PETALING JAYA: The Johor theme has been playing out on some Bursa Malaysia-listed stocks for some time now, leading a few to think that some of these counters have run ahead of themselves.
The Johor theme is premised on the special economic zone for which Malaysia and Singapore inked a memorandum of understanding last week.
The potential of rising land values and new developments is certainly there. The question is, how long will it take before the Johor-Singapore Special Economic Zone (JS-SEZ) comes into fruition. The devil will be in the details on how these two governments finalise the agreements, slated for the later part of the year.
Shenzen, China’s model, is being envisaged in which massive production centres will move into Johor. There are hundreds of economic zones across the globe, many of which function well and create increased business activity.
The location of the JS-SEZ remains unknown, but Maybank Investment Bank (Maybank IB) Research reckons it could be located at the Sedenak and/or Iskandar Puteri areas, and possibly involve the whole Iskandar Malaysia region spanning some 4,749 sq kms – covering Johor Baru, Kulai, Iskandar Puteri, Pasir Gudang and part of Pontian.
“We remain positive on the JS-SEZ, which will create more job opportunities and commercial activities in the Iskandar Malaysia region and eventually, drive demand for properties.
“Apart from (property) developers, plantation estate owners such as Sime Darby Plantation Bhd
, Kuala Lumpur Kepong Bhd and Genting Plantations Bhd, which are sitting on cheap landbank at these areas, are set to benefit from rising land prices over the longer term,” Maybank IB said in a report.
The project will also complement the ongoing construction of the Rapid Transit System Link (RTS Link) project between Johor Baru and Singapore, by means of facilitating more seamless connectivity and expediting clearance of people at land checkpoints.
However, Maybank IB believes that “the positives have been priced in”.
“Share prices of property stocks with landbank in Johor have run ahead of their fundamentals.
“As such, we advocate for investors to take some profit and consider switching to stocks with landbank in Penang for exposure to the upcoming Bayan Lepas light rail transit (LRT) project, where its alignment is expected to be finalised by the first half of 2024,” it added.
To partly fund the Bayan Lepas LRT, the research firm said that transit-oriented (property) developments may be introduced.
“We think this could receive tremendous response, making it an interesting space to watch,” it added.
While the long-term prospects of the JS-SEZ are bright, former investment banker Ian Yoong said stocks with large exposure to Johor have run ahead of their short-term fundamentals.
“That it will be successful is almost inevitable given its close proximity to Singapore, one of the top five financial capitals of the world. Notwithstanding this, we expect a sharp pullback in stock prices of many of these property companies before resuming their rise,” Yoong told StarBiz.
He said there is more to the JS-SEZ than the property thematic play.
Renewable energy, data centres and construction are other sectors that will benefit.
“A better investment would be residential or industrial property in Johor at this juncture rather than property stocks that have appreciated 200% to 300% in less than a year,” said Yoong.
Currently, UEM Sunrise Bhd has the largest landbank in Johor, mainly in Iskandar Puteri.
Other companies with residential property development projects in the state are Iskandar Waterfront City Bhd, Sunway Bhd, Eco World Development Bhd, S P Setia Bhd, Mah Sing Group Bhd and IOI Properties Group Bhd.
Meanwhile, Johor-based developer Paragon Globe Bhd is bullish about prospects for the state. Its executive chairman Datuk Seri Edwin Tan Pei Seng said that “the JS-SEZ will boost foreign direct investment into Johor from Singapore and other countries”.
Tan said the planned QR code access for movement of personnel from Singapore into Johor without the need for the traditional passport immigration steps would be a game changer.
He added that Paragon Globe, whose ongoing projects include the Pekan Nenas Industrial Park, is mulling building new industrial parks and commercial developments in the state to cater for the expected increase in demand.
Another key player in this space is AME Elite Consortium Bhd, while IOI Properties and Eco World also have their respective industrial/business parks in Johor.
