SkyWorld Development Berhad - Setting Foot in Vietnam
Wed, 11-Oct-2023 10:29 am
Apex Research

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SKYWLD (5315)

Target Price (RM)

1.07

Recommendation

Buy

Announcement

• 1.3 Acres of Land for RM67.9m Cash – SkyWorld announced that its wholly-owned subsidiary SkyWorld Development (Vietnam) plans to acquire 1.3 acres of land in Ho Chi Minh City, Vietnam for RM67.9m cash. The developer plans to acquire the land through the purchase of a 100% stake, equivalent to 1.7m fully paid-up ordinary shares, each valued at VND100k, in the Thuan Thanh Trading Production and Real Estate Trading Joint Stock Company.

• Land located in Ho Chi Minh City - We see this strategic move aligned with SkyWorld Development's expansion plan to extend its urban property development business model to Ho Chi Minh City, Vietnam. The Group explains that the land is conveniently located in District 8, Ho Chi Minh City, approximately 12km from the central business district (CBD) in District 1 and well-connected to Vo Van Kiet Street, a major arterial road linking the western part of the city to the CBD.Various local amenities such as schools, hospitals and commercial shops are situated within a 3km radius from the Project Land.

• Financed Internally and Externally – SkyWorld plans to finance the purchase using a combination of funds generated internally, loans from banks, and the issuance of Islamic commercial papers and Islamic medium-term notes. The transaction is anticipated to be finalized in the 4Q24.

• Project planning already in place - The project company is currently in the process of fulfilling legal requirements to register and execute a project that includes a 24-storey apartment building on the land. The project is expected to be priced between VND50m to VND70m per sqm, which the Group believes will cater to a significant target market and achieve a favourable absorption rate. The estimated GDV of the project is approximately VND1,600b or equivalent to RM310.4m.

Earnings Outlook/Revision
• Forecast maintained – We are positive on proposed development but are cautious on forex risks. We make no adjustments to our forecast pending further details from the management as the project is unlikely to contribute to near term earnings at the moment.

Valuation & Recommendation
• Maintain BUY with an unchanged target price of RM1.07. Our target price is pegged at its peers forward 8.4x PE multiple to the Group’s 2025F diluted EPS which is in line with our overall optimistic outlook of the sector as interest rate hikes are deemed to reach its peak while remain overall conservative.

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