Paramount Corp targets sustained margins, to speed up developments

SHAH ALAM: Paramount Corporation Bhd hopes to maintain its profit margin at about 10 per cent as it accelerates its development and control operating expenses, said group chief executive officer Jeffrey Chew.

Paramount expects to perform better in the fiscal year 2023 (FY 2023), fuelled by RM1.5 billion in planned launches spread out in significant areas in the Klang Valley, Penang and Kedah.

"We aim to accelerate development from the time we purchase the site until the time we launch. In order to generate faster returns, we plan to accelerate construction and sales," Chew told the New Straits Times.

"Value engineering is a common practice we use to eliminate all inefficiency. Many features that we discover the purchasers don't appreciate are removed from the development to reduce costs," he added.

Chew said construction is the company's largest expense, accounting for around 40 per cent of total costs. This is followed by land costs (20 per cent), development and compliance cost (15 per cent), marketing costs (10 per cent) and overhead (five per cent).

"Don't be misled by profit margins because gestation periods are lengthy. We need to shorten the cycle and raise the return on assets. We will only purchase land if we think it is desirable and will produce high profits," he said.

Paramount delivered solid results, with a 60 per cent increase in pre-tax profit to RM23.3 million for the first quarter of 2023 (1Q2022: RM14.6 million) on the back of a 16 per cent percent increase in revenue at RM194.6 million (1Q2022: RM168.1 million).

Profit attributable to ordinary equity holders of the company more than doubled to RM11.6 million from RM5.0 million recorded in 1Q2022. 

The pre-tax profit for the property division was 41 per cent higher in 1Q2023 to RM29.3 million from the RM20.7 million recorded in 1Q2022, because of a larger base of on-going projects.

The property division's revenue for 1Q2023 was RM185.8 million (1Q2022: RM163.9 million), with Utropolis Batu Kawan in Penang, Bukit Banyan in Kedah, and Berkeley Uptown in Selangor, as the top three revenue contributors.

Since early this year, Paramount has launched residential and industrial properties worth RM431 million and achieved a strong take-up rate.

Chew expressed optimism over demand for the remainder of 2023, saying that while rising prices and interest rate increases would affect consumer confidence, the anticipated growth of the Malaysian economy and an improving job market would be favourable for real estate demand. 

He also said there was a lack of high-quality housing on the market because fewer developers have been releasing new projects since the pandemic's peak in 2020.

The company is optimistic about launching properties worth RM1.1 billion for the remaining nine months of its fiscal year, on the strength of the strong sales momentum realised in the first quarter of 2023 and pent-up demand for high-end and affordable products, Chew said.

Notable launches are Paramount Palmera Industrial Park in Bukit Minyak, Penang, a new residential development at the prestigious U-Thant enclave, Kuala Lumpur, and Phase 2 of Sejati Lakeside 2 landed homes in Cyberjaya.

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