This article first appeared in The Edge Malaysia Weekly on January 31, 2022 - February 6, 2022

AMID the slowdown in the property market, Johor Baru-based developer Paragon Globe Bhd, which is currently building the Sepang Medical Centre for Selgate Corp Sdn Bhd, is on the lookout for opportunities to develop more private specialist hospitals in Malaysia.

Paragon Globe executive chairman Datuk Seri Edwin Tan Pei Seng says the increased spending in the healthcare and wellness sector, as well as the growing demand for healthcare services, has encouraged the group to venture into this industry.

According to him, Paragon Globe aspires to become a significant player in the healthcare and wellness segment, as it intends to leverage Selgate’s experience and expertise in healthcare management, operating hospitals, health and dental clinics, pharmacies and medical laboratories as well as offering home nursing services.

“We hope by developing more private hospitals, it can aid us in taking sufficient measures to [prepare the public] for any new diseases or viruses. We strongly believe the collaboration with Selgate will take us a step closer to our ambition,” he tells The Edge in an interview.

The 121-bed Sepang Medical Centre will be operated by Selgate Healthcare Sdn Bhd, a unit of Selgate Corp, which in turn is a wholly-owned subsidiary of Selangor State Development Corporation (PKNS).

The hospital, to be built on 7.07 acres of land, is scheduled for completion in the last quarter of 2023. Construction is expected to cost Paragon Globe RM80 million to RM100 million.

Once completed, Selgate Healthcare will operate the hospital for 15 years, with an option to extend for another 15 years.

As an asset owner, Paragon Globe will collect rental as recurring income. For the first 15 years, the group’s expected total gross revenue generated from the lease is about RM199.65 million.

Notably, Paragon Globe had in September last year signed a memorandum of understanding with Selgate for a two-year collaboration to develop more private hospitals.

“We are looking to develop several private specialist hospitals in Malaysia, especially in Penang and Kedah,” Tan says.

In an interview with The Edge earlier this month, Selgate CEO Noor Hisham Mohd Ghouth said the Selangor government-linked company’s ultimate goal was to function in a manner similar to KPJ Healthcare Bhd for the Johor government and TDM Bhd for the Terengganu government.

Over the past 12 months, shares in Paragon Globe have risen 13% to 22 sen, giving it a market capitalisation of RM160.52 million.

Tan, together with his younger brother Datuk Seri Godwin Tan Pei Poh, are the major shareholders of the company, with a 51.8% stake. The duo bought a controlling stake in sanitaryware distributor Goh Ban Huat Bhd from elusive tycoon Tan Sri Robert Tan Hua Choon in September 2017. The company was renamed Paragon Globe in April 2018 and reclassified as a property counter in January 2020.

Robert Tan, who is also known as Casio King for bringing Casio watches and calculators to Malaysia, still owns a 9.8% stake in Paragon Globe.

Like most businesses, Paragon Globe was negatively impacted by the Covid-19 pandemic, particularly during the implementation of the Movement Control Order, which led to a slowdown in the sale of shopoffices and detached factories.

Tan says while it has been keeping a lower profile, the company has been focusing on the development of the Pekan Sentral Phase 2 shopoffices and detached factories, which are part of its flagship project in Pekan Nenas, Johor.

In fact, the property development division’s revenue in recent years was contributed primarily by the sale of shopoffices and 1½-storey semi-detached factories in the Pekan Nenas project.

He says the development of Pekan Sentral Phase 2 is progressing well with the rise in consumer spending after the lockdown was lifted.

Tan adds that the construction of the Pekan Sentral Phase 2 shopoffices and detached factories was completed by end-2021.

“Although there had been slight delays in the completion of the project owing to the pandemic, [there was no financial impact] from this delay. Throughout this period, we were still actively promoting the sale of the projects and had achieved an encouraging response,” he says.

Going forward, Paragon Globe plans to build a workers’ hostel at the Pekan Nenas Industrial Park, as subpar accommodation for migrant workers remains an issue despite the industrial sector’s dependence on them.

“We are looking to develop at an affordable price workers’ hostel or dormitories at the Pekan Nenas Industrial Park, where all the foreign workers at sites or shophouses can be centralised in one location. The development will consist of four hostel blocks that can accommodate up to 2,900 workers,” says Tan.

Paragon Globe saw its net losses narrow to RM555,000 in the first half ended Sept 30, 2021 (1HFY2022), as compared to losses of RM3.58 million a year ago. The improved financial performance was attributed to higher sales of completed inventories and the progressive revenue recognition from the detached factory project at the Pekan Nenas Industrial Park.

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