Small and mid-cap local firms poised to benefit from JS-SEZ
27 Jan 2025
Small-cap and mid-cap Malaysian companies are poised to benefit from the development of the Johor-Singapore Special Economic Zone (JS-SEZ) over the next decade, according to Public Investment Bank Bhd (PublicInvest).
The domestic economy is projected to remain strong in 2025, bolstered by favourable fiscal reforms, increased domestic consumption fuelled by a stable labour market, and growing foreign and local direct investments.
Several industries are well-positioned to leverage these favourable conditions, PublicInvest said in a note.
The firm said that although geopolitical tensions and global economic uncertainties will challenge businesses, especially those reliant on exports, companies with growth driven by domestic demand will show more resilience.
The Malaysian and Singapore governments are committed to attract investments in 50 projects in the first five years, targeting domestic as well as global investors looking to diversify their operations given the growing geopolitical risks and trade tensions that could reshape international trade flows.
With Asia being the key engine of global economic growth and Johor-Singapore’s strategic geographical location, PublicInvest said JS-SEZ is well-positioned to capture the benefits of a fragmented trading system that would lead to greater trade flows within this region.
“While 11 high-value economic sectors have been identified, we reckon companies like CBH Engineering Holding Bhd, UUE Holdings Bhd, Farm Price Holdings Bhd, SDS Group Bhd, and Feytech Holdings Bhd could potentially benefit from the spillover effects of JS-SEZ’s development.
“All three companies are based in Johor and involved in the economic sectors identified, such as data centres, manufacturing, and food security,” the firm said in a note.
Given the trend of a declining fertility rate, it stated that the demand for assisted reproductive services is expected to increase while the rising occurrence of infectious diseases and health awareness will continue to drive demand for condoms.
PublicInvest also expects the renewable energy as well as bioenergy industry to expand further given the introduction of the National Energy Transition Roadmap that should benefit BM Greentech Bhd.
As domestic consumption growth is likely to sustain given the stability of the labour market and the recovery in tourism activities, the firm said IGB Commercial REIT’s portfolio of strategically located office buildings should continue to maintain its high occupancy rates.
“It is estimated to deliver an attractive yield of seven percent, anchored by its 10 investment-grade office buildings in the highly successful Mid Valley City and KLCC area.
Meanwhile, to navigate the increasing protectionist policies from the West, PublicInvest expects more efforts will be made to strengthen alliances through trade agreements within the region, such as Asean and BRICS.
“Southeast Asia’s growth potential could be further unlocked given its strategic geographical location, with Malaysia likely to be favoured as one of the next generation trading hubs,” it added.
Source: NST
