real estate management group assignment
TRANSCRIPT
BWFE 3013 REAL ESTATE MANAGEMENT
Table of Contents1.0 INTRODUCTION.....................................................................................................................1
2.0 BACKGROUND.......................................................................................................................3
2.1 MAIN STRATEGIC...............................................................................................................3
2.2 FIVE FLAGSHIP ZONES IN ISKANDAR MALAYSIA...........................................................6
2.3 INFRASTRUCTURE IN ISKANDAR MALAYSIA................................................................10
3.0 ECONOMIC PERSPECTIVE.................................................................................................12
3.1 ISKANDAR - A GROWTH-CATALYTIC CORRIDOR..........................................................12
3.2 ISKANDAR A CONTRIBUTION TO JOHOR AND MALAYSIA...........................................12
3.3 CATALYTIC INFRASTRUCTURE AND INVESTMENT ON TRACK...................................14
3.4 BROAD-BASED AND STRATEGIC INVESTMENT.............................................................16
3.5 INVESTMENT IS PREDOMINANTLY DOMESTIC INVESTOR-LED..................................18
3.6 JOHOR-MALAYSIA-SINGAPORE CONNECTIVITY...........................................................20
3.7 CONVINCING BUY-INS FROM SINGAPOREAN INVESTORS...........................................20
4.0 PROPERTY PERSPECTIVE.................................................................................................22
4.1 JOHOR COMING BACK TO LIFE?......................................................................................22
4.2 LOTS OF PLAYERS............................................................................................................24
4.3 UEM LAND THE BEST PROXY..........................................................................................25
4.4 OTHER DEVELOPERS UNDER OUR COVERAGE.............................................................33
5.0 PLANTATION PERSPECTIVE.............................................................................................39
5.1 JOHOR IS THE LARGEST PALM OIL-GROWING STATE IN PENINSULAR MALAYSIA. .39
5.2 MALAYSIAN PLANTERS TURNED PROPERTY DEVELOPERS........................................39
5.3 THE KEY IOI CORP PROPERTY PROJECTS IN JOHOR......................................................40
5.4 EXPECT HIGHER SALES FROM ITS JOHOR PROJECTS....................................................41
6.0 CONSTRUCTION PERSPECTIVE........................................................................................43
6.1 BASIC INFRASTRUCTURE HAS TAKEN SHAPE...............................................................43
6.2 TRANSPORT INFRASTRUCTURE TO SHIFT TO RAIL WORK..........................................43
6.3 CONTRACTORS WITH BIGGEST PROPERTY EXPOSURE TO ISKANDAR.......................44
6.4 SPILLOVER FOR BUILDING-MATERIALS SECTOR..........................................................45
7.0 ADVANTAGE INVESTING IN ISKANDAR MALAYSIA.....................................................46
7.1 LOCATION BENEFIT..........................................................................................................46
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BWFE 3013 REAL ESTATE MANAGEMENT
7.2 ECONOMIC COMPETENCE & CONTINUOUS ECONOMIC GROWTH...............................47
7.3 GOVERNMENT SUPPORTIVE & POLICIES.......................................................................47
7.4 EDUCATED & COMPETENCE HUMAN CAPITALIZATION..............................................48
7.5 EFFICIENCY TRANSPORTATION FACILITIES..................................................................49
7.6 HIGH-TECH TELECOMMUNICATIONS FACILITIES.........................................................49
7.7 A SOUND FINANCIAL FACILITIES...................................................................................50
7.8 A WISELY SELECTION OF JOINT-VENTURE PARTNERS IN MALAYSIA........................50
7.9 A SOUND & VIBRANT BUSINESS ENVIRONMENT..........................................................51
8.0 CONCLUSION.......................................................................................................................52
References.....................................................................................................................................54
BWFE 3013 REAL ESTATE MANAGEMENT
1.0 INTRODUCTIONIskandar can trace its roots to the Nusajaya Township in Johor that began life as the
Prolink 2020 project. Prolink 2020 was the brainchild of Tan Sri Halim Saad, the then major
shareholder of Renong Berhad (subsequently renamed UEM World). The Prolink 2020 project
was conceived in the early-1990s and, at 23,875 acres, was touted as the largest private township
in Asia. The landbank came about as part of the construction of the Malaysia-Singapore Second
Crossing as the highway connecting the North South Expressway to the second bridge to
Singapore cuts through Prolink 2020. At that time, the township was estimated to have a GDV of
RM8bn-9bn and a population of 500,000 when completed within 20 years. There were grand
plans for the township then, including the development of duty-free shopping and education
institutions.
Previously known as the Iskandar Development Region, Iskandar Malaysia measures
2,217 sq km (547,669 acres) in total and aspires to be a self-contained, sustainable metropolis of
international standing. It is three times the size of Singapore and twice that of Hong Kong and
covers the southern part of Johor from the Senai Airport to the eastern and western coastal areas,
including the capital of the state, Johor Bahru.
The 1997/98 Asian financial crisis caused major disruptions to the Malaysian economy,
including to Renong and the Prolink 2020 project, which eventually led to the ownership of
Renong and UEM Holdings changing hands from Tan Sri Halim Saad to Khazanah Nasional.
Under Khazanah, the Renong-UEM Group underwent several restructuring exercises, which
resulted in Nusajaya being listed under UEM Land Holdings in 2007. Via UEM Land, Khazanah
emerged as one of the largest development land owners in Johor, which probably led to it taking
on an enlarged role in the planning of the entire Iskandar Malaysia.
In 2005, Khazanah became the planner for the Iskandar Malaysia development corridor.
Iskandar was one of five development corridors launched in 2006 under the 9th Malaysia Plan
but was arguably the most important. In addition to its planning role, Khazanah was identified to
play an investment role for catalyst infrastructure and development projects, such as the Johor
State New Administrative Centre, the Southern Johor Industrial Logistic Cluster, Waterfront
City, Medical Hub, EduCity and a proposed international destination resort. These initiatives
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were to complement the many existing and ongoing developments in the state, such as the Port
of Tanjong Pelepas, Senai Airport, Danga Bay and Johor Corporation.
Figure 1: Map of Iskandar Malaysia
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2.0 BACKGROUND
2.1 MAIN STRATEGICIskandar Malaysia’s five main strategic pillars are:
1. International rim positioning - Iskandar is located mid-way between China and India and
is 4-8 hours’ flight from Bahrain, Delhi, Dubai, Hong Kong, Hanoi, Ho Chi Minh,
Shanghai and Taipei.
2. Establishing hard and soft infrastructure enablers - This is not limited to physical
infrastructure, such as roads, airports, ports and utilities, but also encompasses security,
river cleaning and proper sewerage. Fiscal and financial incentives, human capital as well
as efficient and business-friendly institutions are included too.
3. Investment in catalyst projects - This is to spur further economic activity in the region.
This includes projects in logistic services, financial services, health and education
services, agricultural, manufacturing and leisure and tourism.
4. Establishing a strong institutional framework and the creation of a strong regulatory
authority - The Iskandar Regional Development Authority (IRDA) represents a joint and
coordinated approach between the federal, state and local governments, co-chaired by the
prime minister and the chief minister of Johor.
5. Ensuring socio-economic equity and buy-in from the local population - To ensure the
local population of Johor will benefit from the development; Iskandar will address the
issues of property and equity ownership, local and Bumi participation, business and
income improvement and employment opportunities.
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Figure 2: Iskandar Malaysia Strategy Framework ( Sources from IRDA )
IRDA was established as a statutory body under the IRDA Act of 2007 and has been
appointed as the development authority and a one-stop centre for investors. This includes for
planning and land matters, licences and permits, immigration, business set-up and incentives. It
is responsible for realising the vision and objectives of Iskandar towards becoming a metropolis
of international standing. To facilitate investments into Iskandar Malaysia, IRDA has established
the Iskandar Service Centre (ISC) and the Approvals and Implementation Committee (AIC). ISC
acts as the principal coordinator and facilitator for approvals in Iskandar while the AIC serves to
identify, monitor and coordinate the relevant government entities to expedite the approval and
implementation of strategic investments in Iskandar.
