SKYWLD (5315): Unlocking Value with Strategic Penang Land Acquisition
Summary (TL;DR):
- Research Firm: MERCURY Investment Bank
- Subject: SKYWLD / SKYWLD (5315)
- Core Rating: BUY
- Target Price / Top Picks: MYR 0.64
- One-Liner: SkyWorld’s latest land acquisition in Penang for affordable housing offers a highly favourable cost structure, enhancing future margins and solidifying its earnings visibility, making its current share price decline unjustified.
Report at a Glance
MERCURY Investment Bank released its latest research report on SKYWLD on 2025-07-09, maintaining a “BUY“ rating with an unchanged target price of MYR 0.64. The core thesis of the report is that SkyWorld’s recent acquisition of a 25.9-acre land parcel in Penang at a significantly low cost per square foot paves the way for its first affordable housing project in the region, promising enhanced profitability and strong long-term earnings visibility despite its recent share price underperformance.
Investment Thesis (The Bull Case)
- Strategic Land Acquisition: SkyWorld has acquired a 25.9-acre land in Bandar Cassia, Penang, from PDC for RM48.5m, which is part of a larger 161.5-acre phased acquisition. This enables the launch of its first Penang affordable housing project (Cassia – Phase 1) with an estimated Gross Development Value (GDV) of RM849m, targeted for 2HFY26E.
- Exceptional Land-to-GDV Cost: The acquisition cost translates to a land-to-GDV cost of just 5.7%, which is significantly below SkyWorld’s historical average of 14–16%. This favourable entry cost is expected to enhance margin resilience and preserve profitability amidst input cost fluctuations.
- Robust Outlook & Market Position: The group benefits from a strong position in the affordable housing segment, cushioned by high demand and supportive government policies. This is further backed by a robust RM2.2bn GDV project launches pipeline and the adoption of Industrialised Building System (IBS) using Prefabricated Pre-finished Volumetric Construction (PPVC) to support growth.
Potential Risks (The Bear Case)
- Input Cost Fluctuations: While the favourable land cost mitigates it, the property development sector remains exposed to potential increases in input costs (e.g., raw materials, labour), which could impact project profitability if not managed effectively.
- Unjustified Market Undervaluation: Despite strong earnings visibility and attractive fundamentals, SkyWorld’s share price has declined 23% year-to-date, which the analyst views as unjustified and reflective of market undervaluation rather than fundamental weakness.
- Execution Risk for New Projects: The successful execution and timely launch of the new Penang affordable housing project, especially being its first in the northern region, will be crucial for realising the projected GDV and earnings.
Financial Forecast Summary
The analyst’s financial projections for the coming years are as follows:
| Fiscal Year (YE to December) | FY25F | FY26F | FY27F |
|---|---|---|---|
| Revenue (RM mil) | 445.4 | 548.7 | 932.1 |
| Net Profit (RM mil) | 54.2 | 66.4 | 106.9 |
| EPS (sen) | 4.6 | 5.6 | 9.0 |
| DPS (sen) | 1.5 | 1.3 | 2.1 |
| Dividend Yield (%) | 1.6 | 1.9 | 2.5 |
| P/E Ratio (x) | 9.6 | 7.9 | 3.9 |
(Source: MERCURY Investment Bank research report)
Valuation & Target Price
| Rating | BUY |
| Last Close Price | RM0.44 |
| Target Price (TP) | MYR 0.64 |
| Valuation Methodology | Derived from a 65% discount to the estimated Revalued Net Asset Value (RNAV) of RM1.84 per share. |
Analyst’s Conclusion
- Overall Stance: MERCURY Investment Bank maintains its “BUY” call on SkyWorld, recommending investors to “accumulate on weakness” given the attractive valuation and strong fundamentals.
- Key Catalyst/Strength: The strategic land acquisition in Penang at an exceptionally low land-to-GDV cost is a significant positive, promising enhanced margins and solidifying the group’s long-term earnings visibility, especially within the high-demand affordable housing segment.
- Major Headwind/Risk: The primary concern noted is the unjustified 23% year-to-date decline in SkyWorld’s share price, which the analyst believes does not reflect the company’s robust earnings visibility and attractive valuation.
- What to Watch: Investors should closely monitor the progress and launch of the Penang affordable housing project (Cassia – Phase 1) in 2HFY26E, as well as the continued execution of its broader RM2.2bn GDV project pipeline.
Disclaimer: This article is a summary and interpretation of a research report published by MERCURY Investment Bank on 2025-07-09. All information is for reference purposes only and does not constitute investment advice. Investors should conduct their own independent research and due diligence and assume all associated risks.
