DAP was formed in 1966 by the remnants of the Malaysian branch of the PAP. Its ideology is similar to LKY's call for a "Malaysian Malaysia". However, it is widely known that Lim Kit Siang, DAP's adviser and founder, does not like PAP or LKY very much due to its dictatorial tendencies. Lim is fiercely patriotic too, so it's unlikely that DAP will even think of seceding Penang from Malaysia.
The Chinese community make up more than 70% of the population on Penang Island (if you include the mainland, it will only be 55%), so demographically speaking, Penang shouldn't have any problems forming a union with Singapore like a sort of Confederation. After all, Singapore, Malacca and Penang were ruled together as a separate administrative unit - The Straits Settlement apart from the rest of the Malay states for over 100 years under British colonial rule.
I wonder what LKY is thinking now. Does it ever occur to him the possibilty of forming a union with Penang if the racial tension there got worse ? I am sure the Penang Chinese will choose to be first class Singapore citizens than 2nd class Malaysian "squatters".
does anyone knows that when Singapore joined/merged with Malaysia,LKY was one of the founder/member of DAP - the present party that control Penang ?
after Singapre split from Malaysia,then PAP is founded.
Democratic Action Party
People Action Party
so merging with Penang and JB,should not be a problem as there are a lot of Chinese in these two states. And a lot of Singapore has relatives in these two states also especially those that married Malaysian,Malaysian who married an Singaporean and those who become Singapore PR and Citizen.