Johor theme forecast to be on upward trajectory

MIDF Research noted that the power utilities sector was a spillover beneficiary of Johor’s data centre development as data centres are huge consumers of energy.

PETALING JAYA: The Johor investment theme is seen gaining traction among investors as the state accelerates its plan to be a new economic powerhouse through high-impact business opportunities.

Among the sectors under the radar are power utilities, construction, property and logistics.

In its report, MIDF Research noted that the power utilities sector was a spillover beneficiary of Johor’s data centre development as data centres are huge consumers of energy.

It added that the solar engineering, procurement, construction and commissioning (EPCC) companies, in particular, are potential immediate-term beneficiaries of the data centre-driven demand for renewable energy (RE) EPCC services.

As for construction, the brokerage cited the opportunities generated by the Rail Transit System (RTS) link connecting Johor Baru to Singapore, while the property sector would likely see an increase in demand and logistics sector would benefit from increased trade activities in the state.

“In our recent visit to Johor, one of the highlights was the development of data centre hubs in Johor.

“This is primarily led by the Sedenak Tech Park (STeP) data hub development which is part of the larger Ibrahim Technopolis township development by JLand Group, a subsidiary of state-owned Johor Corp,” MIDF Research said.

STeP entailed a land area of 1,400 acres located in the Kulai district of Johor which is designed specifically for the data centre ecosystem.

“The power utilities sector is a spillover beneficiary of Johor’s data centre development as data centres are huge consumers of energy.

“Data centres generate an immense amount of heat, hence significant power is required for cooling systems, on top of energy requirements to power servers and hard drives. Additionally, the energy consumed by data centres is constant throughout its 24-hour operations,” MIDF Research explained.

“While these data centres are still expected to be heavily reliant on more reliable conventional power sources given their constant demand, we believe there will be increasing demand for cleaner energy sources given environmental, social and governance requirements by predominantly multinational corporation-owned facilities at STeP,” it added, noting JLand Group was exploring options to construct a solar farm within the STeP development to complement the power supply to the area.

It noted that solar EPCC companies such as Samaiden Group Bhd, Sunview Group Bhd and Pekat Group Bhd would likely be immediate-term beneficiaries, while Ranhill Utilities Bhd could potentially benefit from increased water demand for data centre cooling.

Separately, MIDF Research noted the spillover from Singapore and the recently inked memorandum of understanding for the Johor-Singapore Special Economic Zone (SEZ) would augur well for Johor’s construction sector, given expectations of new infrastructures to improve connectivity and potentially stronger demand for industrial properties and office buildings.

“Our positive recommendation on the construction sector is premised on the expectations of infrastructure development rollouts as envisioned under the 12th Malaysia Plan Mid-Term Review and the significant development expenditure of RM90bil under Budget 2024.

“Compounding that is the prospects in Johor, which we believe is a compelling one, anchored by the RTS, SEZ and data centres,” it explained.

The brokerage’s top construction sector picks included Gamuda Bhd, IJM Corp Bhd and Sunway Construction Group Bhd.

Further, MIDF Research said the property landscape in Johor had improved following the reopening of the economy and country borders, generating foreign buying interest.

“The stronger buying interest has led to declining residential and serviced apartment overhangs in Johor. The declining property overhang bodes well for the recovery of the property market in Johor as that eased concern about the oversupply of property in Johor,” it said.

In addition, the SEZ and RTS would likely spur buying interest in property, and property developers with landbank in Johor were expected to see better land value due to the improving property landscape in Johor, MIDF Research said.

The brokerage’s top property sector picks included Mah Sing Group Bhd and Matrix Concepts Holdings Bhd.

As for the transportation and logistics sector, MIDF Research said likely beneficiaries from the ongoing development in Johor included Tiong Nam Logistics Holdings Bhd and Swift Haulage Bhd.

With Tanjung Langsat Port poised to grow as a liquid cargo port in Johor, Dialog Group Bhd would also be able to ride on Johor’s growth, as the company supplied 80% of the port’s liquid cargo through Dialog Terminals Langsat or DTL.

MIDF Research pointed out that under Johor’s development plan, called Rancangan Struktur Negeri Johor (RSNJ) 2030, the vision is to turn the state into a national and regional economic power.

The blueprint, it noted, consisted of four thrusts, 32 high-impact-projects, and 432 implementation initiatives.

“To execute the high-impact projects, the investment cost is estimated at RM35.57bil. These projects will be implemented and executed by 2030,” it added.

MIDF Research said Johor had to grow its economy by 8.9% per annum in 2022-2030 to achieve the targets under RSNJ2030, which included a real gross domestic product (GDP) of RM281.7bil and a GDP per capita of RM45,300, with a population size of 6.2 million, by 2030. As of 2022, the state’s GDP per capita was RM35,300, with a population size of 4.03 million.

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