This article first appeared in The Edge Malaysia Weekly on November 4, 2024 - November 10, 2024

STEEL manufacturer Ann Joo Resources Bhd (KL:ANNJOO) is seeking a buyer for its prime land in Seberang Perai, Penang. It is understood that the 100-acre plot is part of its 200-acre Prai industrial land. If the freehold tract sells as high as RM800 million or RM180 psf as estimated by industry experts, it would set a new record for industrial land transactions in the state.

According to a source familiar with the area, the cost of industrial land prices within selected notable industrial parks in Penang is on an upward trend. The current highest industrial land price was in Penang Development Corp’s (PDC) Batu Kawan Industrial Park 3 (BKIP3) at RM105 psf.

When contacted by The Edge, Knight Frank Real Estate confirmed that the firm has been appointed exclusively to conduct an expression of interest for the prime land.

“The site, equipped with ready infrastructure, sits on a mature industrial area of Prai Industrial Estate, which houses a wide range of manufacturers from electronics, automotive, industrial equipment and solutions, and energy and power. Prominent multinational corporations there include Panasonic Automotive, Canon, Toshiba, Continental, Honeywell, Jinko Solar and Mattel, to name a few, are within close proximity to Prai Industrial Estate,” Knight Frank executive director and head of Knight Frank Penang Mark Saw tells The Edge. Ann Joo’s land is just four minutes’ drive from Penang port.

On the market outlook of the state, Knight Frank’s head of land and industrial solutions Allan Sim said: “Penang has always been on the radar of industrialists due to its rich industrial legacy since 50 years ago. Also dubbed the ‘Silicon Valley of the East’, Penang contributes to over 5% of global semiconductor sales and houses three of the global top 10 semiconductor leaders. The state also houses six of the global top 30 medical device companies and has the highest concentration of medical technology companies in Malaysia and Southeast Asia.”

According to Invest Penang’s website, the six companies are Abbott from the US, B Braun from Germany, Boston Scientific from the US, Smith & Nephew from the UK, as well as Canon and Hoya from Japan.

Major industrial park development within Penang is spearheaded by PDC, whose industrial parks include Bayan Lepas Industrial Park, Prai Industrial Park, Batu Kawan Industrial Park, Penang Science Park and Bukit Minyak Industrial Park.

With the growing interest in industrial land in Penang, according to news reports, PDC has started the development of three new industrial parks in 2022: Bandar Cassia Technology Park, BKIP3 and Penang Science Park South. With a total investment cost of RM3.2 billion including infrastructure developments, the expected completion is 2031.

Under the Penang Transport Master Plan (PTMP), the upcoming LRT station will link Butterworth (Penang Sentral) to Penang Island (Macallum). Targeted for completion in 2030, it will enhance communal transportation accessibility from the island to the site on the mainland.

The Penang Bay project, first introduced in March 2021, aims to prepare Penang for the next phase of growth and development by integrating innovative ideas to transform Penang’s bay area into a sustainable development goal (SDG)-compliant economic zone. The Penang Bay project, which includes George Town and Butterworth waterfronts, aims to regenerate and reuse what Penang has due to land constraints.

According to a local source familiar with the local planning, the Penang Bay master plan is currently being drafted and is expected to be finalised soon. The sites that fall within the master plan will be rezoned to economic zones.

Meanwhile, Penang Chief Minister Chow Kon Yeow shared earlier this year that the state recorded the highest foreign direct investment inflows in Malaysia at a total of RM71.9 billion in 2023, contributing RM61.7 billion or 85.8% of the state’s manufacturing investment inflows for the same period. FDI numbers for 2024 are believed to possibly surpass last year’s record, with investments coming from companies including MKS Instruments Inc, Plexus Corp and Enovix Corp from the US, Elite Material Co Ltd, Advantech and Siliconware Precision Industries Co Ltd from Taiwan, and Singapore’s Equalbase in Penang this year.

Other significant ongoing projects in the state include Gamuda Bhd’s (KL:GAMUDA) Silicon Island, which, according to news reports recently, is currently on track.

Announced in the middle of last year, works for Phase 1 involve about 1,260 acres of the total 2,300 acres to be reclaimed for Island A. Silicon Island Development Sdn Bhd, a joint venture between Gamuda and the Penang government on a 70:30 basis, had estimated a cost of RM3.72 billion for reclamation works with the completion expected by 2032.

Ann Joo started as a scrap metal dealer and today it primarily engages in the manufacturing and trading of steel and related products. Its share price has been on a steady decline recently due to challenges such as the ongoing downturn in China’s property market and weaker manufacturing activities slowing demand for steel and average selling prices. Ann Joo’s share price closed at 84 sen last Tuesday, giving it a market capitalisation of RM604 million.

In an Aug 30 note, CIMB Securities expects the company’s earnings for the financial year ending Dec 31, 2025 (FY2025) to improve, with projects including an expansion in downstream value-added offerings, the commercialisation of its Perfect Channel’s wire operations and initial contributions from the East Coast Rail Link electrification contract.

The group’s 1HFY2024 core loss increased to RM50 million from RM3 million a year earlier despite a small dip of 2% year on year in the top line due to weaker sales and lower steel prices. However, CIMB Securities firmly believes that Ann Joo could turn the corner in 4Q2024 as it starts benefiting from lower coke prices following expiry of the long-term supply agreement for this heating fuel. 

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