• Still OVERWEIGHT; UEM Sunrise and Sunway are key plays on Johor theme. Our recent visit to Johor reinforces our optimism on the Iskandar Malaysia property market. Projects close to the Rapid Transit System (RTS) should continue to see strong demand, and the SGD-driven consumer spending power is expected to have a positive spillover effect on the retail, hospitality and real estate players further out from the city centre, over time.

• Promising signs. Based on our conversations with locals there, we learned that the number of visitors from Singapore rose significantly, especially after the post-pandemic re-opening of the Singapore-Malaysia border in Apr 2022. Besides grocery shopping, areas of major spending include F&B, wellness & beauty and car maintenance. Interestingly, property agents are receiving an increasing number of queries from potential Singapore buyers. We also learned that monthly rental rates for certain condominiums in the city centre started rising to MYR5k per unit from MYR2.5k, when borders reopened – to levels on par with rental rates in Kuala Lumpur’s city centre. A few Airbnb operators have also indicated that occupancy rates for the units under management have risen to 70-80% on average, YTD.

• W City @ JGCC to be launched in 4Q. The first phase of W City @ JGCC project, just a 10-minute drive away (7km) from the RTS station at Bukit Chagar, will make its debut in 1-2 months. With an ASP of MYR900psf (before discount), the project developer has obtained government approval to sell units priced above MYR400k to foreigners. We think it will be able to garner strong interest from local and international buyers – given its concept, layout and, more importantly, short distance to the RTS.

• Higher ASP for the next residential tower in Coronation Square. The second residential block in Coronation Square, which is the project closest to the RTS station with a 300m skybridge, will be launched soon. The first block is already 80% booked, with 60% of the sale & purchase agreements signed. Compared with an ASP of MYR1.2k psf for the first tower, the second tower will likely be priced at MYR1.3k-1.35k psf. As for the residential component to be developed by MTR Corp, the ASP is expected to be around MYR1.8k psf upon the launch of the project – as it will be integrated with the RTS terminal and the customs, immigration and quarantine or CIQ complex.

• Further catalytic developments may be focused on the MalaysiaSingapore Second Link area. During our meeting, Johor State Executive Council member for investment, trade, and consumer affairs Lee Ting Han indicated that the Johor-Singapore special economic zone may involve a few specific sectors, and the finalisation of the terms of reference during the upcoming meeting at the end of this month by the two countries’ leaders should facilitate further talks on collaboration. Lee believes that Johor is a beneficiary of the US-China trade war, as he has been receiving strong interest from MNCs since the borders re-opened. The fast-lane service has eased the entry of corporations in the digital economy, pharmaceuticals, E&E, EMS, chemicals & petrochemicals, and aerospace sectors.

Source: RHB Securities Research - 9 Oct 2023