Paramount swings to loss in 2Q from pandemic impact
Property developer Paramount Corp Bhd slipped into the red in the second quarter ended June 30, 2020 (2QFY20), posting a net loss of RM3.7 million compared with a net profit of RM28.47 million a year ago, mainly due to the unprecedented disruption caused by the Covid-19 pandemic to the property division.
This resulted in a loss per share of 0.6 sen for 2QFY20 compared with an earnings per share of 4.69 sen for 2QFY19.
Quarterly revenue fell 70.4% to RM64.2 million in 2QFY20 from RM216.94 million a year ago.
In a bourse filing yesterday, Paramount said on the back of lower revenue, the property division recorded a pre-tax loss of RM2.8 million for 2QFY20 compared with a pre-tax profit of RM41.2 million in 2QFY19, mainly due to lower construction activities and sales achieved.
“The construction sites of all the projects were closed from March 18 in compliance to the movement control order (MCO) and were progressively reopened during the conditional movement control order phase. (This led) to the loss of two months on average of construction time in 2QFY20, which means no revenue could be recognised.
“In addition, lower revenue was recognised in 2QFY20 as several projects, which were at the advanced stage of development in 2QFY19, had since been completed while new property launches were deferred as a result of the MCO,” it said.
The group noted that sales of new properties in 2QFY20 were also impacted. “Although digital and promotional activities continued to attract potential sales, the lead time for converting these into sales were longer given legal documents could not be executed during the MCO and the longer processing time taken by its customers to procure financing.”
Paramount said the board has exercised prudence not to declare any dividend in this current quarter.
Nevertheless, the group saw net profit surge 13 times to RM463.25 million for the cumulative six months ended June 30, 2020 (1HFY20) from RM34.63 million a year ago, contributed by the gain recognised on the disposal of its pre-tertiary education business of RM460.6 million. However, revenue dropped 45.1% to RM186.31 million in 1HFY20 from RM339.23 million in 1HFY19.
Paramount said for 1HFY20, it achieved property sales of RM193 million, which was 38% lower than the corresponding period last year of RM310 million, on lower sales achieved.
On prospects, Paramount warned that the property market will be weighed down by the uncertainties associated with cautious household, business expenditure and employment market.
Nevertheless, it sees the relief measures and economic stimulus packages announced by the government will play a key role in encouraging consumption and boosting employment. In addition, the low interest rate environment, coupled with the reintroduction of the home ownership campaign in June, is expected to incentivise property purchases.
Paramount’s property’s pipeline launches for 2HFY20 is estimated at RM640 million, comprising entirely of residential properties (including new phases of existing projects) to capitalise on the home ownership campaign.
Although the group’s unbilled sales of RM873 million as at June 30, 2020, provides some visibility on its cashflow in the near term, Paramount said the pace at which this can be converted into billings would depend largely on the construction progress of the projects.
“Hence, the group is reviewing its processes and product designs to allow construction to progress smoothly and efficiently under the new normal, which is key in generating cashflows and profits to the group,” it added. As at June 30, 2020, Paramount had 505.1 acres of undeveloped land in the Klang Valley, Kedah and Penang.
For the financial year ending Dec 31, 2020, the group expects the pandemic to significantly affect the demand of its products and services as well as the projects’ construction progress and hence, the group’s financial performance. “However, this would be bolstered by the RM460.6 million gain on disposal of the pre-tertiary education business that was recognised in 1QFY20.”
Paramount shares closed 0.5 sen or 0.61% lower at 81 sen today, valuing the group at RM497.7 million. Its share price has fallen 39% over the past year from RM1.32.