The Star: Saturday July 28, 2007


PETALING JAYA: Penang's property market is set to sizzle under the soon-to-be-launched Northern Corridor Economic Region (NCER) Master Plan, according to a Deutsche Bank Co Research report released on Wednesday.

The state is expected to enjoy higher allocations from the Ninth Malaysia Plan, strong foreign direct investments, spillover from the NCER's structural growth and investment as well as further liberalisation to drive the undervalued property market.

The report has  a “buy” call on property-based companies such as E&O Property Development Bhd (E&O Prop), Mah Sing Group Bhd and SP Setia Bhd, which are expected to benefit strongly from this development.

It gave a 12-month target of RM5 on E&O Prop, which is developing Seri Tanjung Pinang (STP), the largest integrated seafront development in Penang.

The note said STP, which was launched in 2005, had lifted Penang's property prices to new highs.

“E&O Prop has sold roughly RM300mil worth of properties under STP. Phase 2, to be launched after 2010, will offer among others international standard luxury condominiums and hotels on a cluster of man-made islands across 740 acres,” it said

The note said E&O Prop's proposal to acquire 24% stake in Bridgecrest Resources Sdn Bhd for RM25mil cash would allow it to increase its interest in STP phase 1 to 94% from 70% and phases 2 and 3 to 78% from 66%.

It said the acquisition was expected to enhance E&O Prop's earnings for the financial year ending March 31, 2009 (FY09) by RM12mil to RM26mil.

The report added that Penang would remain the key contributor to E&O Prop's earnings, accounting for about 60% to 70% of its revenue and earnings before interest and income tax for FY09.

SP Setia was among the first few Klang Valley-based developers to venture into Penang. The group has three property projects in Penang – Setia Pearl Island, Setia Vista and Setia Duta View – with a combined gross development value (GDV) of about RM1.1bil.

“Its maiden project Setia Pearl Island is believed to have chalked up sales/bookings of RM218mil since its official launch in March,” the report said.

Following the strong response to Setia Pearl Island and rising property prices, the company has put on hold its Setia Vista project, which has an estimated GDV of RM150mil.

“Based on the three projects, we forecast Penang to account for about 9% to 10% of SP Setia’s  operating profit for the year ending Oct 31, 2009,” it said, adding that the company could undertake more projects on the island given its solid balance sheet.

A newcomer to the Penang property scene, Mah Sing recently announced its foray via the proposed acquisition of 87 acres freehold land in Batu Maung for its Southbay Penang mixed development project.

The report said the project, to be developed over five to seven years, had an estimated GDV of RM1.28bil.

“Given the size of the development, Southbay Penang will play a significant part in Mah Sing’s future earnings performance,” it said.

The project is expected to account for about 29% of Mah Sing’s remaining effective GDV.