KUALA LUMPUR: Sunway Bhd's venture into the industrial segment continues to build momentum via its collaboration with Penang Development Corp (PDC) to develop Batu Kawan industrial Park 2 (BKIP 2), which carries a gross development value of at least RM3.5bil.
Sunway announced that its 70%-owned subsidiary Umech Land has entered into a joint development agreement with PDC to develop 558.96 acres of leasehold land into BKIP 2.
Under the agreement, the JV should also undertake all requisite infrastructure, public utilities and amenities.
In return, PDC shall be entitled to a land entitlement of MYR646m payable on a deferred payment scheme over a period of four years.
Analysts are positive over the development given its proximity to the adjacent Batu Kawan Industrial Park 1 (BKIP 1), which began operations in 2011 and has developed into a fast-growing electrical and electronics semiconductor and life sciences instruments hub.
"The adjacency of Sunway’s BKIP 2 industrial park to BKIP 1 should allow Sunway to capitalize on the success of the latter as existing
companies in BKIP 1 look to expand their facilities; and BKIP 2 should also attract new investments that wish to capitalize on the well-developed E&E ecosystem and supply chain in BKIP 1," said Hong Leong Investment Bank (HLIB) Research in a note.
The research firm also expects the PDC to continue heavily promoting BKIP, which should support demand for BKIP 2.
HLIB said the land cost-to-GDV of 18.5% is fair given the well-developed infrastructure and supply chain around the area.
Additionally, as the land is already an industrial land, there is no need for Sunway to convert the land, allowing the group to launch its project within a short time in early-2025, it said.
HLIB maintained its forecasts, and "buy" call on the company with a target price of RM2.76
RHB Research said in its own analysis it expects demand for BKIP 2 to be encouraging as upstream and downstream semiconductor and light manufacturing industries would typically operate in a cluster.
"Given its balance sheet, track record in construction, concrete and quarry business, Sunway is solid enough to undertake this industrial development with the Penang State Government," it said.
RHB maintained its earnings forecasts with earnings impact expected to be felt only from FY26.
It reiterated its "buy" call and raised its target price sightly to RM2.67 as it imputed the incremental value from BKIP 2.