Johor property demand boosted by JS-SEZ. On 7 Jan 2025, the impending JS-SEZ was formalised with the signing of a joint agreement between Malaysia and Singapore. Following this, MoF also announced packages of tax incentives for both workers and investee companies. We think this bilateral cooperation between two countries is poised to catalyse a surge in foreign direct investment, drive relocation of Singapore- based firms to Johor (mitigate expansion cost in Singapore), and boost cross-border travel fueled by enhanced connectivity through the RTS. In our view, these developments are likely to create a positive spillover, propelling the real estate demand in Johor (both residential and industrial).
Prime beneficiary of JS-SEZ rollout. We view UEM Sunrise (UEMS) as a key beneficiary of the JS-SEZ initiative, given its substantial 7,985-acre landbank in Johor, with 94% (7,470 acres) strategically located within Iskandar Malaysia (IM). This represents significant land monetisation opportunity for UEMS, driven by the surge in land transactions in Johor, particularly for data centre developments and heightened property demand. Additionally, UEMS's outlook is further enhanced by its robust pipeline of property launches in IM (RM929m GDV) and the upcoming masterplan approval for its 2,334-acre development in Gerbang Nusajaya by mid-2025 (RM45bn GDV including the zoning of 1,136 acres to industrial land).
Valuation could re-rate. UEMS currently trades at a significant 50% discount to RNAV, which we believe there is room for a re-rating. This is underpinned by the robust outlook from the JS-SEZ initiative, an upward-revised FY24 sales target of RM1.2bn (RM929m sales achieved in 9MFY24), and strong unbilled sales of RM2.9bn (representing 2.2x of its revenue).
Uptrend likely to continue. The stock demonstrates a continued uptrend following a significant correction after reaching its 52-week high in early May. A swift recovery, aligned with renewed buying interest, has driven the stock into an upward trajectory, leading to a breakout from the triangle pattern. With these bullish technical signals, the stock is poised to test key resistance levels at RM1.14 first and subsequently at RM1.21. The recommended entry zone is at RM1.07 to RM1.08. Stop loss: RM0.970.
Source: Mercury Securities Research - 13 Jan 2025
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