Dijaya, Ivory rise on Penang property tie-up

Dijaya Corp Bhd and Ivory Properties Group Bhd shares were up after the companies announced a tie-up for a mixed-property project with a gross development value of RM10bil in Bayan Mutiara, Penang.

Dijaya rose 3.6%, or 5 sen, to RM1.44 while its warrants advanced 6.5%, or 3 sen, to 49 sen. Ivory Properties added 7%, or 7 sen, to RM1.07.

Dubbed Penang World City, the project will be undertaken by joint-venture vehicle Tropicana Ivory Sdn Bhd (TISB), which is 49% owned by Dijaya and 51% by Ivory Properties. TISB was set up on Oct 14.

Penang World City will be built on a 102.56 acre site, of which 35 acres is to be reclaimed. It will comprise residential units, a shopping mall, office suites, office towers, a hotel, retail spaces and an open mall with a boulevard.

The land is being bought for RM1.08bil from state-owned Penang Development Corp.

Bayan Mutiara is a new development hub in the eastern part of the Tun Dr Lim Chong Eu Expressway and is in the vicinity of Sungai Nibong.

Ivory Properties has proposed to finance the project via a renounceable rights issue of 186,000,000 new ordinary shares of 50 sen each as well as 186,000,000 new free detachable warrants.

Dijaya, meanwhile, will extend financial assistance to TISB in the form of shareholder advances, guarantee, indemnity or collateral of up to RM525.4mil, or 49% of the total consideration of the development land.

Analysts contacted by StarBiz have a positive view of the project, citing its prime location as a major plus factor.

“Land in Penang is scarce and the outlook for housing in the Bayan Mutiara area is booming,” an analyst said.

“It is not easy to get land in Penang for that price. Property developers prefer Johor Baru because land is much cheaper there.”

Another local bank-backed analyst said although he liked the land, he considered it pricey. At RM240 per sq ft, it was comparably higher than IJM Land Bhd's land further north of the island that was purchased at RM50 per sq ft. IJM Land has a 150.24-acre mixed-development called Light Waterfront Penang.

The analyst also said the upside for Ivory Properties' stock would be capped at around 30% as its share base would be diluted by two to three times following the rights issue.

He added that the choice of office towers in the development mix was surprising as the demand for office space in Penang was tepid.

Nonetheless, he said the project was still at its early stage and was subject to change.

“We haven't seen a detailed breakdown of the development components yet but the residential portion is likely to be larger,” he said.

Penang World City is scheduled to be completed in eight years. Work on the first phase is scheduled to begin at the end of next year. - By John Loh (The Star)

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