Investment Highlights

• We peg SkyWorld Development’s (SkyWorld) fair value (FV) at RM0.95/ share, based on a 50% discount to its RNAV, similar to other property developers which have a strong focus on affordably priced properties and a neutral 3-star ESG rating (Exhibit 6).This implies FY24F PE of 7.5x, which is in line with industry peers' average (Exhibit 7).

• SkyWorld, which will be listed today, is a prominent urban property developer specialising in high-rise residential, commercial, and affordable properties solely in Kuala Lumpur (KL), Malaysia.

• Since commencing its property development business in October 2014, SkyWorld has successfully launched and completed 7 high-rise developments, with a total gross development value (GDV) of RM3.1bil. As at May 22, 2023, the group has 6 ongoing developments in Setapak, Setiawangsa, Sentul and Taman Desa with a total GDV of RM2.9bil, scheduled for progressive completion between 2023 and 2026.

• The company currently possesses a substantial KL land bank covering 55.7 acres. Out of this, 37.2 acres are earmarked for the group's planned developments with a total GDV of RM4.1bil, while 18.5 acres are reserved for future projects.

• SkyWorld's focus on development efficiency has resulted in higher than industry-average profit margins. Despite challenges such as COVID-19 lockdowns and rising building material costs, the group has maintained gross margins of 31%-35% over the past 4 years. This achievement is attributed to effective planning, design and procurement strategies that minimise wastage and manage development costs effectively.

• SkyWorld places a strong emphasis on delivering highquality developments with consistently impressive QLASSIC scores ranging from 76% to 85% (vs peers’ 69% to 73%) and emerged as the World Gold Winner for its SkyAwani 2 Residences in the FIABCI World Prix d’Excellence Awards 2023 for affordable housing category.

• We forecast a FY23-FY26F earning CAGR of 7%, supported by: (i) unbilled sales of RM968.3mil (1.1x FY24F revenue); (ii) new development launches; (iii) replenishment of landbank; (iv) expansion into build-to-rent developments; and (v) geographical expansion into Vietnam.

• Based on the IPO price of RM0.80, the stock is valued at a bargain FY24F PE of 6.3x vs industry peers’ x7-8x and offers a decent dividend yield of 3.3%.

Source: AmInvest Research - 10 Jul 2023