Malaysia Strategy - JS–SEZ: Next Economic Growth Engine

Date: 
2025-01-08
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
1.65
Price Call: 
BUY
Last Price: 
0.95
Upside/Downside: 
+0.70 (73.68%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
2.65
Price Call: 
BUY
Last Price: 
1.71
Upside/Downside: 
+0.94 (54.97%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
0.84
Price Call: 
BUY
Last Price: 
0.54
Upside/Downside: 
+0.30 (55.56%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
2.00
Price Call: 
BUY
Last Price: 
1.38
Upside/Downside: 
+0.62 (44.93%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
2.10
Price Call: 
BUY
Last Price: 
1.83
Upside/Downside: 
+0.27 (14.75%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
2.00
Price Call: 
BUY
Last Price: 
1.71
Upside/Downside: 
+0.29 (16.96%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
1.45
Price Call: 
BUY
Last Price: 
1.25
Upside/Downside: 
+0.20 (16.00%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
9.30
Price Call: 
BUY
Last Price: 
8.09
Upside/Downside: 
+1.21 (14.96%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
11.40
Price Call: 
BUY
Last Price: 
10.06
Upside/Downside: 
+1.34 (13.32%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
5.55
Price Call: 
BUY
Last Price: 
5.19
Upside/Downside: 
+0.36 (6.94%)
Firm: 
PHILIP CAPITAL
Stock: 
Price Target: 
1.15
Price Call: 
BUY
Last Price: 
1.08
Upside/Downside: 
+0.07 (6.48%)
  • JS–SEZ stands to be the next key economic stimulus for Malaysia
  • Potential sector to benefit include property (N), construction (O/W), industrial (O/W), renewable energy (O/W) and banking (O/W)
  • Our Johor thematic ideas include Gamuda, AME, Lagenda, Critical, HE Group, MN, BM Greentech, Solarvest, Pekat, Maybank and CIMB

JS–SEZ signed. The long-awaited Johor-Singapore Special Economic Zone (JS–SEZ) was officially signed on Monday. The agreement aims to strengthen cross-border trade and investment by leveraging Johor’s competitive cost structure, abundant land, and Singapore’s financial capital and technological expertise. Focused on developing 9 flagship zones across 13 economic sectors, JS–SEZ is set to create a dynamic ecosystem designed to attract significant foreign direct investment (FDI).

Positive on Johor long-term prospects. While specific details are still unfolding, we are positive that JS-SEZ has great potential to unlock significant economic benefits for both countries. By capitalizing on trade diversion, the SEZ is expected to draw more FDIs, bolstered by pro-business policies and incentives. Potential sectors to benefit include property, construction, industrial, renewable energy and banking.

Property. Developers with sizeable landbanks in Johor, including UEM Sunrise, Sunway, EcoWorld, IOI Properties, and Mah Sing, are poised to benefit. AME Elite, specializing in industrial property development, stands to gain from the influx of FDIs. Lagenda, with its growing presence in Johor, is set to take advantage of the region’s growing demand.

Construction. Connectivity is crucial to the success of JS–SEZ, with a strong emphasis on public transport projects like the Johor LRT/ART and major road developments. This will open up opportunities for infrastructure contractors, including Gamuda and SunCon. The rise in business activity is expected to drive increased demand for more industrial facilities.

Industrial. The proliferation of data centre investments in Johor, driven by spillover demand from Singapore, is positioning the region as a key hub for the digital economy. The establishment of the JS-SEZ is expected to sustain the influx of FDIs, with growing demand for industrial facilities spurring the need for utility infrastructure. This trend benefits engineering companies such as Critical Holdings, HE Group, and MN.

Renewable. The renewable energy sector stands to gain from JS-SEZ, as Singapore plans to import 30% of its energy from renewable sources by 2035. Malaysia's decision to lift its export ban and plans to export up to 300MW of renewable energy to Singapore through the Cross-Border Electricity Sales for Renewable Energy Scheme is expected to support this growth further. Malaysia has begun exporting 50MW of green energy issued under RECs in Dec24. The region's growing need for renewable energy is expected to benefit companies like BM Greentech, Solarvest, and Pekat.

End-25 KLCI target of 1,750. Better opportunities in small-mid caps. Our investment strategy favours small-mid cap opportunities that capitalize on key themes such as sustained FDI growth, increasing infrastructure spending, rapid AI adoption, growing emphasis on local green energy, and the expansion of data centre infrastructure. 5 out of 6 themes highlighted in our 2025 outlook align with the ongoing development in Johor, which we believe will continue to attract strong investor interest.

Source: Philip Capital Research - 8 Jan 2025

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