SKYWLD: Property Developer Poised for Strong Earnings Rebound and Diversified Growth
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Despite a challenging first quarter, a leading property developer is signaling a significant earnings turnaround, driven by strategic diversification and a robust project pipeline. The company’s recent results saw a dip, but improving sales momentum in key projects and a clear path to growth have led an investment bank to initiate coverage with a “BUY” recommendation and a raised target price.
Performance Review
The first quarter of fiscal year 2026 (1QFY26, April-June 2025) saw revenue decline to RM75 million, marking a 25% year-on-year and 35% quarter-on-quarter drop. Core net profit also fell significantly to RM3.8 million, down 62% YoY and 74% QoQ, falling below consensus expectations. This softer performance was largely attributed to a gap in new project launches and the completion of two major projects in late FY25, which impacted operating leverage.
However, a positive shift in sales momentum was observed during the quarter, with RM102 million in new bookings. Take-up rates for existing projects like Curvo Residences and Vesta Residences showed strong improvement, climbing to 64% and 82% respectively, reflecting resilient buyer demand.
Future Outlook and Strategic Initiatives
Analysts believe FY26 will mark the trough of the company’s earnings cycle, with a strong recovery anticipated from FY27 onwards. This rebound is underpinned by a substantial project pipeline totaling approximately RM2.2 billion in gross development value (GDV) for the second half of FY26. Key launches, including SkyAman I, SkyAwani Prima, and Pearlmont Phase I in Penang, are expected to anchor this recovery.
A significant growth driver is the company’s RM13 billion joint venture with the Penang Development Corporation. This initiative, focusing on affordable housing in Seberang Jaya and Batu Kawan, represents a transformational step, diversifying the revenue base away from Kuala Lumpur and integrating the company into Penang’s industrial growth narrative.
Further enhancing future profitability and operational efficiency is the investment in Malaysia’s first large-scale Prefabricated Pre-finished Volumetric Construction (PPVC) plant. Scheduled for commercial deliveries by FY27, this technology is expected to shorten build cycles by 20-30%, improve construction quality, and enhance margin resilience through reduced costs.
The developer is also expanding its market reach with strategic moves into higher-margin segments, including an RM110 million land acquisition in Mont Kiara for a premium high-rise development planned for FY28. Additionally, ventures into the recovering Vietnamese market, specifically Ho Chi Minh City, offer medium-term growth optionality with projects totaling RM300 million GDV.
Financial Projections and Recommendation
Based on these strategic drivers, core net profits are forecast to rebound sharply, with projections of RM41.8 million for FY26, RM94.7 million for FY27, and RM121.9 million for FY28. This translates to an impressive core net profit compound annual growth rate (CAGR) of 21% over CY24-CY27, making it one of the fastest-growing developers under coverage. The company maintains a strong balance sheet with net gearing at a healthy 0.12x as of June 2025 and adheres to a 20% dividend payout policy, with yields expected to increase significantly.
The investment bank notes the stock is currently undervalued, trading at a substantial discount compared to its peers. Given its strong fundamentals, disciplined execution, and leading position in affordable housing, coupled with new growth catalysts, the investment bank has initiated coverage with a BUY recommendation. The target price has been set at RM0.25, implying a potential upside of 25.0% from the last traded price of RM0.20.