One of the primary goals of Iskandar is to attract FDI, especially in areas that will boost
Malaysia's competitiveness. This is in view of Malaysia's lower labour cost-competitiveness
relative to some of its regional peers. The four new sectors of focus that were added to the
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existing five include healthcare, education, financial and creative industries. Iskandar's industrial
plans are aimed at developing it into Asia's premier hub for high technology and emerging
technology manufacturers in the electrical and electronics, petrochemicals and oleochemicals,
and food and agro-processing sectors.
Iskandar's integrated development is guided by the Comprehensive Development Plan
(CDP) 2006-2025. The CDP addresses socio-economic development guided by its main pillars
and anchored on four basic foundations and supporting systems. To garner Singaporean feedback
for Iskandar, there is also a Malaysia-Singapore joint ministerial committee that meets up
occasionally to resolve any issues that may crop up.
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Figure 3: Iskandar Malaysia Economy
Figure 4: Population in Iskandar Malaysia (Million)
Figure 5: Iskandar Malaysia Target (Million)
Figure 6: Investment Target
2.2 FIVE FLAGSHIP ZONES IN ISKANDAR MALAYSIAThere are five flagship zones in Iskandar. Nusajaya is the heart of Iskandar as that is
where Khazanah and UEM Land have a blank canvas to work on and where most of the key
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catalyst projects are taking place. Nusajaya has been repositioned as a regional city with diverse
catalyst developments catering to global market demands. The main advantage of Nusajaya is its
proximity to Singapore where land prices and the cost of doing business are significantly higher.
The centre of Nusajaya is located 27 km or 23 minutes’ drive from Senai International Airport
and 31 km or 25 minutes from the Johor Bahru city centre to the east and Port of Tanjung
Pelepas to the south-west. A toll-free government-funded coastal highway costing RM1bn was
completed at end-2011 and cut travelling time to Johor Bahru city centre from 30-35 minutes to
only 10-15 minutes.
Figure 7: Five flagships zone in Iskandar Malaysia
Nusajaya is in Zone B of Iskandar and is targeted to have a population of 500,000 by
2025. Current economic activities there are focused towards mixed property development, state
and federal administration and warehousing. In future, Zone B will be the hub for high-tech
manufacturing and biotechnology as well as the creative, medical, education and tourism sectors.
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UEM Land is the major land owner and master developer of Nusajaya with Iskandar
Investment Berhad (IIB) playing a significant role too. Key catalyst projects in Nusajaya include
the state administration centre, the Southern Industrial & Logistics Clusters (SiLC), the Medical
Hub, EduCity, Puteri Harbour, Pinewood Studios and an international destination resort (theme
park). More recently, new catalyst projects, including the Motor City and the China Mall, have
emerged.
IIB is 60%-owned by Khazanah, 20% by the Employees' Provident Fund and 20% by the
Johor state government. IIB's role is to promote, coordinate and invest in strategic and catalytic
projects and to engineer public-private partnerships to accelerate and enhance the development
of Iskandar. IIB also owns large tracts of land in Nusajaya, some acquired from UEM Land as
part of its restructuring exercise.
Figure 8: Distance and travelling time from Nusajaya
Zone A in Iskandar is Johor Bahru or the capital of the state. Current economic activities
in Zone A are financial services, commerce, retail, arts and culture, hospitality, urban tourism,
plastic manufacturing, electrical and electronics and food processing. A multi-modal terminal is
being planned for Zone A as well as an MRT/LRT system connecting Johor Bahru with other
parts of Iskandar. Danga Bay is also located in the Johor Bahru area and is enjoying strong
interest from investors and developers. As the largest recreational park in the city, Danga Bay
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spans 1,840 acres and will include financial, commercial, residential, lifestyle, leisure and
family-oriented developments. A new CBD is being planned for Johor Bahru that would
encompass 392 acres and three precincts: 1) Johor Bahru City Waterfront Precinct, 2) Heritage
Precinct, and 3) the Business and Central Park Precinct. These plans, however, may be modified.
In 2012, Iskandar Waterfront Holdings (IWH) was created to undertake developments in
Johor Bahru, encompassing Danga Bay, Johor Bahru city centre and the Tebrau Coast. The site
stretches along a 25km-long scenic waterfront facing the Straits of Johor and covers a total
landbank of about 3,000 acres. From the Johor-Singapore Causeway, this landbank covers the
waterfront of the east, centre and west of the Johor Bahru city centre. IWH will spearhead the
transformation of Johor Bahru into a new iconic business destination and towards becoming the
single largest integrated urban development project in Malaysia. IWH is a strategic partnership
between the Johor state government and businessman Tan Sri Lim Kang Hoo. In addition,
Khazanah and EPF have stakes in promoting development in this area via their interests in the
subsidiaries and associated companies of IWH.
Zone C in Iskandar is the Western Gate Development and the main activity here includes
marine services, warehousing, logistics, engineering, hi-tech manufacturing, food products,
petrochemical, entrepot trade, regional procurement centres and utilities. MMC Corp is the main
player in Zone C via Port of Tanjung Pelepas (PTP) and the 2,100MW coal-fired Tanjung Bin
power plant. Around 700 acres of land in the Free Trade Zone in PTP is available for investment
and there are another 2,215 acres at the US$5bn Maritime Centre at Tanjung Bin for investment
by oil & gas players. Global players with facilities within the free zone include Maersk Logistics,
Schenker Logistics, Geodis International, Naigain Nitto, Nippon Express, BMW Asia Pacific
Spare Parts, Flextronics, CIBA Vision, JST Connectors and Cameron International Malaysia
Systems. The Maritime Centre will comprise oil terminal activities, drydocks, a shipyard,
conventional cargo-handling facilities, logistic parks and real estate development. There is also
around 5,400 acres of land available for real estate development for port support services,
including a residential section, a logistics office complex and training centre and commercial,
industrial and recreational areas.
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Zone D in Iskandar covers the industrial and manufacturing hub, including Pasir Gudang
Port, Pasir Gudang Industrial Park, Tanjung Langsat Port and Tanjung Langsat industrial
complex. Economic activities focus on heavy industries, ports and logistics and warehousing.
There is even a motor racing circuit there, the Pasir Gudang Circuit, which is the first
international class circuit outside the Klang Valley. Also in the Comprehensive Development
Plan is a proposal to build a 59 km light rail transit system from Pasir Gudang to Nusajaya.
Estimated to cost RM2.66bn, the project’s implementation phase is targeted to span from 2016 to
2020.
Zone E covers the Senai-Skudai area where the key economic activities revolve around
airport services, engineering, manufacturing and education. Plans for Zone E are to expand into
agro and food processing, ICT and retail tourism. Senai Airport is being positioned to become
the no. 2 airport in the region after Changi by 2025. A multi-modal terminal and cyber city will
be developed and an MRT/LRT system built to connect Zone E with other parts of Iskandar. It is
estimated that between the Kempas, Senai and Kulai industrial areas, there are over 10,000 acres
of land available for investment.
2.3 INFRASTRUCTURE IN ISKANDAR MALAYSIATo facilitate development of Iskandar, there are plans for LRT, MRT, tram, monorail and
even ferry transport. This is to alleviate road traffic congestion and to complement public
transportation. The LRT is to provide intercity connectivity while the monorail is to serve the
CBD of Johor Bahru. A high-speed rail linking Kuala Lumpur to Johor Bahru is also on the cards
and recent reports have indicated suggestions that the stop be in Nusajaya. Another proposal is to
link the Singapore MRT system with Iskandar, which is forecast to be completed by 2018. The
international ferry terminal in Puteri Harbour has just been completed and will facilitate the
arrival of Singaporeans
Another issue of critical importance to Iskandar is safety. The Safety and Security
Blueprint was completed and endorsed in 2009 and assists the public sector, private sector and
the community to cooperate in building a safe environment. IRDA has been working closely
with the Royal Malaysia Police to ensure safety is continuously addressed and crime reduced.
