Maybank downgrades rating on Malaysia property to ‘neutral’ on JS-SEZ delay, lack of new drivers

MAYBANK Securities lowered its call on Malaysian property developers to “neutral” from “positive” for next year, given the absence of new factors and the delay in details about the Johor-Singapore Special Economic Zone (JS-SEZ).

“Looking ahead, sector themes are expected to remain focused on Johor, data centre developments and corporate exercises,” Maybank analyst Wong Wei Sum said in a report on Monday (Dec 9).

Details on the collaboration between Malaysia and Singapore had been postponed to January 2025 from this month.

While Maybank noted that it remains upbeat on the project, Wong added that investors have likely already priced in the potential boost the JS-SEZ would have on property demand. Thus, they are seeking to monetise from such expectations.

Both countries laid the groundwork for the JS-SEZ in May 2023 when they announced plans to deepen economic ties.

Wong said that another driver that would continue to sustain investor interest in Malaysian property stocks are data centre investments and land sales.

She cited the examples of Sime Darby Property, which recently secured another 20-year lease with Google, and Eco World Development, which is pursuing more data centre deals in its Selangor and Kulai industrial parks.

Malaysia is benefiting from global tech players stepping up their building of data centres, to cater to the demand for infrastructure and computing power to enable artificial intelligence.

A third factor that would anchor Malaysia’s property sector next year is corporate exercises. Maybank observed that the year is likely to be “eventful”, as Sunway is reportedly set to list its healthcare business. Bloomberg reported in September that the developer was exploring an initial public offering of the business that could raise RM3.5 billion (S$1.1 billion).

Maybank’s top picks for the sector are SP Setia, and Sime Darby Property.

It upgraded its call on Sime Darby to “buy” from “hold”, as its income stream from investment properties will be more stable from the 2026 fiscal year.

For the quarter ended September, Sime Darby’s revenue rose 4 per cent on year to RM1.1 billion, while profit attributable to shareholders fell 11.5 per cent to RM128.3 million.

For the nine months however, the developer said that revenue hit a record high.

Maybank downgraded its rating on Sunway to “hold” from “buy”, given the limited upside potential as its share price has already surged 46 per cent so far this year.