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Monday, September 30, 2013

Real Estate - Batu Kawan: A “Mini Iskandar” In The Making


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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