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Some of the actions taken since 2007 include increasing police presence in Iskandar, designating
new police districts and reinforcing existing districts, launching additional beat bases,
introducing high profile mobile policing, establishing a special task force for investors, installing
CCTVs at hot spots and augmenting police presence with auxiliary police.
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3.0 ECONOMIC PERSPECTIVE
3.1 ISKANDAR - A GROWTH-CATALYTIC CORRIDORAll through the last six years since 2006, Iskandar has defied gravity to deliver
impressive development progress, becoming the country's fastest growing corridor. Nine major
economic clusters have been picked to spearhead and fast-track the corridor, with services and
manufacturing sectors leading the pack. The Comprehensive Development Plan (CDP) has set
20-year macro and investment targets to transform Johor into a world-class state. Since Iskandar
was launched on 4 Nov 2006, its investment value has exceeded the Phase 1 (2006-2010) target
by 47.9%. Total committed investments of RM36.8bn in 2011-12 already make up 50.4% of
Phase 2's target of RM73bn for 2011-15.
Figure 9: Iskandar Malaysia’s and Johor’s macroeconomic targets by 2025
Figure 10: Malaysia’s and Singapore’s economy
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The “Iskandar effect” would not only enlarge the economic pie of Johor state in particular
but also enhance Malaysia’s strategic position as an investment destination in ASEAN. Iskandar,
which accounts for about 60% of Johor’s economy in nominal terms, would act as a prime
growth catalyst and complement Johor's overall economic contribution to the Malaysian
economy. Johor is the fifth-largest state by land area and now the second-most populous in
Malaysia. Iskandar constitutes 45.6% of the Johor population and half of total employment there.
The Johor state's GDP size of RM53.2bn is the third-biggest contributor to Malaysia's
GDP (9.3-9.8% each year) with 60% coming from the Johor Bahru area. The state’s economy
expanded 3.7% p.a. in 2005-10, moderately below the national real economic growth of 4.4%
p.a.
There is growing international recognition of Iskandar’s position as Malaysia's future
engine of growth. In July 2012, TIME magazine called it "one of the most ambitious
development projects in the world." It praised Iskandar's geographical advantages: with two ports
straddling the Straits of Malacca and the South China Sea, "it sits at the fulcrum of global trade."
In Dec 2012, the New York Times featured Iskandar in an article titled "Massive Education
Complex Takes Shape in Malaysia", saying that “Nusajaya lush green fields, neatly paved roads
and two theme parks will eventually become a second home to more than 16,000 students.”
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Figure 11: Johor is the third largest contributor to Malaysia GDP
Figure 12: Johor is the second largest population and employed in Malaysia
3.3 CATALYTIC INFRASTRUCTURE AND INVESTMENT ON TRACK
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Skeptics were amazed by Iskandar's boom, engineered by investments from both
domestic and foreign investors. The mega project is on track to be completed by 2025, with
about a quarter already completed. Between 2006 and Dec 2012, Iskandar attracted investments
totalling RM106.31bn, an exponential jump of 841% from a slow start of RM11.3bn in 2006.
YTD cumulative investments are equivalent to 11.3% of 2012’s GDP. On average, total
committed investments surged 45.3% p.a. or RM15.8bn a year in 2006-2012. What is most
encouraging is that 41.1% of the total committed investments have been spent to-date, resulting
in the positive trickle-down on the economy, employment and output. Among the five growth
corridors, Iskandar has emerged as the second-largest recipient of committed investment in
manufacturing, services and primary sectors as at end-2012. It also generated the most
employment opportunities, creating 154,000 new job openings since 2006 until Dec 2012 and
making up nearly 19% of its 2025 target of 817,500 new jobs.
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Figure 13: Cumulative committed investments in Malaysia’s five growth corridors as at end-
2012
Figure 14: New job openings in the five growth corridors as at end-2012
3.4 BROAD-BASED AND STRATEGIC INVESTMENT
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The investments in Iskandar are broadening and, hence, refuting expectations that
property projects are the prime focus of development. Of the total investments as at end-2012,
RM35.1bn or 33% of the total came from the manufacturing sector, RM35.1bn or 33% from
properties, RM28.8bn or 27% from utilities, tourism and others and RM7.3bn or 6.9% from the
government. There is a good mix of private and public investment, encompassing property,
leisure and hospitality, education facilities as well as manufacturing. This underscores Iskandar’s
investment vision of becoming a balanced and sustainable growth corridor with a focus on
economic growth and inclusive social development. At least 30% of the committed investments
in each sector have been realised year-to-date, with the exception of the property sector, which is
slightly behind the others. This reflects the longer-term nature of property development projects.
Figure 15: Iskandar committed investment hit new high of RM21.5bn in 2012
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Figure 16: Johor bringing cummulative investment to RM106.3bn in 2006-2012
3.5 INVESTMENT IS PREDOMINANTLY DOMESTIC INVESTOR-LEDAn array of tax/fiscal as well as non-fiscal incentives is available for approved companies
located in the approved node within Iskandar. Amongst the incentives offered include exemption
from income tax up to 2015/2020, exemption from Foreign Investment Committee guidelines,
flexibilities under the foreign exchange administration rules and unrestricted employment of
foreign knowledge workers. The Iskandar Development Region (IDR)-status companies enjoy
income tax exemption for qualifying activities in six categories of service-based sectors:
creative, education, financial advisory and consulting, healthcare, logistics and tourism.
Local investors poured in more investment in Iskandar than foreigners, facilitated by a
conducive investment climate and favourable incentives to draw strategic investment into the
targeted industries. Since 2008, domestic investors' share of total cumulative investments jumped
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from 45.3% in 2008 to 63.8% in 2012 while that of foreign investors stood at 36.2% in 2012 (vs.
54.7% in 2008). Of the total cumulative foreign investments of RM36.5bn as of July 2012,
Singapore had pumped in the most at some 16.6% or RM6bn, followed by Spain (11.5% or
RM4.2bn) and Japan (9.4% or RM3.4bn).
Major local investors include Tenaga Nasional Bhd, Telekom Malaysia Bhd, MMC
Group, Iskandar Waterfront Development, Port of Tanjung Pelepas, Central Malaysian
Properties Sdn Bhd, IOI Properties and SP Setia Group.
The notable landmarks and attractions in Iskandar are the Johor Premium Outlet,
EduCity, LegoLand Malaysia, colleges and medical facilities as well as health care centres.
Iskandar has also positioned itself as one of the strongest emerging contenders in the
international market of foreign students. Iskandar Investment Bhd has signed up to 10 education
institutions to set up local campuses in the 395-acre EduCity. Marlborough College Malaysia,
Newcastle University Medicine Malaysia, Netherlands Maritime Institute of Technology, Raffles
University Iskandar, Raffles American School and University of Southampton Malaysia Campus
have already started full-time operations and the remaining institutions are expected to start by
2017. Among the latest committed investments are for the creation of a motorsports city,
nanotechnology-based industries, mixed development areas, prime waterfront properties, a trade
and exhibition centre, communications and ICT infrastructure and a global innovation centre.
The biggest beneficiary of the fast-track implementation of infrastructure and catalytic
projects in Iskandar is the broad property sector. We saw established local and foreign
developers starting to build residential, commercial and industrial properties as well as integrated
townships and shopping malls.
Going into 2013, key focus sectors will be healthcare, creative (indications are that
Pinewood Iskandar Malaysia Studios will open in May 2013) and logistics, including business
process outsourcing (BPO) and shared services outsourcing (SSO). We expect the oil & gas and
food and agro-processing (including halal) sectors to spearhead growth in the manufacturing
sector.
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3.6 JOHOR-MALAYSIA-SINGAPORE CONNECTIVITYAs the natural link to Singapore (and its close proximity to the Iskandar project), Johor's
growth is an indication of the positive “Iskandar effect”, which would 1) spin off vibrant
economic and investment connections within Malaysia, and 2) drive a greater flow of investment
and services as well as people between Malaysia and Singapore. Iskandar’s image as a thrilling
growth corridor in the region has created a lot of interest and excitement among Singaporeans
given the island economy’s close proximity to Johor Bahru. A new trend appears to be emerging
as more Singaporean citizens opt to stay here and travel to Singapore for work.
