Recent news on Batu Kawan reinforce our positive view
on Penang mainland’s property market. The various developments
taking shape there highly resembles the initial growth stage of
Iskandar when the latter was about to take off three years ago. The
land prices to be inked by Paramount are likely set a new
benchmark for subsequent transactions. TILB remains the best proxy to
Penang mainland play.
- Batu Kawan: A “Mini Iskandar”. The growth
cycle on Penang’s mainland has just started. Last week, two
education institutions – University of Hull and KDU University
College (under Paramount Corp (PAR MK, NEUTRAL, FV: MYR1.55))
respectively announced plans to set up their new campuses in Batu
Kawan. The developments currently taking shape on the Penang
mainland, including the completion of the Penang Second Bridge as
well as the state government’s plans to put up a premium outlet,
theme park and international golf resort at Batu Kawan, very much
resemble the initial growth trajectory experienced by the Iskandar
region when it was about to take off three years ago. Over the last
three years, the Iskandar region has witnessed the completion of
infrastructure works, highways, theme parks and the sprouting
up of industrial parks, schools and medical centres. Since
then, land and property prices in certain hotspots have more
than doubled due to the influx of local and foreign buyers. As
business activities heighten and job opportunities expand, the
Penang mainland is likely to see the same trend, in our opinion.
- New transactions set new benchmark. Following
EcoWorld’s transaction cost at above MYR30 psf at Jalan Paboi, we
believe the land cost (yet to be announced) for Paramount’s
30-acre project in Batu Kawan (10 acres for KDU’s campus and
20 acres for an integrated development) is likely to set a
new benchmark for subsequent land transactions and pricing of
new properties. High-rise residences, which are gaining
popularity, have achieved a pricing of MYR360 psf in
Butterworth. We expect Paramount to price its university
township project at MYR400 psf and above when it is launched in 1-2
years’ time.
- Landbank owners the winners. With more
developers jumping on the bandwagon, current land owners on Penang’s
mainland are the ultimate winners, and some of them can be
easily taken over due to their relatively small size. Among the key
players including Asas Dunia, Wing Tai, Malton, GOB (all Not
Rated) and IJMLD (IJMLD MK, BUY, FV: MYR3.70), we still like
Tambun Indah (TILB MK, BUY, FV: MYR2.00) the most for its solid
fundamentals. We keep our valuations on Paramount for now, pending
official announcement on signing of the agreements.
Source: RHB
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