Property developers with exposure to Johor gain investors’ interest after govt bid to turn Forest City into special financial zone

• Last Friday, Prime Minister Datuk Seri Anwar Ibrahim reportedly said the government's bid to create a special financial zone in Forest City is meant to boost investment, growth and economic activities in Johor.

KUALA LUMPUR (Aug 28): Several real estate developer stocks caught investors’ interest in Monday (Aug 28) morning trade, following Putrajaya’s unveiling intention to turn Johor’s Forest City, developed by China’s beleaguered Country Garden, into a special financial zone.

Ekovest Bhd was the most actively traded stock at Monday's market break, with 119.88 million shares changing hands. It climbed six sen or 13% to 51.5 sen a share, giving it a market capitalisation of RM1.39 billion.

Iskandar Waterfront City Bhd (IWCity), on the other hand, rose eight sen or 13.4% to 67.5 sen, with 90.47 million shares traded, being the second most actively traded across Bursa Securities.

The current share price valued IWCity at RM621.76 million.

Meanwhile, UEM Sunrise Bhd, the master developer of Iskandar Puteri in Johor, climbed 4.5 sen or 6.7% to 71.5 sen, giving it a market cap of RM3.62 billion.

S P Setia Bhd too gained eight sen or 9.6% to 91 sen, valuing it at RM3.71 billion.

Last Friday, Prime Minister Datuk Seri Anwar Ibrahim reportedly said the government's bid to create a special financial zone in Forest City is meant to boost investment, growth and economic activities in Johor.

According to him, Johor’s strategic location next to Singapore and having a complete basic infrastructure can attract more investors, especially when the cost in Singapore is considered very high nowadays.

In a note to investors on Monday, Maybank Investment Bank Bhd (Maybank IB) said the designation of Forest City as a special financial zone had raised the development potential of southwestern Johor.

“This strategic move not only fosters economic diversification and balances growth in the different regions of Iskandar Malaysia, it also offers sizable job creation potential and heightens Iskandar Malaysia’s investment attractiveness,” it said.

Maybank IB said local developers which focus on affordable landed properties in the region should benefit from the spillover effects of the special financial zone.

RHB Research, meanwhile, said more catalytic developments may potentially shift towards the Malaysia-Singapore Second Link area, given the vast land resources and well-developed infrastructure, and Forest City is situated next to it.

“Unlike the Johor Bahru city centre or vicinity surrounding the causeway that is already crowded, the Second Link area has plenty of land bank, and well-developed infrastructure and amenities,” it said in a note on Monday.

“UEM Sunrise remains the best proxy for this Johor thematic play, followed by Sunway Bhd, given their sizeable exposure to the state’s property market,” said the research house.

Among the incentives that Anwar announced include multiple entry visas, fast track entry for those working in Singapore, and a flat income tax rate of 15% for knowledge workers.

RHB said this move should help to revitalise the Forest City township, which had received lots of negative publicity over the last few years.

“We believe industry players will be looking forward to the announcement of the special economic zone, as it should cover specific industrial and new economic sectors (such as data centres and renewable energy),” it said.

Maybank also said the latest initiative had the potential to attract a growing number of Chinese family funds seeking more affordable alternatives in this region, besides Singapore.

“Additionally, the special financial zone could also benefit from the spillover effects of Singapore’s initiative to develop the Jurong Lake district as its second central business district (CBD),” it said.

“More importantly, establishing a special economic zone in Forest City will help to balance the economic growth in southwestern Johor.

“Currently, business activities are concentrated in Johor’s CBD, which will be further boosted by the upcoming Johor Bahru-Singapore Rapid Transit System, while the southeastern region is driven by oil and gas activities,” it added.

While the special financial zone initiative offers significant potential, Maybank said efficient transportation networks and infrastructure offered by Forest City are crucial to attract investors.

On the local property front, Maybank said competition is inevitable, especially in the high-rise segment, which had been the focus of Forest City.

However, developers like Eco World Development Bhd, S P Setia, UEM Sunrise and KSL Holdings Bhd, which focus more on affordable landed properties priced at RM1 million per unit and industrial parks, are poised to benefit from the spillover effects of increasing investments and job opportunities in the region over the longer term.

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