The growing as well as enhanced bilateral ties between Malaysia and Singapore will
provide an added growth stimulus to the development of Iskandar. The latest game-changer
announcement of the construction of a high-speed rail (HSR) link between Kuala Lumpur and
Singapore marks a new era of enhanced connectivity between the two countries, which will
create greater economic activity on both sides of the border. Improving mobility and accessibility
will lead to increased employment opportunities, more economic and investment activities as
well as higher demand for services, including for real estate in the two countries and along the
HSR stops. The externalities from increased rail, road and sea links between Malaysia and
Singapore will spur regional connectivity among ASEAN countries.
3.7 CONVINCING BUY-INS FROM SINGAPOREAN INVESTORSIn the early days of Iskandar's inception and development, Singapore investors adopted a
cautious approach, taking time to assess whether the "mammoth" growth corridor can take off as
planned. Now, the astonishing development progress in Iskandar, along with continued strong
endorsement from both prime ministers, has changed Singaporean investors' perceptions. It is a
win-win situation for both countries.
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We saw an increase in Singaporean investors' investment in Iskandar, which is a clear
signal that rising costs of living and doing business in Singapore, together with higher labour
costs, are pushing companies to relocate to Johor as part of their long-term business planning
strategies. As of July 2012, Singapore maintained its position as the largest foreign investor in
Iskandar, pouring in a cumulative committed investment of RM6bn or 16.6% of total foreign
investments in Iskandar since 2006. The manufacturing sector, especially the E&E sub-sector,
received the greatest portion of total investments of 78.8% or RM4.8bn, followed by the services
sector (RM0.7bn or 11.5%), largely in the education sub-sector. In the services sector, out of
three projects invested in by Singapore, more than RM100m of its pledged investments went to
healthcare, undertaken by Singapore-listed Health Management International (HMI) into the
218-bed Regency Specialist Hospital on the eastern side of the Iskandar Malaysia region. The
other two projects are the proposed Raffles University and Raffles American School.
Looking ahead, more strategic investments from Singapore are expected to flow into
Iskandar given the increasing growth prospects and investment opportunities offered. The
strengthening of bilateral ties is also playing a part to facilitate more two-way eco economic
connectivity between Malaysia and Singapore.
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4.0 PROPERTY PERSPECTIVE
4.1 JOHOR COMING BACK TO LIFE?Johor may be the second-largest property market in Malaysia after the Klang Valley but
residential prices in Johor have been the worst performer over the past 10-15 years. Johor's 10-
year price CAGR was a pitiful 0.6%, way below even the inflation rate and the country's average
house price CAGR of 4.1%. This is due to many factors, including intense competition,
oversupply and lack of confidence. Even on the property investment front, Johor suffers from the
lowest office occupancy rate in the country and the third-lowest retail occupancy rate. Both
office and retail occupancy rates are in the low 70s percentile range. But all of that could change
in the coming years.
Figure 17: Breakdown of transaction value by location
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Figure 18: House price indices
Figure 19: House price appreciation
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Figure 20: 2011 office occupancy rates
Figure 21: 2011 retail space occupancy rates
4.2 LOTS OF PLAYERS
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Property development appears to be the biggest beneficiary of Iskandar and arguably the
best way to play the Iskandar theme. There are over 20 listed developers with land bank in
Iskandar and investors are spoilt for choice. But for many developers, Iskandar or even the wider
Johor exposure makes up a relatively modest percentage of their landbank and sales. The
exceptions, of course, are the Johor developers but these companies are relatively small and off
the radar screen for most analysts.
Figure 22: Existing developments in Iskandar Malaysia
4.3 UEM LAND THE BEST PROXYUEM Land has arguably the largest and best landbank in Iskandar. UEM Land is the
main developer of Nusajaya, which is in Zone B, and there are numerous catalyst projects PREPARED BY: 212984. 213082, 213310, 213431 | GROUP: A
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situated there. There are seven catalyst developments in Nusajaya that will help accelerate the
development, namely the Kota Iskandar administrative centre, Puteri Harbour, a thematic
industrial park (SiLC), a medical park, an international destination resort, education hub
(EduCity) and Medini. The international destination resort, EduCity and Medini developments
are held directly by IIB.
Figure 23: Nusajaya
Kota Iskandar administrative centre - The administrative centre for the Johor state
government measures 320 acres and Phase 1 has already been completed. Some 2,200 employees
of the state government have moved into the offices since Apr 09. Phase 2 covers a mosque as
well as state government staff housing while Phase 3 covers the federal administrative buildings.
The total GDV for Phase 2 and 3 is RM1.1bn.
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Puteri Harbour - Puteri Harbour is sandwiched between Kota Iskandar and the Straits of
Johor. It measures 688 acres and has 10.8km of waterfront. The theme of Puteri Harbour is
waterfront living and it will encompass upmarket properties with relatively high densities. There
will be canal homes, condos, marinas, a convention centre, transport hub, resorts and hotels as
well as fine dining and lifestyle stores. In total, there will be more than 30m sq ft of net floor
space for sale, of which 60% is for residential, 30% for commercial and 10% for retail purposes.
Total GDV is estimated at RM20bn and the project is expected to take 13 years to complete, i.e.
from 2007 to 2020.
A key attraction within Puteri Harbour is the Family Indoor Theme Park that Khazanah
built at a cost of RM350m. The theme park was completed in 2012 and features world-renowned
and popular children’s characters, including Barney, Thomas & Friends, Hello Kitty and Bob the
Builder. The theme park.measures 60,000 sq ft and other components of the project include a
100,000 sq ft retail centre and a 300-room Traders Hotel.
Development of Puteri Harbour has been expedited via land sales and joint ventures. In
Dec 2007, UEM Land sold 111 acres of land to its joint venture company with Dubai-based
Limitless Holdings for RM242m or RM50 psf. Limitless, which is part of the Dubai state-owned
investment group Dubai World, held 60% in the JV Company while UEM Land owned 40%.
Due to financial difficulties as a result of the global financial crisis, Bandar Raya Development
took over the development rights to the 111 acres from the joint venture.
Another joint venture in Puteri Harbour is a 50:50 JV with United Malayan Land to
develop the Somerset serviced apartments with a retail block. The project has been sold out with
pricing hitting as high as RM1, 000 psf. In Apr 10, UEM Land sold outright a 3.3-acre piece of
land to Encorp for RM26m or RM180 psf that is being developed into a residential and
commercial building with GDV of RM330m. Prices at Encore's condo have set new benchmarks
in Puteri Harbour of over RM1, 000 psf. In mid-2011, UEM Land sold a 3.2-acre piece of land
for RM31m or RM220 psf to Tiong Nam Logistics to develop a hotel and serviced apartments.
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In Jan 2013, UEM Land sold 44 acres of land in Puteri Harbour for RM401m or RM210
psf to Liberty Bridge Sdn Bhd, which is equally owned by Multi-Purpose Holding's Tan Sri
Surin Upatkoon, KL Kepong Tan Sri Lee Oi Hian, Tan Sri Wan Azmi Wan Hamzah and
chairman and managing director of UOB-Kay Hian Holdings Ltd Wee Ee Chao. The pricing of
the land appears to be relatively low due to its large size and lower plot ratios. UEM Land stands
to reap significant profits from this land sale that will be recognised in 2013.
UEM Land has launched two wholly-owned projects in Puteri Harbour since 2011. In
end-2011, UEM Land launched the Imperia condos, which were priced at an average of RM 725
psf. At end-2012, the group launched the Teega condos, which are of slightly lower
specifications but branded under the Sunrise name, and managed to fetch a higher average of
RM750 psf for the first two towers and RM800 psf for the final tower. UEM Land plans to
embark on two more projects in Puteri Harbour in 2013.
