SkyWorld Development Bhd (SKYWLD-Stock code 5315) will be making its debut on Bursa Main Market today. The company is involved in urban property development, particularly high-rise residentials located at Kuala Lumpur. The company has landbank of 55.66 acres located in Kuala Lumpur whereby 37.2 acres are earmarked for 10 launches with an estimated GDV of RM4.08bn between 2023-2026. We expect SkyWorld to register net earnings of RM149.3m and RM158.3m for FY3/24 and FY3/24 respectively. BUY with a TP of RM0.96 based on the average PER of 8x and P/BV 0.8x (refer to table below).

SkyWorld specialises in high-rise residential and affordable properties with selling price starting from RM300K targeting at first time buyers. Since its commencement in October 2014, the company has successfully launched 7 developments with a total GDV of RM3.05bn.

Presently, SkyWorld has 6 ongoing developments in Setapak, Setiawangsa, Sentul and Taman Desa with a combined GDV of RM2.85bn, expected to be completed progressively between 2023- 2026. The company’s projects are well received with consistent strong take up rate of more than 90%. As at 31st March 2023, SkyWorld has total unbilled sales of MYR944.6m which provide clear earnings visibility for the next 3 years.

To explore fresh avenues for growth, SkyWorld plans to extend its reach from Kuala Lumpur to the state of Selangor. With RM100m allocated from the IPO funds, the company is actively searching for suitable land to acquire for future developments. Additionally, SkyWorld intends to expand its footprint beyond Malaysia and is actively sourcing for suitable land in Ho Chi Minh City, Vietnam for its maiden development outside Malaysia.

SkyWorld is targeting to pay dividend of 20% from its net profit. Based on our estimates, the company is expecting to pay dividend of 3.0sen and 3.2sen per share for FY3/24 and FY3/25, translating into yield of 3.7% and 4.0%. Financial leverage is manageable with net gearing of 0.4x as at FY3/23 with strong interest coverage of about 15x. Proceeds from the IPO will be mainly used for land acquisition, working capital and repayment of borrowings.

Source: Rakuten Research - 10 Jul 2023

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