SkyWorld banks on RM2.6bil launch pipeline

PETALING JAYA: Despite its recent share price decline, SkyWorld Development Bhd’s earnings recovery and RM2.61bil property launch pipeline could present an attractive buying opportunity, according to Hong Leong Investment Bank (HLIB) Research.

On Oct 20, SkyWorld’s share price fell 6.8% on heavy trading volume to 34 sen, despite management checks indicating no negative developments at the company.

HLIB Research believes the selling could reflect fund-specific considerations, such as a change in house views on the property sector or a need to raise cash, rather than a deterioration in the group’s fundamentals.

It added that the sharp decline may have been exacerbated by a lack of incremental buyers to absorb the selling pressure, leaving the stock with limited buying support.

The research house maintained its “buy” rating and 90 sen target price, based on a 60% discount to its estimated revised net asset value of RM2.24 per share.

“In our view, SkyWorld’s prospects are now at their strongest since listing, yet its share price is at an all-time low.

“This disconnect represents a gross mispricing and offers an exceptional entry point, with our target price implying a total return of 160.2%.

“We believe the stock has reached its earnings inflection point, with financial year 2026 (FY26) marking the trough.”

HLIB Research also suggested that the market is underestimating the pace of its billing growth once the group’s precast volumetric construction plant commences operations, reflected in the undemanding stock valuation.

That said, SkyWorld is entering a new earnings upcycle, supported by Penang as a new growth driver, a rebuilt launch pipeline and record-high unbilled sales.

“With record-high unbilled sales, stronger billings are just a matter of timing,” HLIB Research said.

It forecasts a three-year earnings compound annual growth rate of 82.6% over FY26 to FY29, with the stock trading at fully diluted price-to-earnings ratios of just 6.5 times, 2.9 times and 2.1 times for FY27, FY28 and FY29, respectively.

The research house said the worst was behind the property developer, with earnings expected to rise further in the second quarter of FY27 (2Q27), both quarter-on-quarter (q-o-q) and year-on-year.

Core earnings had bottomed out at RM4.2mil in 4Q26 before improving 4.8% q-o-q to RM4.4mil in 1Q27.

HLIB Research attributed the expected improvement to higher earnings recognition from completed unit sales at Curvo Residences, stronger progress billings from Vesta Residences as construction advances towards its targeted handover by end of FY27, and a lower q-o-q effective tax rate.

Following the recent commencement of previews for SkyWorld’s SkySolis project in Vietnam, improved visibility on future sales could also support the recognition of relevant deferred tax assets.

“This could bring down the group’s effective tax rate in 2Q27 and provide a further lift to earnings,” it added.

On its RM2.61bil launch pipeline in the second half of FY27, SkyWorld is expected to record full-year sales of more than RM1bil and year-end unbilled sales of RM1.4bil to RM1.5bil, equivalent to 3.3 to 3.6 times its FY26 property development revenue.