Executive Summary

We recently organised a 2-day trip to Penang to gain a deeper understanding of the dynamic property market in Penang. We met up with Penang Development Corporation (PDC) to gain insights into PDC's significant role in driving Penang's growth, specifically its focus on strategic industrial and mixed development initiatives and the planning and development of Bandar Cassia. Separately, we visited project sites across both the mainland and the island of Penang, including Eco Horizon by ECOWLD (Not Rated), Utropolis Batu Kawan by PARAMON (Buy, TP: RM1.17), Sunway Medical Centre and Sunway Carnival Mall by SUNWAY (Buy, TP: RM2.40) & SUNREIT (Buy, TP: RM1.75), as well as notable projects on Penang Island, including Andaman Island, by E&O (Not Rated), The Light City by IJM (Sell, TP: RM1.85), and Queensbay Mall by CLMT (Buy, TP: RM0.63). We also discussed with developers to gather their perspectives on the extensive Penang Transport Master Plan (PTMP).

Contractors

Given the mounting traffic congestion due to urbanisation and the influx of foreign investment, we believe that a well-planned holistic transport master plan should be implemented in the immediate future. Therefore, given the sheer size of the master plan, we are firmly convinced that PTMP will serve as a solid rerating catalyst for the construction sector. GAMUDA (Buy, TP: RM5.19) is undoubtedly one of the primary beneficiaries of the PTMP, given that the group has a sizeable exposure in Penang via SRS Consortium Sdn Bhd. Meanwhile, we also like KERJAYA (Buy, TP: RM1.57) due to its strong track record in Penang's building sector and preferred contractor status for reclamation, infrastructure, and building projects on Andaman Island. KERJAYA is well-positioned to benefit from growth in both Andaman Island and Bandar Cassia, thanks to its established relationships with E&O and Aspen Group, respectively. Other listed construction players that could potentially benefit from the PTMP include IJM, WCT (Buy, TP: RM0.57), and SUNCON (Sell, TP: RM1.73), which have strong expertise in railway-related jobs as well as civil works for township development. Maintain Overweight

Developers & MREITs

We anticipate that the PTMP will serve as a long-term catalyst, enhancing land value, stimulating economic activity, and driving housing demand in Penang. Consequently, property developers holding landbank in Penang Island stand to gain long term from the enhanced road and public transport connectivity under the PTMP. Potential beneficiaries of the Bayan Lepas LRT project include E&O, IDEAL (Not Rated), IJM, IVORY (Not Rated) and MAHSING (Buy, TP: RM0.95). To a lesser extent, ECOWLD, PARAMON, TAMBUN (Not Rated), and SPSETIA (Buy, TP: RM1.05), which have landbank in mainland Penang, could also reap benefits from the improved road and rail network. We are optimistic about Penang's residential property market, driven by the robust recovery of the medical and tourism sectors on Penang Island post-pandemic, coupled with the thriving industrial sector on both Penang Island and the mainland. We maintain our Overweight stance on both the Property and MREITs sector.

Source: TA Research - 31 Oct 2023