Public Bank Gives Fair Value Of RM0.96 For SkyWorld IPO

Public Bank has given a review on the upcoming IPO for SkyWorld Development which is an urban property developer focusing on the development of high-rise residential, commercial, and affordable properties in the Federal Territory of Kuala Lumpur.

Giving a preface to the company’s impending listing, PB profiled the developer who had commenced its property development business in Oct 2014 up to 22 May 2023, the company has successfully launched and completed seven developments with a total gross development value (GDV) of RM3.05bn. As of 22 May 2023, the group has six- going developments in Setapak, Setiawangsa, Sentul, and Taman Desa with a total GDV of RM2.85bn and these are expected to be completed progressively between 2023 and 2026. Since the commencement of its operations in 2014 and up to 22 May 2023, all of SKYWLD’s completed property developments achieved QLASSIC scores ranging between 76% and 85% under assessment by Construction Industry Development Board (CIDB).

As of 22 May 2023, SKYWLD’s completed developments have a collective take-up rate of 98% and the group has a total sold and unbilled GDV of RM968.28m which will be recognised progressively between FY23 and FY27. As of 22 May 2023, SKYWLD has a total landbank of approximately 55.66 acres in KL, out of which 37.17 acres are for the group’s planned developments and 18.49 acres are reserved for its future developments.

PB derived a fair value of RM0.96 based on a c. 8x PE multiple to its FY25F EPS of 12.3sen with the IPO expected to raise approximately RM166.4m from the issuance of 208.0m new shares. Besides utilising 60.1% of the proceeds for the acquisition of land for development, 21.2% and 12.0% of the proceeds are allocated for working capital for project development and repayment of bank borrowings, respectively.

The investment bank said the developer’s growth will be driven by: i) launching of new developments, ii) replenishment of landbank, iii) expansion into build-to-rent developments, and iv) geographical expansion into Vietnam.

Competitive strengths. SKYWLD’s competitive strengths include: i) proven track record, ii) significant emphasis on the quality of property developments, iii) having on-going and future planned property developments at strategic locations, iv) having a sizeable landbank, v) having experienced executive officers and key senior management, and vi) having initiatives to enhance customer’s experience further.

Catalysts. Key drivers may include: i) increasing urbanisation rate, ii) gradual increase in population growth, and iii) government incentives.

Key risks. Key downside risks, among others, include: i) continuing increase in the property overhang conditions, ii) inherent risk of the property development industry, iii) dependency on contractors to perform the construction works for its developments, iv) unanticipated increase in developments costs, v) adverse land issues, and vi) interest rate risk.

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