• SkyWorld to co-develop a PR1MA project at Brickfields with RM192m GDV

• The development is expected to replenish land bank by RM192m, supporting sales and earnings from FY27E onwards

• We tweaked our FY26–27E EPS by 0-2% to factor in the earnings contribution from this development. Maintain HOLD with unchanged target price at RM0.56

Acquires PR1MA development rights for RM32m

SkyWorld’s wholly owned subsidiary, Aspirasi Cekap (ACSB), has entered into a joint development agreement (JDA) with PR1MA Corporation Malaysia to undertake the proposed development and construction of affordable homes with all the amenities and infrastructure on two acres of leasehold land located at Brickfields, Kuala Lumpur. The proposed development for this project is expected to cost RM32m, with RM28m for the land cost and RM4m for the landowner’s guaranteed profit, which is payable 36-48 months after the JDA execution. The SkyAwani Prima development is projected to have a GDV of RM192m, with launch expected in FY27E, subject to required approvals.

Strategically located affordable housing with a potential GDV of RM192m

The purchase consideration of RM32m for the development rights translates to a land-to- GDV cost of 16.8%, similar to the historical average of 14-16% for its affordable housing segment. We are positive overall about this acquisition as it will replenish SkyWorld’s remaining land bank by 6% to RM3.7bn. The project is strategically located in Brickfields, Kuala Lumpur, which is within close proximity to KL Sentral, offering strong connectivity to several key business districts, educational institutions, and medical facilities. Post- acquisition, we expect minimal impact on its FY25E gearing as the majority of the payments are scheduled in tranches after 18-48 months.

Maintain HOLD

We adjust our FY27E earnings forecasts by 2% to factor in the earnings contribution from this project but trim FY26E earnings by 1% on higher interest expense. Maintain our HOLD rating and RNAV-derived target price at RM0.56. Key risks to our HOLD call include faster- than-expected geographical expansion to Vietnam, lower-than-expected property sales, sluggish landbank replenishments, and higher building material prices.

Source: Philip Capital Research - 10 Oct 2024