An increasing population in Penang coupled withlong-term property demand will be supported by major projects driven by public-private partnerships (PPPs), according to Affin Hwang Capital Research.
Among the PPP projects, the largest being the RM27bil Penang Transport Master Plan (PTMP), could be awarded by September. Singapore’s Temasek Holdings also has a proposed joint venture with Penang Development Corp (PDC) to develop an RM11.3bil business process outsourcing centre and an international technology park.
The research house said in a report that its top stock picks for infrastructure and property exposure to Penang were Gamuda Bhd, IJM Corp Bhd, and Eastern & Oriental Bhd (E&O).
It said the Penang government had pushed for the economy to move up the value chain by encouraging knowledge-intensive and innovation-led manufacturing and services.
“Property development companies such as E&O, Eco World Development Group Bhd and Ewein Bhd are embarking on new large-scale mixed development projects in the state with total gross development value (GDV) of RM60bil,” it added.
E&O has the highest exposure to Penang with property development projects in the state comprising 77% of GDV totalling RM34bil.
The multi-billion ringgit PTMP has seen keen interest, with six consortiums submitting bids to be the project delivery partner (PDP) while Affin Hwang Capital understands that discussions for the joint venture with PDC were in the final stages.
“The joint development agreement is expected to be inked in July or August. Work on the BPO Prime is expected to start in the first quarter of 2016.” The entry of Temasek would also attract more Singapore companies and other foreign investors to Penang.
“We believe Gamuda will likely be appointed the PDP for the project. Also, being one of the largest contractors in Penang, IJM Corp is expected to win a substantial portion of construction work for the PTMP,” it said.
“The Penang government also managed to convince Hewlett-Packard to choose Penang as the location to set up its new RM1bil manufacturing facility instead of Iskandar Malaysia.”
The plant would produce high-speed inkjet printer heads for the global market.
A ready pool of skilled workers out of a total workforce of 797,700, developed infrastructure, established information technology eco-system, and consistent and investment-friendly state government policies could be the reasons why Penang continue to be attractive compared with Iskandar Malaysia.
The island’s popularity with tourists, diverse culture, historical attractions, beautiful coasts and famous cuisine were added attractions.
“We believe property developers with land bank and established presence in Penang will benefit from rising property demand in the long run.
“Job creation from rising investments in industrial and service sectors should support population growth from organic expansion and inbound migration,” said Affin Hwang Capital Research. - By The Star