Southern Industrial & Logistics Clusters (SiLC) - SiLC measures 1,300 acres and is a
managed industrial park based on the clustering concept. The industrial park is expected to take
33 years to complete with a GDV of around RM1bn for land only. UEM Land will promote
“clean” industrial clusters around three major areas, including 1) advanced technologies of
nanotech and biotech, 2) agro-based industries of food and nutrition, and 3) integrated logistics.
Phase 1 and Phase 2A covering 275 acres have already been completed and UEM Land is now
undertaking works on Phase 2B and Phase 2C with an additional land of 332 acres. Most of the
buyers thus far have been Singapore-based companies.
Afiat Healthpark - The medical park spans only 67 acres and will primarily serve the
healthcare needs of the local population. It is an integrated development with three distinctive
areas covering modern medicine, traditional and complementary medicine and wellness.
International destination resort - The international destination resort space covers 3,321
acres and will be the site for large international theme parks. It will be anchored by an
international theme park with a strong brand name and supported by well-known hotels as well
as retail, dining and entertainment facilities. We believe that success in securing a major theme
park would go far in accelerating the development of Nusajaya and the spillover to the rest of
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EduCity - The 395-acre EduCity will be a fully-integrated education hub consisting of
world-class universities, industry-centric R&D clusters, colleges, international schools and
amenities. GDV of EduCity is in excess of RM1bn over seven years. It is estimated that the
student population will hit 16,000 by 2018. The Netherlands Maritime Institute of Technology
(NMIT) Maritime Studies.
JB City Campus and the medicine faculty of Newcastle University started operations in
2011. The University of Southampton engineering faculty and Marlborough College commenced
operations in 2012. EduCity also has a 12,000-seating capacity stadium and sports complex on
22 acres of land as well as an international student village.
Medini - Medini is a major catalyst project and considered one of the flagships of
Nusajaya. An agreement was signed on 29 Aug 2007 between IIB and 1) Mubadala, the
investment company of the Abu Dhabi government, 2) Kuwait Finance House, and 3)
Millenium, a member of the Lebanon-based Saraya Holdings Group. Medini measures 2,200
acres and a 99-year leasehold interest was transacted for US$1.2bn or over RM43 psf. Medini
will be developed into a US$20bn integrated city made up of three clusters consisting of nine
distinctly-themed zones.
Significant incentives were granted by the government solely for Medini, including 1)
exemption from Foreign Investment Committee rules, 2) freedom to source capital globally, 3)
the ability to employ foreigners freely, 4) exemption from income taxes for 10 years from
commencement of business, and 5) exemption from withholding tax on royalty and technical fee
payments to non-residents for 10 years from commencement of operations. These incentives are
available only for the creative, education, financial advisory and consulting, healthcare, logistics
and tourism industries.
Medini is a mixed-use urban development which will feature a lifestyle and leisure
cluster, a logistics village, “creative park” and an international financial district. It is divided into
four zones, i.e. Medini North, Iskandar Financial District, Medini Central and Medini South.
Significant progress has been achieved at Medini and infrastructure works are being undertaken
by WCT, costing RM 767 m. In addition to being awarded the infrastructure works in Jul 09,
WCT also acquired two parcels of land in Medini, a residential one costing RM61m and PREPARED BY: 212984. 213082, 213310, 213431 | GROUP: A
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measuring 11 acres (RM127 psf for the land and RM30 psf based on GFA) in Oct 09 as well as a
10-acre commercial parcel costing RM50m (RM115 psf for the land and RM30 psf based on
GFA) in Dec 10.
The RM750m LegoLand Theme Park sits on 76 acres and is one of the key attractions in
Medini. The theme park was completed last year and is expected to attract 1.2m-1.5m visitors
annually. Another major development in Medini is E&O’s joint venture with Khazanah and
Temasek to develop a RM3bn wellness township. Other projects in Medini include UEM Land’s
55%-owned Lifestyle Retail Mall next to LegoLand, WCT’s RM600m 1 Medini condo and the
Medini Square joint venture with Bina Puri. A LegoLand-themed hotel and Phase 2 of LegoLand
is under construction. Temasek will also build and own two office buildings in Medini.
Another major project in Medini is the Gleneagles Medini medical centre to be built on
15 acres of land. The hospital will provide a comprehensive and fully-integrated healthcare
service platform. Phase 1 will have a 300-bed capacity while future phases will include a
rehabilitation centre, nursing home and hospital residency. Phase 1 is targeted for completion in
2014. Adjacent to Medini is the RM400m Pinewood Iskandar Malaysia Studios, a collaborative
project between Khazanah and UK-based Pinewood, located on 80 acres of land. The plan is to
develop a world-class media production facility to produce a variety of movies and animations.
Phase 1 involves 30 acres of land and is targeted for completion this year.
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Figure 24: Nusajaya catalyst projects
Other residential projects in Nusajaya - UEM Land have five residential projects in
Nusajaya that are not part of the catalyst projects. This includes East Ledang, Horizon Hills,
Ledang Heights, Nusa Idaman and affordable housing. East Ledang was launched in Feb 2008
and is a 275-acre project for the development of high-end guarded and gated residential
properties. East Ledang has a GDV of over RM1bn and will take 6-8 years to complete. Nearly
60% of its buyers are foreigners, mostly from Singapore. Horizon Hills is a 50:50 joint venture
with Gamuda. The upmarket project spans 1,227 acres and has a GDV of RM4bn. Ledang
Heights measures 360 acres and is located next to East Ledang. It was one of the first projects
launched in Nusajaya by the group in 1998. Nusa Idaman is a medium- to high-end hillside
development and was launched in 2006. The project measures 250 acres and features precinct-
based communities with a single entrance-exit and perimeter fencing. The project has a GDV of
slightly over RM0.5bn. There are two social housing projects under affordable housing: Taman
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Nusantara measuring 650 acres and R10/R11 measuring 193 acres. Affordable house prices are
regulated by the state government and start from as low as RM35,000 per unit. Margins are
generally narrow, if not negative.
Other recent developments - Last year UEM Land's 4,500-acre Gerbang Nusajaya
development finally took off. Translated as "Gateway to Nusajaya", Gerbang Nusajaya is the
first development that those driving from Singapore via the second crossing will pass through
after customs and immigration. The project is conservatively estimated to have a GDV of
RM18bn. UEM Land believes that Gerbang Nusajaya could rival, if not exceed, UEM Land’s
current flagship Puteri Harbour in terms of potential. The key strategy behind Gerbang Nusajaya
is to attract Singaporeans and create jobs.
Figure 25: Gerbang Nusajaya
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The masterplan for Gerbang Nusajaya was undertaken by a Singapore-based company in
order to attract Singapore buyers and the focus is on activity-based retail. The idea is to leverage
the abundance of cheap land in Nusajaya to provide retail elements not found in land-scarce
Singapore. There are several key components, including an industrial park, an auto test track and
China Mall. Towards the end of last year, these projects started to materialise. In Oct 2012, UEM
Land entered into a 40:60 joint venture with Ascendas Land (Malaysia) Sdn Bhd to develop a
RM3.7bn 519-acre integrated technology park in Gerbang Nusajaya. The land was sold to the
joint venture company at RM13 psf. This project is slated to take off this year and should help
attract Singapore businesses to Iskandar.
In Dec 2012, UEM Land entered into a memorandum of understanding with China Mall
Holdings Pte Ltd to develop China Mall, a trade and exhibition centre. Also that same month,
UEM Land entered into a 30:70 joint venture with FASTrack Autosports Pte Ltd, a company
controlled by Singapore billionaire Peter Lim, to develop 270 acres in Gerbang Nusajaya into a
RM3.5bn Motorsports City. The land was sold for RM223.5m or RM19 psf. The proposed
development will consist of showrooms, automotive retail, workshop, test track, go-kart track
and all other automotive-related trades and activities with emphasis on 4S, i.e. sales, service,
spare parts and system.
