- Down to 12. The local press reported that CH Williams, Talhar and Wong (WTW), the transaction advisor handling the request for proposal (RFP) for Bandar Malaysia, expects the review process to be completed by year-end. We understand that 12 companies have participated in the RFP exercise. At the moment, WTW is reviewing the proposals from the 12 participating companies that are vying to be development partners for the project.

- Good mix of foreign and local. The 12 bidders included local private developers, government-linked companies and foreign parties either submitting independently or via a consortium. Prior to this, the earlier expression of interest (EOI) process had generated interest from 40 local as well as global players including Singapore, China, Japan, South Korea and Australia. The deadline for submission has been set on 10 July.

- Binding transaction targeted by year-end. Once the review is completed, WTW will require the approval of the 1Malaysia Development Bhd's (1MDB) board. It would then provide its recommendation to 1MDB Real Estate (1MDBRE), the master developer that is spearheading the Bandar Malaysia development, which will proceed to shortlist the final bidders. This would be a precursor to negotiations for financial and share sale agreements. The bidders will each receive an investment memorandum that outlines Bandar Malaysia’s development vision and its proposed master plan. They will also be required to sign non-disclosure agreements. To make the final cut, the contenders had to showcase their track record, branding and financial capabilities to be a development partner for Bandar Malaysia. We understand that 1MDBRE is looking to execute a binding transaction by year-end.

- Vital development cog for Greater KL: The 486-acre Bandar Malaysia is being positioned as a mixed use urban development that is expected to serve as a catalyst for the transformation of Greater KL. 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. Apart from its close proximity to the city centre (~7km from KLCC, and 3km from the TRX), 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.

- Weighing up its investment merits. As with our previous sector update on 29 June (Bandar Malaysia taking shape), 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. Another key difference is that unlike some of the 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 could involve equity participation in nurturing the overall make-up of Bandar Malaysia. By extension, we believe 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 likely be determined on a gross basis, we understand. Likewise, the type of property components that can be absorbed by the market is another key consideration for the bidders to consider.

- Maintain OVERWEIGHT: The positive progress made by Bandar Malaysia would certainly provide a slight kick to Malaysia's property market, where sentiment remains largely muted in the near term amid a slowdown in transaction volumes. We continue to favour select developers that possess either township landbanks with immediate development potential and connectivity and/or strategic transport-oriented developments that offer best leverage ahead of the next property upcycle. From the ground up, our top picks are Mah Sing, MRCB, Titijaya Land and E&O Properties.

Source: AmeSecurities Research - 3 Sep 2015