Skyworld Development Bhd - Pipeline expansion underway
Tue, 17-Jun-2025 07:54 am
by Research Team • Apex Research

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SKYWLD (5315)

Target Price (RM)

0.52

Recommendation

Buy

  • Earnings growth is expected to improve in FY26F, driven by five new launches with a total GDV of RM2.2bn.

  • PPVC plant JV on track to support Penang projects, targeting to shorten delivery timelines and improve IRR, with contributions expected from FY28F.

  • After the land deal in Ho Chi Minh City fell through, the Group is currently renegotiating the deal structure to align with updated local regulations.

  • We have raised our CNP higher by 8.4%/11.3% to RM55.8m/RM67.4m for FY26F/FY27F, respectively, adjusting for the potential contribution from new and ongoing launches.

  • We upgrade our recommendation to BUY (from HOLD) with a higher target price of RM0.52 (from RM0.47), based on a 30% discount to our RNAV valuation and appraised with a three-star ESG rating.

 

Upcoming launches. SKYWLD is planning a total of RM2.2bn GDV launches in FY26F with at least five new developments on track to be launched (Figure 1). We believe that this target is achievable, as the first phase of SkyAmanyi is set to launch over the foreseeable future and the Group is backed by a strong track record of securing take-up rates above 90%. These launches are expected to support the Group’s earnings growth in FY26F, with most of the contribution likely to be reflected in FY27F, given that majority of the launches are anticipated to take place in 2QFY26. 

 

Updates for Ongoing Projects. Current active projects include Curvo Residences and Vesta Residences. The launch of SkyAwani 6 is scheduled once Curvo Residences reaches its 80% sales threshold.

 

Build-to-Rent. Sama Square continues to perform well, with a solid 96% occupancy rate. SkyBlox, on the other hand, is still ramping up, with occupancy currently at 22%. These rental assets provide recurring income and help to diversify SKYWLD’s earnings base beyond property sales. However, we expect contribution is expected to make up to only 3.8%/3.1% of core net profit for FY26F/FY27F.

 

Investing in Construction Efficiency with PPVC Plant. SKYWLD is enhancing construction efficiency through its 70:30 JV with Teambuild to establish a precast prefinished volumetric construction (PPVC) plant, which will primarily support its Penang developments. The plant is progressing on schedule and is expected to contribute starting FY28F. Notably, revenue from this venture will not be eliminated at the Group level as modular units will be sold directly to third-party contractors. Management has guided that the total CAPEX will be capped at RM200m (including moulds and factory setup), to be funded through internal funds and/or borrowings. The venture is expected to break even within 7–8 years. The Group expects to shorten the home delivery timeline to 36 months (from the typical 42–48 months), which creates a buffer period that can enhance IRRs. However, implementation is currently limited to sites located within 14km radius of the plant, due to logistic constraints.

 

Setback at Vietnam.  SKYWLD’s expansion into Vietnam saw a temporary setback after a land deal in Ho Chi Minh City fell through due to regulatory issues. The deposit was refunded, and the Group is currently renegotiating the deal structure to align with updated local regulations. 

 

Earnings revision. We have raised our CNP higher by 8.4%/11.3% to RM55.8m/RM67.4m for FY26F/FY27F, respectively, adjusting for the potential contribution from new and ongoing launches. 

 

Valuation & Recommendation. Upgrade to BUY recommendation with a higher target price of RM0.52 (from RM0.47), based on 30% discount rate to RNAV and 0% ESG adjustment, reflecting the appraised three-star ESG rating. We anticipate stronger earnings in the coming years, underpinned by improved project launches, better take-up rates, and contributions from recurring income assets.

 

Risks. Inability to replenish landbank, rising construction costs, and policy risks.

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