4.4 OTHER DEVELOPERS UNDER OUR COVERAGENearly all developers under our coverage with the exception of UOA Dev have exposure
to Johor. Even UOA Dev was eyeing landbank in Iskandar but will only venture there at the right
price and right location. In terms of landbank, UEM Land has by far the biggest exposure to
Johor at 8,426 acres, of which 7,166 acres is in Nusajaya. A distant second is SP Setia with over
1,000 acres of land bank spread throughout seven projects in the state. Several of its projects are
located within Iskandar and the group's Bukit Indah Johor township is part of Nusajaya. For
many years now, SP Setia was the dominant developer in Johor and in FY10/10, the group
chalked up a record RM1.35bn in new sales
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Figure 26: Breakdown of land banks (acres)
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Figure 27: S P Setia’s various projects in Iskandar
Last year, however, UEM Land for the first time took over the lead as the top selling
developer in Johor and racked up RM1.8bn in sales. This came mainly from its East Ledang,
Horizon Hills and Teega projects. In fact, 73% of its new sales in 2012 came from Nusajaya and
only 27% from outside Johor. This shows that demand in Johor, particularly Iskandar, is really
taking off. SP Setia is very bullish about Iskandar and president and CEO Tan Sri Liew Kee Sin
said during its FY12 analyst briefing that "it is boom town Charlie" for Iskandar over the next
five years.
SP Setia's bullishness is not surprising given the very strong demand for its various
products. Last year, SP Setia's project in Johor Bahru, Setia Sky 88, chalked up a record for
Johor Bahru condo prices. The RM750m project achieved average prices of RM900-1,400 psf,
unheard of in Johor Bahru at that time. Despite the steep prices, the response to the project was
overwhelming and take-up rate is 100%. Many buyers were Singaporeans.
Figure 28: Setia Sky 88
Under our coverage, Mah Sing is a further distant third in terms of sales from Johor in
2012 as new sales from the state was only RM250m. But with its new condo project in Medini, PREPARED BY: 212984. 213082, 213310, 213431 | GROUP: A
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Mah Sing is targeting to achieve RM609m in new sales from Johor in 2013. Mah Sing acquired
the 8.2-acre land in Medini in Oct 2012 for RM75m or RM209 psf. The leasehold land has a plot
ratio of 6x while GDV is large at RM1.1bn. The project comprises residential properties priced
around the RM550-600 psf range, retail and commercial space as well as a hotel. Mah Sing plans
to launch the project in 2H13.
Figure 29: Mah Sing’s Meridin@Medini
E&O will be the new comer to Johor in 2013 and will soon launch its RM3bn wellness
project. The project is a joint venture between E&O, Khazanah and Temasek. The 210 acres was
acquired in mid-2011 at a cost of RM350m or RM38 psf, are leasehold (99 years + 30 years) and
payments will be made in three tranches. The development does not have any Bumiputera or
foreign buyer quotas and come with tax incentives. The township will include a peat reserve with
walkways for residents and a water retention pond that will be beautified. Residential properties
there will be gated and guarded and E&O's main target market is Singaporeans.
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Figure 30: E&O’s Avira wellness project
In Iskandar, Sunway owns three land banks, which have a total size of 1,858 acres (48%
of total landbank). Two plots measuring a combined 1,770 acres are located in 1) Medini South
(691 acres) and were purchased in 2011 for RM 745.3m, and 2) Pendas Region (1,079 acres),
comprising Pendas North and Western Pendas South (779 acres) and Eastern Pendas South (300
acres). The total purchase price was RM597m (RM12 psf). Total GDV for Medini South is
RM12bn over 10 years. First launch (RM300-400m GDV) is targeted for end-2012 or early-
2013. It will be a mixed development consisting of a hotel, serviced apartments, office lots and
retail shops. The Pendas Region land plots have a total GDV of RM18bn over 15-17 years. It
will offer a mixed integrated development with a commercial-residential split of 65:35 and could
also offer other amenities, such as hospitality, healthcare and education facilities and theme park.
First launch is likely a year from now, pending the finalisation of the development's master plan.
Sunway holds a 60% stake in this venture while the balance 40% is held by Iskandar Asset Sdn
Bhd (IASB).
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Figure 31: Sunway’s land in Medini and Pendas
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5.0 PLANTATION PERSPECTIVE
5.1 JOHOR IS THE LARGEST PALM OIL-GROWING STATE IN PENINSULAR MALAYSIA
As the country’s third largest state, Johor is the largest palm oil-growing state in
Peninsular Malaysia. Approximately 14% (714,130 ha) of the total planted palm oil estates in
Malaysia are located in Johor. As large landowners in the state, listed Malaysian planters could
be among the key beneficiaries of the strong property demand and rising land values in Johor
thanks to the success of the Iskandar development.
Figure 32: Breakdown of plantation estates in Malaysia
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The sharp rise in land and property values in the Klang Valley in the mid-90s spurred
many plantation companies to expand into property development to unlock the value of their
land banks. This has led some to view plantation companies as an alternative play to the property
sector in the mid-90s during the property boom. The Malaysian planters quickly moved up the
ranks in this space, and have today emerged among the largest and most profitable property
developers in Malaysia. Some have also since spread their wings beyond Malaysian shores to
Singapore, UK, China and Australia.
5.3 THE KEY IOI CORP PROPERTY PROJECTS IN JOHORBandar Putra, Kulai is the largest of the three development projects in the Iskandar
region. Bandar Putra covers approximately 6,000 acres of freehold land and is a fully
comprehensive regional township located within the boundary of the Senai-Kulai Township. The
projected gross development value (GDV) for this project is around RM8.7bn and the group has
developed around 67% of the land area converted for development of about 2,299 ha (5,680
acres).In 2012, this project accounted for 29% of its total units sold and 19% of its total sales
values. Taman Lagenda Putra, a 91 ha (225 acres) development, is located next to Kulaijaya toll
gate and Jalan Kulaijaya-Pekan Nanas/Pontian Road. It is close to Second Link Expressway and
North-South Highway. The project is just a short distance away from Senai International Airport
while Johor Bahru city centre is 35 minutes away via Skudai Highway/North-South Highway. It
is also located next to the proposed Kulaijaya-Senai Bypass. This is the smallest of the three
projects that are located in the Iskandar region. This project makes up 10% of the total units sold
by the group and 4% of total sales value.
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Figure 33: Location of Bandar Putra, Kulai
The group's second largest and newest township project in Iskandar, Johor is Taman
Kempas Utama. Launched in 2007, the project covers 119 ha (294 acres) and has a gross
development value of RM2.5bn. This project is located next to Kempas Toll and opposite
Starhill Golf and Country Club and is 15 mins away from Johor City Centre. It has also
designated as an integrated public transportation hub for Iskandar Malaysia, which means the
proposed Rail Transit System and High Speed Rail System linking Malaysia and Singapore will
be located close to the township. This project contributes around 6% of the group's property sales
value and 5% of units sold. Other on-going projects by the group in Johor include the Bandar
Putra Segamat, a 6,000 acre township development in Segamat, and The Platino, a serviced
apartment project located next to the Skudai highway.
5.4 EXPECT HIGHER SALES FROM ITS JOHOR PROJECTS
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The opening of JPO has also helped boost sales for the group's project in Indahpura. The
group has in recent years sold several pieces of industrial land in its project for RM18-24 per sq.
ft. which has helped boost its property earnings. We expect the addition of JPO and the rising
appeal of Iskandar to enhance the group's property and land bank values over time. Our tracking
of the group's property sales in Johor revealed a sharp surge in property contribution from Johor
in 2011. We also find Johor to be the key contributor to the group's property sales, making up
99% of total sales in FY11.
Figure 34: Property sales in Johor by Genting Plantations
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6.0 CONSTRUCTION PERSPECTIVE
6.1 BASIC INFRASTRUCTURE HAS TAKEN SHAPESince Iskandar’s inception in 2006, basic infrastructure within Iskandar and access roads
from the fringes of Iskandar has almost been completed. Construction in the last five years
focused on developments within Nusajaya, covering earthwork, access roads and the
construction of several catalytic developments, such as universities and the LegoLand Theme
Park. The largest earthwork package in Medini was worth RM767m, awarded to WCT in 2009.
Sunway, on the other hand, secured three jobs for LegoLand (RM248m), Pinewood Studios (RM
309) and the LegoLand Water Theme Park (RM45m) between 2011 and 2013.
