Property a big winner: Potential Malaysia beneficiaries from Johor-Singapore SEZ

WHILE there are probable Singapore winners arising from the Johor-Singapore Special Economic Zone (JS-SEZ), analysts believe that there are even more Malaysian beneficiaries.

“Stock beneficiaries are largely on the Malaysia side. Most of the nine zones focus on manufacturing and logistics, with some energy and other service sectors identified,” said Macquarie in a note.

The SEZ comprises nine zones in the state of Johor that will enjoy tax incentives under the agreement. Both countries have set a target of 50 projects in five years and 100 projects in 10 years; the goal is to drive investments in 11 key sectors.

Lucas Tan, research analyst at CGS International Securities Malaysia, told The Business Times: “Based on what has been revealed about the JS-SEZ so far, it looks like Malaysia stocks will benefit more than Singapore stocks.” 

Property names in Malaysia are set to be a big winner, followed by data centres and power players, said analysts.

“We continue to believe the JS-SEZ is poised to generate significant spillover effects, driving long-term property sales growth in Johor and boosting Malaysian developers’ earnings,” said Tan, adding that the main beneficiaries will be developers with land banks in Johor.

He said that the increased connectivity offered by key infrastructure projects such as the Johor Bahru–Singapore Rapid Transit System, the Johor Automated Rapid Transit and Light Rail Transit, and the Gemas-Johor Bahru Electrified Double Track Rail are set to further support property demand.

Maybank analyst Lim Sue Lin, in a report on Wednesday (Jan 8), added: “The most direct beneficiary of the JS-SEZ efforts remains the property sector, though we believe positives have largely been priced in.”

Overall, she said that the SEZ is primed to drive construction, industrial property, data centres and tech sectors in Malaysia. Secondary beneficiaries will include residential, retail and office properties, as well as consumer sectors, she added.

But ultimately it’s a “win-win” for both Malaysia and Singapore, said Maybank analyst Wong Wei Sum in a report.

“Malaysia offers cheaper real estate and labour for Singapore companies expanding into the JS-SEZ, while Singapore can facilitate investments, driving job creation in the zone,” she wrote.

“This is expected to boost long-term property demand for residential, commercial and industrial properties, due to population growth and rising wealth effects,” she added.

Top picks

These are the main Malaysia stocks set to benefit, said analysts from CGS, Maybank and Macquarie.

CGS: Its top pick is Eco World Development Group, as the bulk of its 494.9-hectare (ha) land bank (as at October 2024) is within the SEZ, said Tan.

“The group’s Quantum Edge project in Kulai, Johor, has been gaining traction, as shown by its recent land sales to data-centre operators. Its property sales in the southern region have also grown rapidly, with a three-year CAGR (compound annual growth rate) of 28 per cent over FY2021 to 2024,” he said.

Other property developers with land banks in Johor include Sime Darby Property, Mah Sing Group, SP Setia and UEM Sunrise, he added.

Maybank: The bank’s top property stock picks are Eco World Development Group and SP Setia.

Wong also flagged UEM Sunrise, which she noted is a major landowner with a “strategic and sizeable” land bank in Iskandar Puteri. It stands a “good chance” of securing some of the targeted 50 projects, she said.

“Iskandar Puteri (is) a prime location near Singapore, supported by strong infrastructure and a growing population, particularly among those commuting to Singapore,” she said.

But she added: “While the JS-SEZ theme offers a compelling tailwind for UEM Sunrise, much of the positives may already have been priced in, and investors could look to monetise expectations that have been building since July 2023.”

UEM Sunrise, one of the major landowners in Iskandar Malaysia, holds a strategic and sizeable land bank totalling 1,935.6 ha with a gross development value of RM61 billion (S$18.5 billion), including joint ventures, in Iskandar Puteri – a prime location near Singapore, supported by strong infrastructure and a growing population, particularly among those commuting to Singapore.

The JS-SEZ theme provides a compelling tailwind for UEM Sunrise. 

In the tech and power space, Maybank also likes ITMax System and YTL Power, respectively.

Macquarie: It named NationGate for a play on the artificial intelligence and data centre theme, YTL Power for data centres and water concession, and Tenaga Nasional for power and transmission.