SKYWLD’s 1QFY26 CNP came in at RM3.8m (-62.2% YoY, -73.8% QoQ. The results were below expectations, accounting for only 6.8% of our full-year forecast and 5.9% of consensus estimate. The earnings miss was primarily driven by slower construction progress of ongoing projects, while newly launched projects have yet to meaningfully contribute.
We factor in the Penang landbank with GDV of RM12.0bn to be developed over 12 years, which raised our RNAV/share to RM1.00 after its recent launch.
We revise our earnings forecast downward by 7.6%/8.1% to RM51.5m/RM62.0m for FY26F and FY27F, respectively, to reflect our expectation that earnings may remain subdued in the near term given the time lag between new launches and meaningful profit recognition, and roll forward FY28F to RM87.8m.
However, we widened the RNAV discount from 30% to 50% to reflect SKYWLD’s weaker-than-expected earnings delivery, limited near-term earnings visibility, and execution risks tied to the monetisation of its sizeable yet long-dated landbank.
Downgrade to HOLD recommendation with an unchanged target price of RM0.52, based on a 50% discount to our revised RNAV valuation and appraised with a three-star ESG rating.
Results below expectations. Excluding the gain on fair value adjustment on short-term funds (-RM1.3m) and unrealised foreign exchange loss (+RM2.3m), 1QFY26 core net profit (CNP) came in at RM3.8m. The result was weaker-than-expected, accounting for 6.8% of our forecast of RM55.8m and 5.9% of consensus estimate of RM64.4m. The earnings miss was primarily driven by lower-than-expected revenue recognition from ongoing projects due to slower construction progress.
YoY. CNP fell 62.2% YoY to RM3.8m (from RM10.0m), on the back of a 24.5% YoY decline in revenue. The weaker top line was due to the absence of contributions from EdgeWood Residences and SkyVogue Residences. Earnings were supported solely by ongoing projects, namely Vesta Residences and Curvo Residences.
QoQ. CNP fell 73.8% QoQ (from RM14.5m), mainly due to the high base effect in the preceding quarter, which benefited from stronger contributions from EdgeWood Residences and SkyVogue Residences that were completed in 4QFY25, alongside higher progressive billings from key projects in the immediate preceding quarter.
Outlook. In the coming quarters, we expect stronger contributions from Vesta Residences as construction accelerates, following the slower progress in 1QFY26. With a take-up rate of 85%, earnings recognition should become more meaningful, while Curvo Residences (take-up: 66%) is on track for completion in 4QFY26. We expect approximately RM408.8m to be recognised from ongoing projects. Unbilled sales stood at RM483.1m (from RM461.2m in 4QFY25), and are expected to be largely recognised in FY26. The RM2.0bn launch target for this year remains intact, although we believe meaningful earnings contributions will only materialise from FY28 onwards. The pipeline continues to be replenished through recent and upcoming launches, while longer-term prospects are supported by the RM12.0bn affordable housing projects in Penang, launched in FY26 with construction scheduled to begin in CY27. Management’s recent review suggests greater confidence that the GDV of its Mont Kiara project could rise to RM1.0bn (from RM800m), underpinned by its strategic land positioning. Nevertheless, we remain cautious as new launches may not immediately translate into a meaningful earnings uplift. Channel checks indicate that SkyAman bookings have reached nearly 50%, but we remain guarded on conversion rates and overall market absorption.
Earnings Revision. After factoring in the lower-than-expected revenue recognition due to slower construction progress, we slash our FY26F and FY27F earnings forecasts by 7.6% and 8.1%, respectively.
Valuation. Following the recent rebound in share price, we downgrade SKYWLD to HOLD (from BUY) with an unchanged target price of RM0.52, based on a 50% discount to our RNAV valuation, and appraised with a three-star ESG rating. We now see SKYWLD as fairly valued, with limited near-term catalysts given slower construction progress and earnings visibility largely hinging on unbilled sales recognition, while upside from new launches and longer-term projects may take several years to meaningfully contribute.
Risks. Potential increases in construction costs, intense competition in the mid-range residential segment and regulatory changes.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.216494 | 4.249912 |
| EUR | 4.923595 | 4.928588 |
| CNY | 0.592163 | 0.592763 |
| HKD | 0.540426 | 0.544215 |
| SGD | 3.273679 | 3.296901 |