SkyWorld Development Bhd: Setting up base for PPVC Plant

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SkyWorld Development Bhd Report by Mercury Securities


MERCURY SECURITIES SDN BHD

(A Participating Organisation of Bursa Malaysia Securities Bhd.)

Company Update

Monday, August 11, 2025

Ng Hong Tong

hongtong@mersec.com.my

BUY
Main Market | Property Sector
TP: RM0.64(→)
Last Closing Price: RM0.52

SkyWorld Development Bhd: Setting up base for PPVC Plant

SkyWorld has acquired four adjoining freehold parcels in Seberang Perai Tengah, Penang, totalling 26.37 acres for RM82.7m (RM72 psf) to support its upcoming affordable housing projects in the state. We view the land acquisition as a strategically advantageous, given its close proximity (12-15km) to its affordable housing development site in Penang. This location advantage should help to lower transportation costs for prefabricated modules, thereby supporting margin expansion and improving delivery efficiency. Besides, the planned PPVC manufacturing facility will not only support the execution of SkyWorld’s Penang affordable housing development pipeline but also enhance its ability to secure future large-scale affordable housing projects, supported by the PPVC plant’s estimated annual production capacity of ~3,600 residential units. We believe PPVC manufacturing will become a meaningful earnings contributor for SkyWorld as execution of its Penang affordable housing pipeline gathers momentum. We reiterate our BUY call with an unchanged TP of RM0.64, derived from 65% discount to our estimated RNAV of RM1.84 per share.

Key details.

SkyWorld, via its 70%-owned subsidiary Prefab Master Sdn. Bhd. and in turn through its wholly-owned unit Prefab Master (Penang) Sdn. Bhd. has entered into a Sale and Purchase Agreement with Mr. Tan Tio Cheng @ Tan Chow Cheng for the acquisition of four adjoining parcels of freehold land in Mukim 14, Daerah Seberang Perai Tengah, Pulau Pinang. The land, measuring a total of approximately 26.37 acres, are purchased for a total cash consideration of RM82.7m (equivalent to RM72 per sq ft).

Primary usage of the land.

SkyWorld plans to use the acquired parcels for the construction of a manufacturing facility dedicated to producing prefabricated and prefinished modular systems, which will support its upcoming joint development projects in Penang in collaboration with the Penang Development Corporation (PDC) and PDC Properties Sdn. Bhd. Recall that in December 2024, SkyWorld entered into a joint development agreement with these partners to deliver over 35,000 affordable housing units under the Rumah Bakat MADANI schemes with estimated total GDV of RM13bn over 15 years.

Our takes.

We view the land acquisition as strategically positive, given its close proximity (12-15km) to SkyWorld’s affordable housing development site in Penang. The close distance should translate into lower transportation costs for prefabricated modules, thereby enhancing project margins and improving delivery timelines. Besides, the new PPVC manufacturing facility will not only support the execution of its Penang affordable housing pipeline but also enhance its ability to secure future large-scale affordable housing projects, supported by the PPVC plant’s estimated annual production capacity of ~3,600 residential units. Furthermore, we believe PPVC manufacturing would form meaningful earning contributor to SkyWorld once its Penang affordable housing development gains execution momentum.

Our earnings forecast maintained.

We maintain our FY26-27 earnings forecasts as we expect minimal earning contribution from PPVC manufacturing in the near term. No change to our TP of RM0.64 based on a 65% discount to our estimated RNAV of RM1.84 per share. We continue to like SkyWorld for its strong position in the affordable housing segment (cushioned by strong demand and supportive government policy), strong earning visibility backed by robust RM2.2bn GDV project launches pipeline and PPVC adoption to support growth.

Business Overview

SkyWorld Development Berhad (SkyWorld), a property developer that focuses on the development of residential and commercial properties.

Share Price Performance

A line graph shows the share price performance from August 2024 to May 2025. The closing price (LHS) fluctuates between RM0.45 and RM0.60. The relative performance to FBMKLCI (RHS) shows a general upward trend, starting from around 80 and ending near 120.

