This article first appeared in The Edge Malaysia Weekly on December 9, 2024 - December 15, 2024

JOHOR Bahru-based property developer Paragon Globe Bhd (KL:PGLOBE) has maintained a relatively low profile since Datuk Seri Edwin Tan Pei Seng’s family acquired its predecessor, Goh Ban Huat Bhd (GBH) — a ceramic sanitaryware and tableware company — from “Casio King” Tan Sri Robert Tan Hua Choon in 2017, before renaming it in 2018.

However, 2024 has proven to be a pivotal year for Paragon Globe, with notable announcements on land acquisitions, sales and new projects. The group has also reaped substantial benefits from the booming data centre industry.

Johor, with its strategic location and robust infrastructure, has emerged as a hotspot for data centre investments, attracting major global players. Paragon Globe has strategically positioned itself to ride this wave, leveraging its land bank to meet the needs of data centre operators.

Year to date, shares in Main Market-listed Paragon Globe have surged 66%, closing at 36 sen last Thursday and giving the company a market capitalisation of RM272.52 million.

The stock is currently trading at a historical price-earnings ratio of 19.5 times, against its cumulative profits of RM13.988 million over the past four quarters.

Is it time for investors to take a closer look at this counter?

Edwin, who is executive chairman of Paragon Globe, says the property firm’s recent moves, including some interesting land transactions and the launch of new projects, present a compelling case for investors’ attention.

“We are on track to stage a turnaround in the financial year ending March 31, 2025 (FY2025), by recording our highest profits since we took over [the company] in 2017. And once our key projects kick in, we should see even stronger earnings growth between FY2027 and FY2030,” he tells The Edge in an interview.

Edwin, 43, says the underlying value of Paragon Globe will be increasingly recognised when upcoming initiatives and business plans are executed. “Since taking over GBH seven years ago, we have laid a solid foundation, and this year marks a turning point as we execute transformative initiatives.”

Edwin, along with his younger brother Datuk Seri Godwin Tan Pei Poh, who is the group’s executive director, controls the majority stake of 51.8% in Paragon Globe.

Robert Tan, who used to own 9.8% stake in the company, had ceased to be a substantial shareholder of Paragon Globe in August, after divesting 37 million shares via an off-market deal.

According to Paragon Globe’s annual report 2024, its top 30 largest shareholders included the late Tan Sri Ta Kin Yan and Tan Sri Richard Koh Kin Lip.

Paragon Globe returned to the black with a cumulative profit of RM14.82 million in the first half ended Sept 30, 2024 (1HFY2025), compared to a net loss of RM411,000 a year ago. The strong earnings performance was driven primarily by land sales in Desa Cemerlang, Johor Bahru.

Additional disposal gains are anticipated to be reflected progressively in the coming quarters, further bolstering the group’s financial results.

In May, Paragon Globe entered into a conditional sale and purchase (S&P) agreement with Bridge Data Centres Malaysia IV Sdn Bhd for the disposal of 47.86 acres of freehold land in Plentong, Johor Bahru, for RM238.317 million in cash.

About three months later, the group signed another conditional S&P agreement with Bridge Data Centres for the sale of an additional 19.759 acres in Plentong for RM98.98 million in cash.

Interestingly, these two parcels of land measuring 67.62 acres are part of the 104.5-acre tract that Paragon Globe had bought for RM71.5 million in November 2023.

From these two transactions, Paragon Globe is projected to secure a cumulative cash inflow of RM337.3 million, translating into an estimated net pro forma gain of RM112.9 million.

While Paragon Globe has made notable gains through land disposals, Edwin is not getting carried away.

He stresses that the group remains focused on its core property development business, as these transactions are part of a broader strategy to strengthen its financial position, with the proceeds being reinvested into ongoing and future development projects.

Edwin recalls that Paragon Globe had acquired its land at competitive prices and the group had initially intended to develop an industrial project by itself.

“The timing was good, as data centre operators came to knock on our doors and asked us to sell them our land. So, we capitalised on the booming demand for data infrastructure in Johor. Such transactions provide immediate cash flow for us.

“We were quick to identify and act on market opportunities. Although it was never our intention to make a quick gain by buying and selling land, we managed to leverage our assets effectively. The buyers offered us good prices and we took it. It’s all about navigating evolving market conditions,” he explains.

While the recent land sales have not only delivered substantial profits but also demonstrated Paragon Globe’s ability to align with market trends, Edwin insists that these transactions are not the endgame. “We are a property developer; we are not a property investment company. We want to build properties; we are not here to buy and sell land. We want to ensure sustainable growth rather than relying solely on one-off gains.

“In my view, the window of opportunity to make quick disposal gains from land transactions will probably last for another year. We need to think further. While we have reaped short-term benefits from land sales, we continue to prioritise long-term development projects.”

The upcoming launches, particularly in residential and commercial property, are expected to drive Paragon Globe’s future revenue growth. Dividends may be considered once profits from these ventures are realised, says Edwin.

Since 2022, Paragon Globe has acquired 251.6 acres of prime land in a move to diversify its portfolio. As a result, it has achieved strong sales momentum. For instance, the launch of Pekan Sentral Phase 3 saw a 54% uptake for international lots, reaffirming the robust demand in Johor’s commercial property market.

Today, Paragon Globe has a total land bank of 335.55 acres, with key locations in Johor (Desa Cemerlang, Nusajaya, Iskandar Puteri and Plentong) and Sepang, Selangor.

Meanwhile, the group has laid the groundwork for several flagship projects, including the Sepang Medical Centre, which is its foray into healthcare real estate.

Scheduled to commence operations in 2025, this 121-bed state-of-the-art medical facility is secured under a build-and-lease agreement with Selgate Healthcare Sdn Bhd. This recurring income is anticipated to contribute to Paragon Globe’s financials from next year, generating an estimated RM199.65 million in gross rental income over a 15-year lease period.

Edwin says Paragon Globe is stepping up efforts to gain a foothold in the healthcare sector, as part of the group’s strategy to diversify revenue streams and secure stable and recurring income.

“In the long run, healthcare infrastructure should offer steady returns and align with our group’s goal of building sustainable, future-ready assets.

“Although this is an early-stage initiative, the partnership with Selgate Healthcare places Paragon Globe in a favourable position to explore further opportunities and grow our presence in this vital sector.”

While the land sales have delivered an uplift to Paragon Globe’s earnings, as Edwin points out, such disposals are not the group’s core business. The real test for Paragon Globe in the coming years lies in demonstrating sustained profitability through its future development projects. 

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