SKYWLD: Property Developer Faces Weak Start to FY26, Future Growth Secured by Robust Pipeline

A property developer experienced a weak start to its financial year 2026, with core earnings for the first quarter registering a significant decline. The company reported core earnings of RM5.2 million, marking a 68.5% year-on-year decrease, which fell short of both the investment bank’s and consensus full-year estimates. Revenue also saw a sequential decline of 34.8% quarter-on-quarter, contributing to a 49.6% year-on-year drop in gross profit and a decline in profit before tax to RM5.6 million.

Performance Review

The underperformance was primarily attributed to the absence of contributions from projects completed in the prior financial year, namely EdgeWood and SkyVogue Residences, which had been completed in 1QFY25. Additionally, weaker billings from The Vesta Residences and a one-off unrealised foreign exchange loss of RM2.3 million further impacted profitability and led to margin compression. Slower-than-expected progress billings from ongoing projects and the back-loaded recognition of new launches along the S-curve also weighed on the results.

Challenges and Adjustments

In light of the slower-than-expected progress billings from ongoing projects and the back-loaded revenue recognition, the investment bank has revised down its FY26-27E revenue forecasts by 6-17% and core earnings by 5.9-17.2%. This necessitated a wider 68% discount (from 65%) to be applied in the RNAV-derived target price calculation, resulting in a lowered target price of RM0.59 (from RM0.64). Slower take-up rates at The Curvo Residences also presented a challenge, though targeted marketing initiatives are now addressing this.

Future Outlook

Despite the near-term headwinds, the outlook remains positive, underpinned by a robust pipeline of future projects and improving market conditions. As of June 30, 2025, unbilled sales stood at RM483.1 million, equivalent to 1.0 times the forecast FY26 revenue. This figure is expected to improve with enhanced sales momentum at The Curvo Residences and strong buyer interest for Pearlmont – Phase 1, which was launched ahead of schedule.

The company anticipates a significant boost from its planned RM2.2 billion pipeline of new launches in the second half of FY25, which includes projects like SkyAmani VI and Cassia – Phase 1. These launches are projected to potentially increase the revenue cover to over 2 times from FY26 onwards. While recent launches such as SkyAman 1, SkyAwani Prima, and Pearlmont have garnered strong interest, meaningful earnings contributions are largely expected to materialize from FY27 as projects ramp up along the S-curve.

The company’s strong position in the affordable housing segment, coupled with resilient demand and supportive government policies, is expected to drive sustained sales momentum. Furthermore, the adoption of Prefabricated Prefinished Volumetric Construction (PPVC) is poised to enhance execution efficiency and foster growth, providing solid earnings visibility.

Analyst View and Recommendation

Despite the revised forecasts and target price adjustments, the investment bank maintains a BUY recommendation. This constructive view is underpinned by the company’s strong fundamentals in the affordable housing sector, resilient demand, and a solid earnings visibility supported by its robust project pipeline and enhanced operational efficiency from PPVC adoption.