- The Edge Financial Daily reported that a request for proposal (RFP) will be called next month by the Penang state government to develop 60 acres of landfill site in Jelutong into an eco-town featuring a mixed development over a 10-year period. The RFP also includes an alternative site for construction and demolition waste once the landfill site is shut down.

 - The eco-town will feature affordable housing units (a pre-requisite for the development), shopping mall, meetings, incentives, conferences and exhibitions centre, saltwater beach and a yachting marina.

 - This project will also involve the reclamation of 20 acres of land on either side of the landfill site. The 20 acres of reclamation land do not require approval from the Federal government as only reclamation projects involving more than 50 acres require Federal’s approval, we understand. The state’s Department of Environment approval is sufficient.

 - Based on our ground checks, this 60-acre land is located nearby IJM Land’s The Light project and next to the proposed reclamation of 1,500 acres of land mooted for the Penang Middle Bank.

 - This piece of land is earmarked to provide access to Penang Middle Bank. We think that the massive reclamation of Middle Bank is unlikely to take-off as it would require Federal’s approval.

 - While the development potential could be high for the landfill site, we note that the average selling price within Jelutong has been enhanced by the highly successful The Light project. We are somewhat uncertain that the reported minimum price of RM500psf can be achieved. The Light is currently selling at about RM800psf- RM1,000psf vs. its launched price of <RM500psf in 2008.

 - Accessibility to The Light and this 60-acre site will undoubtedly be enhanced given that the Penang Master Transport Plan (PMTP) will cut across the Tun Dr. Lim Chong Eu Expressway in Jelutong. The PMTP would provide an added kick to the development potential within Jelutong.

 - Should the state government be able to achieve a minimum price of RM500psf from the development of this landfill site, it would further underscore the development potential and enhance value of Eastern & Oriental’s (E&O) Sri Tanjung Penang 2 (STP2) given its strategic location and sea-fronting land. We estimate STP2’s land value at RM500psf. Total land cost for the reclamation of STP2 is projected at RM94psf for gross land (RM139psf for net land). E&O is our top pick given the significant accretion from the highly coveted STP2.

Source: AmeSecurities