Figure 35: Major awards in Iskandar to listed contractors since 2007
6.2 TRANSPORT INFRASTRUCTURE TO SHIFT TO RAIL WORKHighways, the upgrading of major road networks and building of new ones had been
completed between 2010 and 2012, mainly awarded to private companies. The main project was
the RM945m Coastal Highway. This is a 6-lane, toll-free highway that links Nusajaya and Johor
Bahru city (at Danga Bay) and was completed and officially opened to the public in 2Q12. The
15 km stretch cuts the existing 30-minute ride to the Johor Bahru city centre to 15 minutes while
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dispersing traffic congestion by 30%. Over the next 5-6 years, we expect infrastructure
construction in Iskandar to shift to its rail transport system.
Figure 36: Major Road and highway projects within and around Iskandar
Figure 37: Coastal highway alignment
6.3 CONTRACTORS WITH BIGGEST PROPERTY EXPOSURE TO ISKANDAR
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Contractors under our coverage also have property exposure to Iskandar. But the ones
with larger exposure are WCT, Sunway and Gamuda. WCT has a total of 46 acres (4% of group
land bank) of landbank in Johor, of which 34 acres are located in Medini. The three land parcels
in Medini has a total outstanding GDV of RM2.8bn, comprising high-rise homes and mixed
commercial developments. This accounts for 19% of its total group outstanding GDV. Sunway
owns 1,858 acres in Iskandar or 48% of its total land bank. Total estimated GDV is RM30bn
over 12-17 years and will feature a township development similar to its integrated development
in Bandar Sunway. As for Gamuda, it owns a 50% share of Horizon Hills in Nusajaya with UEM
Land. Its total remaining GDV here is RM4.8bn (55% of its domestic GDV) with unsold land of
710 acres or 69% of its total unsold land domestically.
6.4 SPILLOVER FOR BUILDING-MATERIALS SECTORThe building-materials sector, particularly cement and steel, should also benefit from the
spillover of projects in Iskandar. Demand for steel should be underpinned by the HSR and RTS
as steel typically accounts for about 40% of the input for rail projects. Where cement is
concerned, we expect 4-5% demand growth in 2013 from ongoing property-development
projects in Iskandar. Major building-materials suppliers under our coverage that will likely
benefit are Lafarge (dominant market share), Tasek and Ann Joo.
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7.0 ADVANTAGE INVESTING IN ISKANDAR MALAYSIAIskandar Malaysia was designed with investor’s desire. The region will enjoy Tip-top facilities,
full infrastructure and a one-stop Business Centre to ensure business transactions are fast,
seamless and convenient. Moreover, Iskandar Malaysia is will become Southern Peninsular
Malaysia's most developed region, where living, entertainment, environment and business
seamlessly converge within a bustling and vibrant metropolis. Furthermore, Iskandar Malaysia
has been allocated RM6.83 billion by the Government. Encompassing a vast acreage of land, it is
the largest single development project ever to be undertaken in the region. The advantage of
investing in Iskandar Malaysia as a list of following:
7.1 LOCATION BENEFITOne of the magnitudes advantage investing in Iskandar Malaysia is location where the southern
gateway to Peninsular Malaysia, its advantages include:
Six to eight hours flight radius from Asia's burgeoning growth centre such as Bangalore,
Dubai, Hong Kong, Seoul, Shanghai, Taipei and Tokyo (Connecting Asia Region).
Within reach of a global market of some 800 million people (Global Market).
Located at the crossroads of the East-West trade routes (Trade Benefit).
Accessible by Air, Land or Sea from the rest of Asia (Transportation Benefit).
Almost 3 times the size of Singapore, with vast land banks primed with ready
transportation and telecommunications infrastructure (Facilitate Operating).
Enjoys the same standards of living at a much lower cost of living than Singapore, Hong
Kong, Taiwan, Japan or Korea (Better Living State).
Populated with a multi-lingual, educated workforce from within Johor and the rest of
Malaysia (Great Human Capitalization).
Because of its strategic location, accessibility to leading Asian cities, proximity to some of the
world's most rapidly growing and important economies, and a range of attractive fiscal
incentives, Iskandar Malaysia is poised to attract an exciting influx of foreign and high-level
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corporate investments as discerning investors look to benefit from its many advantages and high
growth potential.
By having location benefit in order to facilitate the business environments in the region,
Malaysia is one of the best places to invest in. Taking into account its competitive wages, low
inflation, high staff retention rate, a well-educated and multilingual workforce along with world-
class infrastructure, it makes perfect economic sense to invest in a country that is as sound and
stable as Malaysia.
7.2 ECONOMIC COMPETENCE & CONTINUOUS ECONOMIC GROWTHMalaysia is a country on the go and dubbed the "lucky country" because of its wealth of mineral
resources and fertile soils, Malaysia did not rest on its laurels but took decisive steps to progress
from an economy dependent on agriculture and primary commodities in the sixties to a
manufacturing-based, export-driven economy spurred on by high technology, knowledge-based
and capital-intensive industries. The structural transformation of Malaysia's economy over the
last 40 years has been spectacular.
Moreover, Malaysia's pragmatic and flexible management approach has enabled the economy to
raise its competitiveness and dynamic competences enhance its resilience in facing challenging
circumstances. Deliberate measure has been taken to make the economy more diversified and
broad-based to ensure sustainable growth. Continuous efforts have been pursued to enhance the
services sector, accelerate value-added of the manufacturing sector as well as boost the
agriculture and agro-based sector as the third engine of growth. New sources of growth continue
to be promoted and developed such as biotechnology, information and communications
technology, halal products and Islamic finance. Indeed Malaysia is developing as a knowledge-
based economy, driven by human capital, innovation and ideas.
7.3 GOVERNMENT SUPPORTIVE & POLICIESGovernment policies that maintain a business environment with opportunities for on the growth
and profits have made Malaysia an attractive manufacturing and export base in the region. The
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private sector in Malaysia has become partners with the public sector in achieving the nation's
development objectives.
Firstly, one of the factors that have attracted investors to Malaysia is the government's
commitment to maintain a business environment that provides companies with the opportunities
for growth and profits. This commitment is seen in the government's constant efforts to obtain
feedback from the business community through channels of consultation such as regular
government-private sector dialogues. These allow the various business communities to air their
views and to contribute towards the formulation of government policies which concern them.
Secondly, liberal equity policy that provides foreign investors in Malaysia's manufacturing sector
can hold 100% equity in projects which export at least 80% of their production. However,
effective from 17 June 2003, 100% foreign equity holding is allowed for all investments in new
projects, as well as investments in expansion/diversification projects by existing companies
irrespective of their level of exports.
Thirdly, attractive tax incentives that have attracted investors to Malaysia invest which
Malaysia's company tax rate is attractive at 27% and is applicable to both resident and non-
resident companies. Malaysia also offers a wide range of tax incentives for manufacturing
projects under the Promotion of Investments Act 1986 and the Income Tax Act 1967. The main
incentives are the Pioneer Status, Investment Tax Allowance, Reinvestment Allowance,
Incentives for High Technology Industries and Incentives for Strategic Projects and Incentives
for the Setting-up of International/ Regional Service-based Operations.
7.4 EDUCATED & COMPETENCE HUMAN CAPITALIZATIONMalaysia offers investors a young, educated and productive workforce at costs competitive with
other countries in Asia. Backed by the government's continued support of human resource
development in all sectors, the quality of Malaysia's workforce is one of the best in the region.
Literacy levels are high at more than 94% and labor productivity has grown steadily at more than
3.3% per annum over the last few years surpassing that of many developed countries.
Other than that, foreign companies in the manufacturing sector are allowed to employ expatriates
where certain skills are not available in Malaysia.
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7.5 EFFICIENCY TRANSPORTATION FACILITIESFirstly, a great efficiency network and well-maintained highway in Peninsular is a boon for all
level users, especially for industries. These highways link major growth centres to seaports and
airports throughout the peninsula and provide an efficient means of transportation for goods.
