Comprehensive Stock Analysis: Beneficiaries of the JS-SEZ Initiative
Comprehensive Stock Analysis: Beneficiaries of the JS-SEZ Initiative
Broker: Maybank Investment Bank
Date of Report: January 8, 2025
Overview of the Johor-Singapore Special Economic Zone (JS-SEZ)
The Johor-Singapore Special Economic Zone (JS-SEZ) represents a groundbreaking collaboration between Malaysia and Singapore, solidifying their status as a regional economic powerhouse. Spanning nine flagship zones and encompassing 15 key growth sectors, the initiative is poised to drive investments in construction, industrial property, technology, and more. The JS-SEZ aims to attract 50 projects in the first five years and 100 projects within a decade, fostering economic synergies between Singapore’s advanced industries and Malaysia’s cost-efficient resources.
Stock-by-Stock Analysis: Key Beneficiaries of the JS-SEZ
YTL Power (Recommendation: Buy)
YTL Power stands out as a prime beneficiary of the JS-SEZ initiative, with a market capitalization of MYR 36,951 million and a current share price of MYR 4.50. The target price is set at MYR 4.70, indicating a modest upside. YTL Power’s price-to-earnings ratio (PER) is projected at 11.8x for CY2024 and 12.1x for CY2025. The company boasts a strong return on equity (ROE) of 14.5% and a dividend yield of 1.6% for CY2024. The recommendation to “Buy” reflects its potential to leverage the JS-SEZ’s focus on energy and infrastructure.
SD Guthrie (Recommendation: Buy)
With a market capitalization of MYR 34,924 million, SD Guthrie is well-positioned to capitalize on land development opportunities within the JS-SEZ. Its current share price is MYR 5.05, with a target price of MYR 5.41. The company’s PER is projected at 22.4x for CY2024 and 21.3x for CY2025. An ROE of 8.3% and a dividend yield of 2.7% for CY2024 make it an attractive investment. SD Guthrie’s vast landbank in Kulai could be a significant asset for future developments within the economic zone.
KL Kepong (Recommendation: Hold)
KL Kepong, with a market capitalization of MYR 23,573 million, has been rated as a “Hold” with a target price of MYR 21.30, slightly below its current share price of MYR 21.50. The PER for CY2024 is projected at 27.6x, with an ROE of 6.1% and a dividend yield of 1.8%. While the company holds potential within the JS-SEZ, the limited upside suggests its positives are already priced in.
Dialog Group (Recommendation: Buy)
Dialog Group, specializing in energy and logistics, has a market capitalization of MYR 10,552 million. Its current share price is MYR 1.87, with a target price of MYR 2.97. The PER for CY2024 is estimated at 16.0x, with an ROE of 10.7% and a dividend yield of 2.0%. As a “Buy,” Dialog Group is expected to benefit significantly from the energy and logistics sectors within the JS-SEZ.
Eco World Development (Recommendation: Buy)
Eco World Development’s market capitalization of MYR 6,328 million reflects its strong position in property development. With a current share price of MYR 2.14 and a target price of MYR 2.25, it is projected to achieve a PER of 17.8x for CY2024. The company has an ROE of 7.2% and a dividend yield of 2.8%, highlighting its growth potential within the JS-SEZ’s residential and commercial property sectors.
Genting Plantations (Recommendation: Buy)
Genting Plantations, with a market capitalization of MYR 5,230 million, is another strong contender in the JS-SEZ. Its current share price of MYR 5.83 comes with a target price of MYR 6.96. The PER for CY2024 is projected at 17.7x, with an ROE of 5.5% and a dividend yield of 4.0%. The company’s extensive landholdings make it a key player in agricultural and food security initiatives within the economic zone.
ITMAX System (Recommendation: Buy)
ITMAX System, a tech-focused firm, has a market capitalization of MYR 3,915 million and a current share price of MYR 3.80. It has a target price of MYR 4.40, with PER projections of 50.0x for CY2024 and 36.9x for CY2025. Despite its high valuation, the company’s ROE of 19.6% underscores its profitability, while its focus on digital economy initiatives aligns well with the JS-SEZ’s goals.
Al-Salam REIT (Recommendation: Sell)
Al-Salam REIT, with a market capitalization of MYR 220 million, has been rated as a “Sell.” Its current share price is MYR 0.38, with a target price of MYR 0.36. The PER for CY2024 is a high 47.5x, with an ROE of 0.7% and a dividend yield of 1.8%. Its limited growth potential within the JS-SEZ makes it less appealing to investors.
AME Elite (Not Rated)
AME Elite, with a market capitalization of MYR 1,138 million, is not rated but shows strong potential within the JS-SEZ. Its current share price of MYR 1.78 and a target price of MYR 2.17 reflect a promising outlook. The PER for CY2024 is projected at 12.7x, with an ROE of 11.1% and a dividend yield of 1.7%. The company’s focus on industrial property development aligns with the economic zone’s objectives.
Conclusion
The Johor-Singapore Special Economic Zone (JS-SEZ) is poised to drive significant economic growth across multiple sectors, creating numerous investment opportunities. Companies like YTL Power, SD Guthrie, and Dialog Group are well-positioned to benefit, while others like Al-Salam REIT face challenges. Investors should carefully evaluate these opportunities in light of their risk tolerance and investment goals.
