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Malaysia's biggest developer, UEM, taps buyers in land-starved Singapore

UEM looks to land-starved Singapore for buyers as it markets HK$10b in housing and commercial projects in Iskandar economic zone

PUBLISHED : Wednesday, 29 May, 2013, 12:00am
UPDATED : Wednesday, 29 May, 2013, 3:21am

UEM Land Holdings, Malaysia's biggest developer by market value, will start selling 4 billion ringgit (HK$10 billion) of new residential and commercial projects this year, targeting Singaporean buyers.

About three-quarters of new developments will be at Nusajaya city in the southern Malaysian state of Johor, where new condominium prices have more than doubled since 2009, says CEO Wan Abdullah Wan Ibrahim.

That is within the 550,000-acre Iskandar Malaysia economic zone, promoted by the government to tap demand from neighbouring Singapore for everything from seafront homes to oil storage.

"Land value in Nusajaya is gaining momentum," Wan Abdullah said. "Investors are seeing a trend that they like very much."

UEM Land is exploiting the closer ties being fostered by the two Southeast Asian nations after decades of arguments over issues including land ownership have been resolved. UEM Land announced 4 billion ringgit worth of projects in Iskandar in December, including an F1 racing test track and an exhibition mall.

Malaysian Prime Minister Najib Razak and his Singaporean counterpart, Lee Hsien Loong, have announced plans for a high-speed rail link by 2020 that would cut the 300-kilometre journey time from the island city to Kuala Lumpur to 90 minutes, with Lee saying the two capitals could be seen as twin cities like London and Paris.

Singaporean firms have invested about S$2.5 billion (HK$15.3 billion) in Iskandar since it was set up in 2006, making Singapore the largest foreign investor, says the Iskandar Regional Development Authority.

The zone is almost three times the size of New York, while Singapore, with 5.3 million residents, is smaller than the American metropolitan area.

"The wealth they have in Singapore could certainly benefit Malaysia as well, and Malaysia's hinterland will benefit Singapore," Najib said last month. "I told Prime Minister Hsien Loong 'I don't mind, you can be the Manhattan, we'll be New Jersey. But we'll prosper together'."

UEM Land is the biggest landowner in the Iskandar region, say brokers Hwang DBS Vickers Research and CIMB Group. The firm still has 2,500 hectares of land in the area to be developed, in addition to 1,400 hectares outside Nusajaya, Wan Abdullah says.

The firm, 65 per cent owned by Khazanah Nasional, Malaysia's state-investment firm, is overseeing the development of Nusajaya, one of five zones in Iskandar.

Selling prices per square foot for new condominiums developed by UEM Land in Nusajaya have risen from 310 ringgit in 2009 to 480 ringgit in 2011 and 800 ringgit in November, Wan Abdullah says, citing past examples of several key projects.

Investors are starting to pay attention. UEM Land has soared 61 per cent this year, outperforming a 4.7 per cent advance in the benchmark FTSE Bursa Malaysia KLCI Index and giving the stock the biggest gain on the 30-member stock gauge.

Eleven of 19 analysts tracked by Bloomberg recommend buying the stock, with five calling for a hold and three saying sell.

This year is "absolutely" the right time to sell real estate in Iskandar, says Terence Wong, a CIMB analyst who has a buy rating on UEM Land. "This year is better than any other year.

"The corridor is getting a lot of media attention. If you look at the press it's coming out practically every day. Sales have been strong for any launches that have taken place."

Developers are set to gain from Najib's election victory earlier this month, which may spur more infrastructure spending, says Bank of America Merrill Lynch. The win gave Najib a mandate to continue promoting an economic transformation plan to draw US$444 billion of private-sector led investments this decade.

"There was always this suspicion that if Singapore doesn't accept, or doesn't play along with all possibilities that Iskandar is presenting, then the Iskandar story will not fly as high," Wan Abdullah said.

"What is evident in the last year, two years maybe, is the strengthening of the relationship. I'd say the Malaysia and Singapore relationship is at an all-time high."