IKEA is opening  its second outlet in Malaysia in  Batu Kawan, Penang. The  news reaffirms  our positive stance on the Penang mainland market since 2H13. The spillover will be significant, coupled with the industrial park, education institutions and premier outlet developments in place. Being  the  key  landbank  owners,  Tambun  Indah  (TILB),  Malton  and Global Oriental (GOB) are the main beneficiaries.

• IKEA  setting foot in  Batu Kawan. Last Friday, it was reported that the Swedish furniture maker  –  IKEA will open  a  second  store  in the country in  Batu  Kawan,  Penang,  after  setting  up  its  first  store  in  Mutiara Damansara, Kuala Lumpur.
• Significant  spillover to Batu Kawan/Seberang Perai properties.  This is  a  strong  re-rating  catalyst  to  the  real  estate  in  Batu  Kawan  and Seberang Perai Selatan. Based on  historical experience, the opening of IKANO/IKEA outlet in 2003 boosted population density, property demand and  real  estate  values  in  the  Taman  Tun/One  Utama/Mutiara Damansara/Desa  Parkcity  enclave.  We  expect  Batu  Kawan  and Seberang Perai area to experience  a  similar trend in the coming years, given  the  enhanced  road  infrastructure,  a  pickup  in  industrial  and commercial  activities,  and  the  establishment  of  more  education institutions (GEMS International School in Pearl City and KDU campus in Batu Kawan) in the area. Once IKEA and the premier shopping outlet by PE Land and CBRE start their operations in 2017/18, Batu Kawan will be able  to  pull  in  a  bigger  crowd  given  its  local  population  catchment  of 5.47m  (1.95m  from  Kedah,  1.56m  from  Penang  and  1.96m  from Northern/Central  Perak),  in  addition  to  the  flow  of  foreign tourists/shoppers from Medan, Indonesia and Southern Thailand.
• TILB,  Malton  and  GOB  the  winners.  Major  landbank  owners  in  Batu Kawan and Seberang Perai Selatan  such as TILB  (TILB MK, BUY, FV: MYR2.08)  –  600 acres, Malton  (MALT MK, NR)  –  300 acres,  and GOB (GOB  MK,  NR)  –  350  acres  are  key  beneficiaries.  Other  bigger developers  such  as  Ecoworld,  IJM  Land  (IJMLD  MK,  BUY,  FV: MYR3.70)  and  Mah  Sing  (MSGB  MK,  NEUTRAL,  FV:  MYR2.44)  have also  accumulated  some  small  parcels  there,  and  we  believe  they  will acquire more going forward.
• Exciting  for  Penang.  Since  2H2013,  we  have  consistently  advised investors to watch out for Penang’s  property space and this first  major news  of the year has reaffirmed our view.  Pending further details  of the deal, we do not discount the possibility of further upgrading our FV  forTILB as the deal is a long-term positive for the Penang mainland.

The IKEA deal.  Last Friday, the Penang state government held a press conference to announce a sizeable investment made jointly by Aspen Vision Land SB and Ikano Pte  Ltd.  Aspen  Vision  Land  SB  is  a  51%  subsidiary  of  Aspen  Group  and  49% associate  company  of  Ivory  Properties  Group  (IVORY  MK,  NR),  while  Ikano  owns and  operates  IKEA  franchises  in  Malaysia,  Singapore  and  Thailand.  The  plans include:

• 30 acres for the development of IKEA Store and Phase 1 of the shopping mall
• 45 acres for the development of Phase 2 of the shopping mall; and
• 170 acres for mixed development purposes (remaining parcels)

The total land cost for the 245-acre project is MYR484m, and payment is to be made within 60 months from the date of agreement. A MYR5m non-refundable deposit has already  been  paid  to  Penang  Development  Corp  (PDC).  According  to  the  state government,  the  entire  commercial  and  mixed  developments  are  expected  to  be completed within 10 years, and IKEA should start its operations in 5-6 years’ time, depending on various surrounding, economic and demand factors.

Source: RHB