A positive move to lift the future of Johor

While no further details are revealed on the Johor-Singapore Special Economic Zone (JSSEZ), the MOU signed yesterday reaffirms the joint commitment between Malaysia and Singapore to strengthen economic cooperation. We remain positive on the JSSEZ, which will create more job opportunities and commercial activities in the Iskandar M’sia region and eventually, drive demand for properties. That said, the positives have been priced in and we advocate investors to consider Penang, for an exposure in the upcoming Bayan Lepas LRT. Our BUYs are SPSB, TILB.

Strengthens collaboration between M’sia and S’pore

Malaysia and Singapore have signed a MOU to work on a JSSEZ to strengthen economic connectivity between Johor and S’pore. No further details on the JSSEZ was announced but we understand that the JSSEZ will target sectors related to electronics, financial services, business-related services and healthcare. Both countries will work towards a full-fledged agreement and provide an update at the 11th M’sia-S’pore Leaders’ Retreat, probably in 2H24. Elsewhere, Malaysia and Singapore will also work on several initiatives that build towards the JSSEZ (see figure 1).

Exact location of JSSEZ remains unknown

Location of the JSSEZ remains unknown. While we suspect the JSSEZ could be located at Sedenak and/or Iskandar Puteri areas (see our report dated 4 Jan 2024), there is a possibility that the JSSEZ could involve the whole Iskandar Malaysia (IM) region that spans 4,749km2 covering Johor Bahru, Kulai, Iskandar Puteri, Pasir Gudang and part of Pontian, benefiting all the land owners in these regions and leveling the playing field for all land owners. Apart from developers, plantation estate owners such as SDPL MK, KLK MK and GENP MK which are sitting on cheap landbank at these areas, are set to benefit from rising land prices over the longer term.

While the South is shining, do not forget the North

We are positive on the JSSEZ, which is expected to create more job opportunities through investments from/via Singapore. This will help drive demand for both residential and commercial properties, with the higher population requiring housing. Having said that, we believe the positives have been priced in, and share prices of property stocks with landbank in Johor have run ahead of theirs fundamentals. As such, we advocate for investors to take some profit and consider switching to stocks with landbank in Penang for an exposure to the upcoming Bayan Lepas LRT project, where its alignment is expected to be finalized by 1H24. Potential beneficiaries are EAST MK, MRC MK, SPSB MK, IJM MK.

Source: Maybank Research - 24 Jan 2024