SkyWorld Development’s profitability was not adversely impacted during the Covid-19 pandemic period in financial year 2020-21. In financial year 2020-22, the group recorded strong average earnings before interest, tax, depreciation and amortisation margin 21% and average net profit margin of 13%, supported by effective land inventory turnaround cycle and resource optimisation, said CGSCIMB in the recent Retail Research Report.
“Post-pandemic recovery in financial year 2022 was strong, with a 62% year-on-year surge in revenue to RM790 million, 80% year-on-year increase in earnings before interest, tax, depreciation and amortisation to RM168 million and 78% year-on-year growth in net profit to RM106 million,” said CGSCIMB.
Earnings visibility is underpinned by unbilled sales of RM968 million and RM4.1 billion worth of new launches in the pipeline up to 2026. The nine months financial year 2023 earnings before interest, tax, depreciation and amortisation grew 14% year-on-year to RM143 million. Also, net profit rose 7% year-on-year to RM86 million.
Historically, the group has delivered a 3-year average return on equity of over 20%, thanks to strategic property launches, robust property sales from previous launches, and high take up rates of 92-100% for selected key projects.
As at end-financial year 2022, cash and cash equivalents stood at RM281 million with total borrowings of RM448 million. This translates to a net gearing ratio of 0.36x, a sequential decline from 0.86x in financial year 2020 and 0.64x in financial year 2021. Nine months financial year 2023 net gearing stood at a lower 0.21x.
“The group has targeted a maiden post-initial public offering dividend payout ratio of 20% of net profit,” said CGSCIMB.
The group has earmarked to launch 10 new developments in 2023-2026, with a total gross development value of RM4.1 billion. In addition, the initial public offering proceeds will pave the way for further expansion in land bank via acquisition of several plots of land located around the fringes of Kuala Lumpur/Klang Valley and potentially overseas within 36 months from listing.
SkyWorld has also been actively exploring overseas ventures. It aims to expand into Ho Chi Minh City (HCMC) in Vietnam, focusing on its core competency in urban high rise residential and commercial developments backed by attractive demand-supply conditions. HCMC also offers vast potential for urban development driven by urbanisation.
The group has planned to develop Build-to-Rent properties including commercial square and co-living space in Kuala Lumpur commencing in second half 2023. Build-to-Rent properties will be implemented under an asset management model which would generate future recurring income.
“Sustainable living remains a core focus for SkyWorld, with the company emphasising on the integration of passive and sustainable designs in all its projects. This core focus is in addition to various sustainability initiatives under the group environmental, social and governance policies,” said CGSCIMB.
SkyWorld will continue to focus on quality developments and to sustain its track record in meeting the building/construction standards under the Quality Assessment System in Construction (QLASSIC) by the Construction Industry Development Board (CIDB) – high QLASSIC scores of 79% and 85% for two development projects in 2020 while all developments projects have undergone QLASSIC certification.
Key risks to the group include weaker-than-expected property sales, weak take up rates, unfavourable fluctuation in raw material costs, weaker property buying sentiment, challenges in securing new land banks within 36 months from listing, and sustained domestic property overhang conditions.
