All eyes on stocks linked to SJER

All eyes on stocks linked to SJER

By KEITH HIEW

PETALING JAYA: The anticipated heavy trading in South Johor Economic Region (SJER)-related property and construction stocks following news of the Government allocating RM5bil for infrastructure projects in the region under the Ninth Malaysia Plan did not materialise yesterday.

However, analysts are still bullish on the medium-term prospects of those companies.

They said while shares of companies such as UEM World Bhd, SP Setia Bhd and Gamuda Bhd did not exactly attract heavy trading, their medium-term prospects remained “exciting''.

A local analyst contacted by StarBiz yesterday expected UEM group to be involved “one way or another” in the tendering for and securing of SJER-related projects due to its “relatively large land bank” in Johor.

The analyst said other companies could benefit, but the most important factor in determining the future profit of those companies making bids would be the distance of their project site from the centre of the SJER.

“The main point to consider is SJER's catalyst developments, which would include the building of basic amenities such as hospitals.

“Once those are built, we could see more interested investors and hence, an appreciation in land value.”

The analyst said the relatively lukewarm reception to the stocks yesterday was expected, as the initial euphoria over SJER-related stocks in the first half of the year had subsided.

“People are now waiting to see if these catalyst developments can kick off successfully.

“Once these are up, they would probably wait another couple of quarters to see if earnings are impressive for these companies before any further re-rating,” he added.

An analyst from OSK Securities offered a similar point of view, saying that most of the investors would have known which companies stood to gain from SJER projects.

He said while the full details were not known, such as which company would be getting a specific job, investors knew that companies such as MMC Corp Bhd, UEM and SP Setia had a presence in Johor and could be holding back until there was convincing proof of how those companies would fare should they win any contracts.

Meanwhile, another research house said in its report that the key beneficiaries of the development of Johor as well as the SJER included Mah Sing Group Bhd, Plenitude Bhd and KSL Holdings Bhd.

This is especially with the SJER projects and the upcoming integrated resorts in Singapore potentially boosting land value in Johor and housing demand, it said.

However, the research outfit also said the downside to the Johor property market could come from a demand slowdown, especially since the market had decelerated following a rise in the price of petrol and electricity tariff.

Land scarcity in Johor Baru would also mean developers would need to venture out further to secure land bank, it added.