SkyWorld Development Berhad - A sluggish quarter
Mon, 26-Aug-2024 07:32 am
by Research Team • Apex Research

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SKYWLD (5315)

Target Price (RM)

0.51

Recommendation

Hold

Summary

SKYWLD 1QFY25 core net profit of RM10.0m (-76.2% yoy and -51.8% qoq) came below ours and consensus expectations, constituting to only 8.8% and 9.5% of forecast respectively, dragged by lower progressive contribution from EdgeWood Residences, while SkyAwani IV Residences was completed in the prior financial year.

Slashed our earnings by -27.8% and -17.4% to RM82.0m and RM101.3m for FY25F and FY26F respectively to account for slower-than-expected revenue recognition from on-going projects such as EdgeWood Residences, Curvo Residences and Vesta Residences.

Maintained our HOLD recommendation, but with a lower target price of RM0.51, based discount rate of 20% to our RNAV.

 

Results Review

  • Results review. 1QFY25 core net profit sank -76.2% yoy and -51.8% qoq to RM10.0m, dragged by lower progressive contribution from EdgeWood Residences, while SkyAwani IV Residences was completed in the prior financial year. Revenue for the quarter dipped -53.1% yoy and -37.6% yoy to RM98.8m.

  • Results below expectations. The reported core net profit came below expectations, accounting to only 8.8% and 9.5% of ours and consensus expectations. Key deviation is mainly due to slower-than-expected recognition ongoing projects.

  • Operations Highlights. During the quarter, we gather that GP margins fell to 32.4% vs. 37.3% in the previous corresponding quarter as several projects are at infant stage of construction progress. Still, the Group maintained a lean balance sheet, equipped with a net cash position that is supported by RM515.3m cash in 1QFY25.

  • Industry Highlights. Malaysia property transactions continue to demonstrate resiliency with housing loan applications rose 16.9% qoq to RM121.5bn in 2Q24, while loan approval rate hovered above 40% during the period. While residential overhang declined to 24,208 units in 1Q24 – the lowest level since 2018, we remain cautious over the take up rates of new property launches priced above RM500,000.

  • Outlook. SKYWLD's unbilled sales remain relatively unchanged at RM555.5m, from RM548.1m in 4QFY24, indicate that 0.8x of FY24 revenue that is sufficient to maintain revenue visibility for the next 12 months. Moving forward, SKYWLD remain on track to launch several projects that carries a total gross development value (GDV) of RM1.0b for FY25. Earnings sustainability will be supported by progressive recognition of several projects such as EdgeWood Residences, Curvo Residences and Vesta Residences.

  • Valuation. Slashed our earnings by -27.8% and -17.4% to RM82.0m and RM101.3m for FY25F and FY26F respectively to account for slower-than-expected revenue recognition from on-going projects. Maintained our HOLD recommendation on SKYWLD, but with a lower target price of RM0.51, based discount rate of 20% to our RNAV.

  • Risk. Economic stagnation, coupled with limited land availability, potential construction cost increases, and regulatory changes, could hamper future development.

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