projects is RM750 million for the former and close to RM1 billion for the latter. Last year, it launched Surian Industrial Park with a GDV of RM110 million. Its landbank also includes 492 acres in Bukit Banyan in Sungai Petani, the development of which will be launched in 4Q10.

On Tuesday, Paramount acquired a 50-acre freehold parcel in Cyberjaya for about RM78.4 million. The development has a potential GDV of RM530 million.

Teo said the location was very attractive for residential projects as renowned developers such as Mah Sing Group Bhd and UEM Land Bhd were doing well there. Development will begin by September next year.

For its education division, Paramount has submitted an application to the Ministry of Higher Education for university-college accreditation for its KDU College. Teo said such accreditation would open up a new market for local degree seekers.

“It will give us a chance to open another market for those who favour local degrees. As a college, we can’t issue degrees. We can only issue diploma or our twinning partner’s degrees,” Teo said.

A new campus for KDU College will be built on a 10-acre site in Petaling Jaya next year, with a temporary branch in Section 13, Petaling Jaya.

As for its school portfolio, Teo said it had received overwhelming response to its first international secondary school in Petaling Jaya, which is scheduled to open in September next year and can cater to 650 students.

Paramount is also looking at setting up a primary and secondary school campus  on a 10-acre plot in Iskandar Malaysia.

“We are taking a very serious step to evaluate a campus there. In this current year, hopefully we can do something. We are studying the demographics of the population there,” Teo added.

The KDU Colleges in Petaling Jaya and Penang registered revenues of RM43.4 million and RM18.7 million, respectively, last year. Its primary and secondary schools registered a revenue of RM33.3 million last year.

Meanwhile, Teo confirmed the company’s intention to sell its KDU International Language Training School in Chongqin, China after the outfit registered the same quantum of losses of RM1.7 million last year as in 2008.

The English language centre in China is the only overseas outfit in its education portfolio, which consists primarily of KDU colleges, and primary and secondary schools.

This article appeared in The Edge Financial Daily, June 4, 2010.

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