Photo by Low Yen Yeing/The Edge

KUALA LUMPUR (Sept 12): Maybank Investment Bank (Maybank IB) advised investors to refocus on property stocks with solid fundamentals and proven execution capabilities amid enthusiasm around the Johor-Singapore Special Economic Zone (JS-SEZ).

The much-anticipated JS-SEZ, while still a key theme of Malaysia's property sector, has seen delays in policy details, pushing timelines back to November 2024.

The research house advised investors to adopt a selective approach to this theme, citing the importance of picking companies with a strong track record.

"Hence, we advise investors to refocus from potential news flow-driven developments to companies with solid fundamentals, proven execution track record, and which can unlock land value/synergies through land sale/corporate exercises," it said in a note on Thursday.

Besides, Maybank IB’s analysis of second-quarter earnings revealed a mixed performance among Malaysia's top property developers.

It also noted that recent quarterly earnings included significant one-off gains from land disposals.

Although corporate exercises and thematic drivers, such as data centre investments and the Kuala Lumpur-Singapore High-Speed Rail project, are likely to sustain interest in certain stocks, the bank is stressing the need to focus on companies that can deliver long-term value through strategic land sales and portfolio optimisation.

For the quarter, 71% of developers covered by Maybank IB have reported their results.

While companies like Sunway Bhd (KL:SUNWAY) and Tambun Indah Land Bhd (KL:TAMBUN) met expectations, others like S P Setia Bhd (KL:SPSETIA) and UEM Sunrise Bhd (KL:UEMS) struggled due to project losses and weak high-rise sales in the Klang Valley.

Although the JS-SEZ is seen as a growth driver for developers with exposure in Johor, Maybank IB cautioned that the zone’s expanded coverage could dilute its positive impact.

The JS-SEZ, which is designated to attract investment and free up the movement of goods and people between the two countries, was formally unveiled in October last year, during Prime Minister Datuk Seri Anwar Ibrahim’s visit to Singapore for the 10th leaders’ retreat.

The project is expected to encompass Iskandar Malaysia and Pengerang, covering 3,505 sq km in southern Johor — an area more than four times the size of Singapore.

Maybank IB maintained its ‘positive’ outlook on the property sector, and ‘buy’ calls on Eco World Development Group Bhd (KL:ECOWLD), S P Setia and Sunway.

The house also warned of downside risks, such as weaker-than-expected property sales due to economic headwinds, policy uncertainties, stricter lending measures, and rising construction costs.

Investors are advised to approach the market with caution, focusing on stocks with the potential to enhance shareholder value through fundamentals rather than riding the wave of speculative trends.

At the time of writing on Thursday, Sunway Bhd’s share price was up two sen or 0.51% at RM3.94, with a market capitalisation of RM22.47 billion, while Tambun Indah rose 1.5 sen or 1.69% to 90 sen, with a market cap of RM395.46 million.

Meanwhile, S P Setia was up two sen or 1.80% at RM1.13, with a market value of RM5.49 billion, and UEM Sunrise rose 1.5 sen or 1.79% to 86 sen, with a market cap of RM4.32 billion.