Comprehensive Analysis of Johor-Singapore Special Economic Zone Beneficiaries

Prepared by: Maybank Research Pte Ltd

Date: January 7, 2025

Overview of the Johor-Singapore Special Economic Zone (JS-SEZ)

The Johor-Singapore Special Economic Zone (JS-SEZ) is a groundbreaking initiative unveiled at the Singapore-Malaysia leaders retreat. Designed to synergize Singapore’s global finance and logistics expertise with Johor’s cost-competitive land, labor, and energy resources, the JS-SEZ promises to create a differentiated value proposition. The initiative targets 100 projects over the next decade in industries such as aerospace, electronics, chemicals, medical devices, pharmaceuticals, and manufacturing. Additional incentives, including tax benefits and technology-enabled cross-border mobility, are expected to attract multinational corporations (MNCs) and local businesses alike.

Sector Winners and Key Beneficiaries

Maybank Research identifies several sectors and leading companies poised to benefit from the JS-SEZ. Below is a comprehensive, detailed analysis of each company mentioned in the report.

AEM Holdings (AEM SP)

Recommendation: Sell

Market Cap: USD 372 million

Target Price: SGD 1.10

Current Price: SGD 1.62

Upside/Downside: -32.1%

AEM Holdings, a player in the technology manufacturing sector, faces a negative outlook with a “Sell” recommendation by Maybank Research. While the JS-SEZ offers potential tax benefits and access to cost-effective labor, AEM’s current valuation and market position reflect significant downside risks. Investors are advised to approach cautiously as the company navigates a challenging operational landscape.

CapitaLand Integrated Commercial Trust (CICT SP)

Recommendation: Buy

Market Cap: USD 10,647 million

Target Price: SGD 2.30

Current Price: SGD 1.99

Upside/Downside: +15.6%

CICT’s diversified portfolio of prime and suburban malls, as well as CBD offices, positions it well to capture increased business activity stemming from the JS-SEZ. The REIT is expected to benefit from higher demand for office setups and retail spending, driven by cross-border corporate expansions and rising disposable incomes.

Frencken Group (FRKN SP)

Recommendation: Buy

Market Cap: USD 369 million

Target Price: SGD 1.50

Current Price: SGD 1.18

Upside/Downside: +27.1%

Frencken Group is well-positioned to take advantage of the JS-SEZ’s focus on electronics and manufacturing. With existing facilities in Malaysia, the company is poised to expand its capacity, leveraging tax incentives, lower operational costs, and access to a skilled workforce. This makes it a strong candidate for growth in the coming years.

Genting Singapore (GENS SP)

Recommendation: Buy

Market Cap: USD 6,871 million

Target Price: SGD 1.01

Current Price: SGD 0.78

Upside/Downside: +30.3%

Genting Singapore, a leader in the gaming sector, is set to benefit from increased cross-border mobility and infrastructure improvements. With Malaysians already accounting for a significant portion of Singapore’s gross gaming revenue, the JS-SEZ is expected to boost visitation, particularly among mass-market gamblers, which yield higher EBITDA margins. Reduced labor constraints may also help optimize operational costs.

Mapletree Logistics Trust (MLT SP)

Recommendation: Buy

Market Cap: USD 4,857 million

Target Price: SGD 1.60

Current Price: SGD 1.31

Upside/Downside: +22.1%

MLT is anticipated to benefit from increased trade volumes and economic growth in the region. While lower-value logistics operations may shift to Johor, MLT’s strategic assets near ports and its diversified network position it to capitalize on higher throughput and supply chain integration.

Oversea-Chinese Banking Corporation (OCBC SP)

Recommendation: Buy

Market Cap: USD 55,572 million

Target Price: SGD 17.89

Current Price: SGD 16.79

Upside/Downside: +6.6%

OCBC’s extensive foothold in Malaysia and ASEAN markets positions it to capture credit demand and non-interest income opportunities arising from JS-SEZ initiatives. The bank is expected to benefit from lower cost-to-income ratios as back-office functions shift to Johor, along with increased cross-border spending and credit card transactions.

United Overseas Bank (UOB SP)

Recommendation: Buy

Market Cap: USD 45,482 million

Target Price: SGD 38.75

Current Price: SGD 36.80

Upside/Downside: +5.3%

UOB shares similar advantages as OCBC, with its regional integration allowing it to participate in supply chain shifts and expansions into the JS-SEZ. The bank is likely to see credit demand growth from SMEs and MNCs leveraging the SEZ’s cost benefits.

Singtel (ST SP)

Recommendation: Buy

Market Cap: USD 37,288 million

Target Price: SGD 3.65

Current Price: SGD 3.08

Upside/Downside: +18.5%

Singtel is a key player in the telecom and data center space, benefiting from Johor’s position as a data hub. Its partnership with Telekom Malaysia to build a 200MW AI-ready data center demonstrates its proactive approach to leveraging the SEZ’s opportunities. Increased demand for terrestrial and submarine cable infrastructure will further support growth.

Sembcorp Industries (SCI SP)

Recommendation: Buy

Market Cap: USD 7,231 million

Target Price: SGD 6.20

Current Price: SGD 5.54

Upside/Downside: +11.9%

Sembcorp Industries stands to gain from Singapore-Malaysia renewable energy cooperation and ASEAN grid connectivity. With a focus on clean energy generation and distribution, SCI is well-positioned to seize revenue opportunities in the transition to net zero. However, policy backtracking and execution risks remain potential challenges.

Venture Corporation (VMS SP)

Recommendation: Hold

Market Cap: USD 2,788 million

Target Price: SGD 12.60

Current Price: SGD 13.09

Upside/Downside: -3.7%

Venture Corporation is a technology manufacturing player that could benefit from the SEZ’s focus on advanced manufacturing. However, with a “Hold” rating, the company’s limited upside reflects cautious optimism amid competitive challenges and current valuations.

Thomson Medical Group (TMG SP)

Recommendation: Buy

Market Cap: USD 911 million

Target Price: SGD 0.06

Current Price: SGD 0.05

Upside/Downside: +27.7%

Thomson Medical’s Iskandar Medical Hub project in Johor, set for completion by 2030, is expected to benefit from the SEZ. The company’s freehold assets in Johor also offer potential for revaluation as property values increase. However, competition from lower-cost healthcare services in Johor may pose challenges for its Singapore operations.

UMS Holdings (UMSH SP)

Recommendation: Hold

Market Cap: USD 578 million

Target Price: SGD 1.03

Current Price: SGD 1.05

Upside/Downside: -1.9%

UMS Holdings has manufacturing facilities in Malaysia, which could benefit from the SEZ’s tax incentives and cost advantages. However, with a “Hold” recommendation, minimal downside is expected as opportunities are balanced against execution risks.