- Planning for Bandar Malaysia. The Star, quoting property consultancy firm CH William Talhar, reported over the weekend that the development of Bandar Malaysia will likely be carried out via a consortium of developers. This is given the size and potential GDV of the land, which could run into “billions of ringgit” – not unlike other mega developments. CH Williams is the transaction advisor for 1MDB RE Sdn Bhd, the master developer for the 486-acre Bandar Malaysia. Earlier last week, interested parties were invited to submit expressions of interest (EOI) to participate in the project.

- More to be known by October. The deadline for submission has been set on 10 July. After this, the shortlisted candidates will be required to sign non-disclosure agreements. A Memorandum of Information containing more information would then be provided to assist the bidders in preparing their bids. If things go as planned, the entire exercise could be wrapped up by October this year. The Star report also indicated that unlike some other large redevelopment projects such as KWASA Damansara, Bandar Malaysia will not be carved out nor developed via a series of joint ventures. Instead, it will likely involve equity participation in nurturing the overall make-up of Bandar Malaysia. Via a screening process, we reckon that each potential bidder is required to make their own respective assumptions (e.g. land value, payment terms, and level of equity participation). The indicative land value will be determined on a gross basis, we understand.

- Four key parameters. Along with the TRX, KWASA Damansara and Menara Warisan Merdeka (KL118), Bandar Malaysia is among several prime government redevelopment projects that are set to take off over the next few years. Bandar Malaysia is central to Greater KL’s transformation program. The project site is located approximately 7km from KLCC, and 3km from the TRX. It currently houses the Sg. Besi airfield. At the same time, a Bernama report indicated that 1MDB is required to relocate existing facilities on the site. This is to be carried out through the delivery of eight new military and police bases across Malaysia. The construction of these new bases are on track for handover by 1 January, 2017, according to the Bernama report. That being said, we believe it is still too early to pre-empt any potential beneficiaries as key details remain unknown (e.g. indicative land cost, plot ratio and effective land use) at this juncture. Likewise, the type of property components that can be absorbed by the market is another key consideration for the bidders to consider, we opine. But, what can be broadly ascertained is that the Bandar Malaysia model will be based on four key parameters: (1) Transport-oriented development (TOD): The Bandar Malaysia development is being repositioned as an integrated transport hub within the city centre. The proposed KL-Singapore High-Speed Rail terminus will be located here. Future linkages have also been mooted for the MRT lines 2 and 3, KTM Komuter, Express Rail Link (ERL) to KLIA and KLIA2, Bas Rapid Transport (BRT), as well as connections to 12 major highway networks. (2) Sustainable city living for future lifestyles. (3) Position as a global business hub: Bandar Malaysia aspires to have world-class built environment and offices, in addition to a dedicated commercial hub for creative industries. (4) Tourism destination: Future planned facilities include a waterfront promenade and vibrant retail boulevard. The area aims to be a one-stop destination for shopping, festivals, culinary, and culture.

- Maintain OVERWEIGHT on the property sector. While transaction volumes could remain insipid in the near term, we expect a bottoming of the property market towards the end of the year, as the market remains awash with liquidity. We also note of a gradual pick-up in presales activities of late, particularly within the landed segment (e.g. fresh launches by key developers in South Klang valley near Kota Kemuning) or condos in strategic/good locations within the Klang Valley. Current valuations (property stocks within our stock universe trading at an average of 55% vs. their respective NAVs) imply that most of the key headwinds plaguing the sector have been largely priced in. On a bottom-up approach, we continue to favour Mah Sing, MRCB, Titijaya Land and E&O Properties for leverage to any recovery in the property sector.

Source: AmeSecurities Research - 29 Jun 2015