-  The Star reported that Johor is set to become a data centre hub on news that Microsoft Corp is looking to invest between RM5bil and RM6bil to set up its data centre in Sedenak, Kulaijaya. This follows comments by Johor state trade executive councillor Datuk Tee Siew Keong which indicated that Johor is set to receive a sizable investment of c.RM5bil, although the name of the company was not revealed.

-  The Star report added that Multimedia Development Corp (MDC) had aggressively courted Microsoft to set up base in Cyberjaya. However, it is believed that Microsoft's preference for Johor stems from its proximity to Singapore and ongoing progress within the Iskandar Malaysia region.

-  We understand that news of Microsoft's purported interest in Iskandar Malaysia has been circulating for the past few months. From our channel checks, Microsoft appears to be embarking on an ambitious drive to expand its data centers globally as it transforms itself into a cloud-services centric entity. To-date, the US IT giant has spent over US$15bil in building up its data centre infrastructure.

-  If this news is true, it would be a welcome respite for Johor’s property market that has been facing some short-term headwinds arising from policy uncertainties and a sizeable incoming supply of properties – particularly with the recent entry of Chinese developers. To be sure, Iskandar Malaysia has been earmarked as a second hub for data centre in Malaysia under the government’s Entry Point Project 3 of the Economic Transformation Program.

-  Specifically, this development could be boost land values for IOI Properties’ Bandar Putra Kulai, located within the Senai-Skudai zone under Flagship E of Iskandar Malaysia. Other developers with landbank within the vicinity include the Genting group’s Asiatic Indahpura (home to the proposed 150-acre Bandar MSC Cyberport Kulai), UM Land and Lee Rubber.

-  The drive for investments in the services sector and high-income based workers is pivotal for Iskandar Malaysia’s next phase of growth, and underpins demand for its properties. That said, we believe any positive impact will not be immediate in the near-term as the market will likely need to digest the sizeable incoming supply pipeline – particularly within the high-rise space in the JB city/Danga bay area.

-  On the flipside, we believe developers offering affordable homes (Mah Sing and IOI Properties) and providers of industrial properties (e.g. Crescendo) are better in weathering any near-term bumps in Johor, as demand for this segment is more driven by own-usage rather than for investments. We likewise believe that Sunway’s upcoming launches in Iskandar Malaysia – notably its landed homes – will likely do well due to the shortage of landed products within Medini Iskandar, which is still exempted from any property restrictions. Similarly, phase 1 of E&O’s Avira (garden terraces) had achieved a take-up rate of c.80% since its soft launch early this year.

Source: AmeSecurities