Return Information

KLCI (pts) 1,557.0
YTD KLCI chg. (5.2)
YTD Stock Price chg. (8.0)

Price Performance

1M 3M 12M
Absolute (%) 12.0 9.6 (9.6)
Relative to KLCI (%) 10.6 8.9 (7.2)

Stock Information

Market Cap (RM m) 515.0
Issued Shares (m) 1,000.0
52-week High (RM) 0.611
52-week Low (RM) 0.380
Est. Free Float (%) 33.5
Beta vs FBM KLCI 1.22
3-month Avg Vol. (m) 0.35
Shariah Compliant Yes
Bloomberg Ticker SKYWLD MK

Top 3 Shareholders

Shareholder %
Datuk Seri Ng Thien Phing 44.4
Datuk Lam Soo Keng @ Low Soo Keong 10.3
Lee Chee Seng 5.0

FY DEC (RM m)

FY25A FY26E FY27E
Revenue 445.4 548.7 932.1
EBITDA 97.5 107.3 161.9
PBT 82.8 87.4 140.6
Net Profit 54.2 66.4 106.9
Core Net Profit 54.2 66.4 106.9
Core EPS (sen) 4.6 5.6 9.0
Core EPS Growth (%) (49.1) 22.6 60.9
Net DPS (sen) 1.5 1.3 2.1
BV Per Share (sen) 87.8 93.1 101.7
Net Div. Yield (%) 2.9 2.6 4.2
P/E (x) 11.3 9.2 5.7
P/B (x) 0.6 0.6 0.5
ROE (%) 6.2 7.1 10.5

Key Financial Data

Income Statement

FYE Dec FY23 FY24 FY25 FY26E FY27E
Revenue 841.4 688.0 445.4 548.7 932.1
EBITDA 217.9 172.8 97.5 107.3 161.9
Depn & amort 2.1 4.9 6.7 5.8 7.2
Net interest expense (11.2) (8.4) (8.1) (7.4) (7.4)
Pretax profit 204.8 159.9 82.8 87.4 140.6
Taxation (54.1) (53.4) (28.6) (21.0) (33.8)
Net profit 150.7 106.5 54.2 66.4 106.9
Core net profit 150.7 106.5 54.2 66.4 106.9

Balance Sheet

FYE Dec FY23 FY24 FY25 FY26E FY27E
PPE 23.7 31.6 33.5 38.6 50.0
Trade and other receivables 52.1 112.5 236.5 88.5 145.6
Contract Assets 175.1 96.1 38.7 42.2 71.7
Tax asset 12.6 15.3 16.3 16.3 16.3
Other assets 816.6 803.3 849.3 744.2 840.1
Deposit, bank and cash 237.7 499.9 349.6 646.3 659.3
Assets 1,317.7 1,558.6 1,523.8 1,559.9 1,766.8
LT borrowings 323.9 276.1 188.8 188.8 188.8
ST borrowings 159.2 213.4 260.4 260.4 260.4
Payables 212.4 196.1 184.3 167.2 288.6
Other liabilities 6.5 30.1 12.2 12.2 12.2
Liabilities 702.0 715.8 645.7 628.6 750.1
Share capital 62.5 245.0 245.0 245.0 245.0
Reserves and retained earning 547.3 601.1 633.2 686.3 771.8
Shareholder’s equity 609.8 846.1 878.1 931.3 1,016.8
NCI 5.9 (3.3) (0.0) (0.0) (0.0)
Equity 615.7 842.8 878.1 931.2 1,016.7
Equity and Liabilities 1,317.7 1,558.6 1,523.8 1,559.9 1,766.8

Cash Flow Statement

FYE Dec FY23 FY24 FY25 FY26E FY27E
Profit before taxation 204.8 159.9 82.8 87.4 140.6
Depreciation & amortisation 2.1 4.9 6.7 5.8 7.2
Changes in working capital (203.3) 47.9 (131.6) 248.7 (61.0)
Net interest received/ (paid) (24.8) (28.5) (14.5) (14.0) (14.0)
Tax paid (79.3) (49.6) (39.4) (21.0) (33.8)
Others 12.8 18.3 4.9 7.4 7.4
Operating Cash Flow (87.8) 153.0 (91.3) 314.4 46.4
Capex (26.1) (26.1) (8.7) (11.0) (18.6)
Others 3.9 (53.8) 29.4 6.6 6.6
Investing Cash Flow (22.2) (79.9) 20.8 (4.4) (12.0)
Issuance of shares 166.4
Changes in borrowings 144.2 (15.0) (42.0)
Dividends paid (42.5) (15.0) (13.3) (21.4)
Others (0.0) (4.0) (0.0)
Financing Cash Flow 144.2 104.9 (57.0) (13.3) (21.4)
Net cash flow 34.2 178.1 (127.5) 296.7 13.0
Beginning cash 189.4 223.4 402.2 270.4 567.2
Ending cash 223.6 401.5 274.7 567.2 580.2

