• Maintain OVERWEIGHT. We are upbeat on the outcome of the recent meeting between Malaysia and Singapore. Both governments have committed to accelerate the progress of the Johor-Singapore Special Economic Zone (SEZ), with further updates/details regarding tax incentives and cross-border electricity trading expected to be announced in the coming months. The leaders strongly emphasised the aim to smoother trips for people and transportation of goods. Companies that can potentially benefit significantly include UEM Sunrise, Sunway and AME Elite Consortium.

• Strong commitment to accelerate the progress of SEZ. Malaysian Prime Minister Datuk Seri Anwar Ibrahim and Singapore Prime Minister Lee Hsien Loong had a high-level discussion during the two-day 10th SingaporeMalaysia Leaders’ Retreat. According to media reports, although the exact location of the SEZ has not been announced, the key highlights include: i) the SEZ should lead to better and easier arrangements for people who have to work on both sides of the causeway, and ii) potential special tax arrangements to ensure smoother flow of goods between the two sides under the SEZ. Lee highlighted that the incentives should enhance the investor ecosystem in Singapore and Iskandar Malaysia, which means companies can have a presence on both sides and achieve greater operational flexibility (compared to if they only operate either in Singapore or Johor).

• Potential industries that may benefit. Lee mentioned that both countries are pursuing cross-border electricity trading. Note that Singapore intends to import 30% of its electricity supply from low-carbon sources by 2035, while Malaysia has recently lifted a ban on renewable energy exports. Apart from the renewable energy sector, other industries (which can benefit from the ease of movement of goods between the two countries) that have been highlighted by the Johor Chief Minister Onn Hafiz Ghazi earlier include the electronics, pharmaceutical, automotive, and agriculture sectors.

• MoU to be signed on 11 Jan 2024. Both governments have announced that an MoU on the SEZ is expected to be signed on 11 Jan 2024, as officials on both sides are currently conducting a feasibility study on the SEZ to determine interest from investors and market demand. We believe developers with landbank near the border (causeway and the Tuas link) should benefit given the focus on “ease of travelling of goods and people”. The greater connectivity and industrial activities should lead to higher demand for residential and commercial properties in the future.

• Perhaps further update on UEM Group’s hybrid solar PV power plant soon? Given both countries’ interest on cross-border electricity trading, we expect further news flow on UEM Group’s development of its large scale 1GW hybrid solar photovoltaic power plant to be coming up soon. This solar energy plant will be integrated with a renewable energy industrial park.

Source: RHB Securities Research - 31 Oct 2023