Secondly, a great efficiency seaport of International used also is a boon for all level users,
especially for international trade such as seaborne trade, has traditionally been the lifeblood of
Malaysia. Today, 95% of the country's trade is by sea via Malaysia's seven international ports -
Penang Port, Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port and Kemaman Port
in Peninsular Malaysia and Bintulu Port in Sarawak. Hong Kong-based Cargonews Asia placed
Port Klang and Port of Tanjung Pelepas among Asia's top ten best seaports and top ten best
container terminal operators.
Thirdly, a well-functioning international airport also is a boon for all level users. Malaysia's
central location in the Asia Pacific region makes her an ideal gateway to Asia. Air cargo
facilities are well-developed in the five international airports - the Kuala Lumpur International
Airport (KLIA), Penang International Airport and Langkawi International Airport in Peninsular
Malaysia, Kota Kinabalu International Airport in Sabah, and Kuching International Airport in
Sarawak. Malaysia's biggest airport, the KLIA, located 50 kilometers south of Malaysia's federal
capital of Kuala Lumpur, has an initial capacity of 25 million passengers and 650,000 tons of
cargo per year. Cargo import and export procedures are fully automated at the KLIA to cut down
delivery time. Within a short span of two years since its opening, the KLIA was ranked number
one for overall business passenger satisfaction in an International Air Transport Association
(AITA) survey.
7.6 HIGH-TECH TELECOMMUNICATIONS FACILITIESMalaysia's telecommunications network has seen impressive expansion and upgrading during the
past decade following the successful privatization of its Telecommunications Department. The
latest digital and fiber optics technology is being used to provide high quality telecommunication
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Other than that, a few week ago that the fastest network which is 4G LTE technology have been
using to provide highest speed and quality telecommunication services at reasonable price widely
all over Malaysia. With all of these telecommunications facilities are able to facilitate the
business operating & great living lifestyle.
7.7 A SOUND FINANCIAL FACILITIESA well-developed financial and banking sector has enhanced Malaysia's position as a dynamic
export base in Asia. Sophisticated financial facilities are available through domestic and foreign
commercial banks and their nationwide network of branches. There are also representative
offices of several foreign banks that wish to establish a presence in the region.
Besides the commercial banks, merchant banks, finance companies and industrial finance
institutions are major sources of credit to the industrial sector in Malaysia. Exporters in Malaysia
can also take advantage of the credit facilities offered by the Export-Import Bank of Malaysia
Berhad (Exim Bank), while another institution, Malaysia Export Credit Insurance Berhad
(MECIB), offers export insurance cover and guarantees.
To complement Malaysia's financial system, the government has established an International
Offshore Financial Centre (IOFC) on the island of Labuan located off the north-west coast of
Borneo. Companies in Labuan enjoy minimal taxes as well as confidentiality. To-date, more than
2,700 offshore companies have started their operations in Labuan. These include offshore banks,
trust companies, and insurance and insurance related companies. The Labuan Offshore Financial
Services Authority (LOFSA) is the agency which promotes and develops Labuan as an IOFC.
7.8 A WISELY SELECTION OF JOINT-VENTURE PARTNERS IN MALAYSIAMost large Malaysian companies have been involved in trade and industry for generations, and
many have excelled in international and regional markets. Thus, foreign investors seeking joint-
venture partners in Malaysia will be able to select from a wide range of companies to find one
that matches their needs. MIDA also assists foreign investors in business matchmaking to start
joint-venture projects or to undertake contract manufacturing
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7.9 A SOUND & VIBRANT BUSINESS ENVIRONMENTMalaysia's market-oriented economy, supportive government policies and a large local business
community that is ready to do business with international corporations have made Malaysia a
highly competitive manufacturing and export base.
In addition, Malaysia's rapid move towards the k-economy allows companies to do business in
an environment that is geared towards information technology.
One of Malaysia's major pull factors is its large pool of young, educated and trainable workforce.
Many of Malaysia's university graduates are trained overseas in fields such as engineering, and
accountancy, allowing them to adapt easily to an international corporate environment.
English is widely used in Malaysia, especially in business thus facilitating the investor's
communication with local personnel and suppliers. The country's legal and accounting practices
derived from the British system are familiar to most international companies.
In short, the advantages of investing in Iskandar Malaysia not only discuss above and it is more
and more it makes perfect economic sense to invest in a country that is as sound and stable as
malaysia. Thus, having more and more advantages of investing in Iskandar Malaysia discuss just
now is an overview of competences to achieve the investor objectives. Moreover, Malaysia is
one of the best places to invest in with the advantages of location benefit, economic competence
& continuous economic growth, government supportive & policies, educated & competence
human capitalization, efficient transportation facilities, high-tech telecommunication facilities, a
sound financial facilities, a wisely selection of joint-venture partners in Malaysia a sound &
vibrant business environment and other such as competitive wages, low inflation, high staff
retention rate, a well-educated and multilingual workforce along with world-class infrastructure,
it makes perfect economic sense to invest in a country that is as sound and stable as Malaysia.
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8.0 CONCLUSIONWhy we think Iskandar will succeed
1) It was planned by Khazanah Nasional, which has some of the best brains in the country and
has a personal interest in making it a success
2) It has the buy-in of the top political leaders in the country as well as of their Singapore
counterparts through the joint ministerial committee
3) It is the natural hinterland to Singapore, where costs are far higher, and is within eight hours’
flight from key Asian countries, including China, India and the Middle East
4) The political friendship between the two countries is probably at its highest point in many
years with numerous outstanding issues of the past addressed
5) The recently-completed catalyst projects that draw in big crowds - LegoLand and the Puteri
Harbour Theme Park - make Iskandar highly visible and exciting
6) Other catalysts, including numerous education institutions, the Johor Premium Outlet and
Pinewood Studios, have been completed or are nearing completion
7) There are many more catalyst projects in the pipeline, including the Motor City, China Mall,
Ascendas industrial estate, Danga Bay, Desaru and Pengerang projects, which will keep
Iskandar's momentum going
8) Accessibility is being improved significantly through infrastructure projects, including new
highways, LRT/MRT connectivity, ferry/MRT connection to Singapore and high-speed rail
9) Hugely successful recent property launches by UEM Land, United Malayan Land, WCT and
SP Setia have attracted the interest of other developers
10) Many soft issues are being looked into, including safety (there is a Safety and Security
Blueprint) and ease of movement for Singaporeans (there is a proposed Free Access Zone),
which will enhance Iskandar's attractivenes
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In conclusion, Iskandar no longer appears to be a pie in the sky and investors and buyers alike
from Malaysia and Singapore are taking a serious second look at opportunities there. Is this
sustainable? The answer to this question depends on which aspect investors are looking at.
If investors are asking about physical property prices, which seem to be going up rapidly with
prime condo prices in Puteri Harbour already reaching RM1,200 psf, then the answer is yes but
only for a few more years until a lot more supply comes onstream. The early property projects,
such as those by UEM Land and United Malayan Land, were priced at RM 700-800 psf while,
more recently, prices have risen to RM1,000-1,200 psf. We believe Iskandar property prices still
have much more upside as prices remain a fraction of their Singapore equivalents. But Iskandar
prices could reach a temporary peak in 3-5 years’ time when the supply of completed units starts
to hit the market. This is not dissimilar to what happened in the KLCC market when prices
doubled within 2-3 years, only to peak and fall after huge supply came onstream.
But if the question relates to Iskandar as a business destination and a growth corridor, then we
believe the answer is a resounding yes. We believe the momentum is sustainable as long as the
conditions remain conducive with no major hiccups in the relationship between the two
countries. Thus far there has been strong progress made on so many fronts, including buy-in
from the authorities of both countries, completion of major catalyst projects, commencement of
new catalyst projects that are even more ambitious and enhancements and additions to
transportation links that can only draw the two nations even closer. Singapore's importance to
Iskandar cannot be overemphasized but the relationship also goes both ways. Singapore too
stands to benefit significantly from Iskandar as it makes perfect economic sense and that is why
we continue to remain bullish on Iskandar.
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