Key Statistics & Ratios

FYE Dec FY23 FY24 FY25 FY26E FY27E
Growth
Revenue 6.4% -18.2% -35.3% 23.2% 69.9%
EBITDA 29.9% -20.7% -43.5% 10.0% 50.9%
Pretax profit 36.5% -21.9% -48.2% 5.6% 60.9%
Net profit 44.5% -29.3% -49.1% 22.6% 60.9%
Core EPS -3.6% -29.3% -49.1% 22.6% 60.9%
Profitability
EBITDA margin 25.9% 25.1% 21.9% 19.6% 17.4%
Net profit margin 17.9% 15.5% 12.2% 12.1% 11.5%
Effective tax rate 26.4% 33.4% 34.5% 24.0% 24.0%
ROA 11.4% 6.8% 3.6% 4.3% 6.0%
ROE 24.5% 12.6% 6.2% 7.1% 10.5%
Leverage
Debt/ Assets (x) 0.37 0.31 0.29 0.29 0.25
Debt/ Equity (x) 0.78 0.58 0.51 0.48 0.44
Net debt/ equity (x) 0.4 Net Cash 0.1 Net Cash Net Cash
Key Drivers
GP margin 35.5% 36.8% 37.2% 36.0% 35.0%
PBT margin 24.3% 23.2% 18.6% 15.9% 15.1%
Unbilled sales (RM m) 944.6 548.1 461.2 1,025.4 1,864.3
Valuation
EPS (sen) 12.7 9.0 4.6 5.6 9.0
Core EPS (sen) 12.7 9.0 4.6 5.6 9.0
P/E (x) 4.1 5.7 11.3 9.2 5.7
EV/ EBITDA (x) 3.5 2.9 6.3 3.0 1.3
Net DPS (sen) 2.3 1.5 1.3 2.1
Yield 0.0% 4.4% 2.9% 2.6% 4.2%
BV per share (RM) 0.62 0.84 0.88 0.93 1.12
P/BV (X) 0.8 0.6 0.6 0.6 0.5

Disclaimer & Disclosure of Conflict of Interest

The information contained in this report is based on data obtained from data and sources believed to be reliable at the time of issue of this report. However, the data and/or sources have not been independently verified and as such, no representation, express or implied, are made as to the accuracy, adequacy, completeness or reliability of the information or opinions in this report.

This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements are based on assumptions made and information currently available to Mercury Securities Sdn Bhd. (“Mercury Securities”) and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this report should not place undue reliance on any such forward-looking statements. Mercury Securities expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

This report does not have regard to the specific investment objectives, financial situation and particular needs of any specific person. Accordingly, investors are advised to make their own independent evaluation of the information contained in this report and seek advice from, amongst others, tax, accounting, financial planner, legal or other business professionals regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. Nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise represents a personal recommendation to you. This report is not intended, and should not under no circumstances be considered as an offer to sell or a solicitation of any offer or a solicitation or expression of views to influence any one to buy or sell the securities referred to herein or any related financial instruments.

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

This report has been prepared by research analyst(s) of Mercury Securities pursuant to the Research Incentive Program under Bursa Research Incentive Scheme Plus (“Bursa RISE+”) administered by Bursa Malaysia Berhad. This report has been produced independent of any influence from Bursa Malaysia Berhad or the subject company. Bursa Malaysia Berhad and its group of companies disclaim any and all liability, howsoever arising, out of or in relation to the administration of Bursa Research Incentive Program and/or this report. This research report can also be found in the Bursa Marketplace or via the link: https://www.bursamarketplace.com/mkt/tools/research.

Recommendation Rating

BUY
Stock’s total return is expected to be +10% or better over the next 12 months (including dividend yield)
HOLD
Stock’s total return is expected to be within +10% or -10% over the next 12 months (including dividend yield)
SELL
Stock’s total return is expected to be -10% or worse over the next 12 months (including dividend yield)

Published & Printed By:

MERCURY SECURITIES SDN BHD
Registration No. 198401000672 (113193-W)
L-7-2, No 2, Jalan Solaris, Solaris Mont’ Kiara, 50480 Kuala Lumpur
Telephone: (603) – 6203 7227
Website: www.mercurysecurities.com.my
Email: mercurykl@mersec.com.my



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