Hong Leong Investment Bank Bhd (HLIB) maintained its BUY call on SkyWorld Development Bhd with an unchanged target price of RM0.90, implying 125% upside from RM0.40, despite the property developer’s weaker-than-expected start to FY27.
HLIB said the company’s record RM1.13 billion in unbilled sales provides strong earnings visibility, with stronger billings expected as projects progress.
SkyWorld’s 1QFY27 core profit after tax and minority interest (PATAMI) rose 4.8% quarter-on-quarter but fell 13.2% year-on-year to RM4.4 million. HLIB said the result was below expectations, accounting for only 5.7% of its full-year forecast, mainly due to weaker gross profit margins from a higher contribution from lower-margin affordable housing projects and a higher effective tax rate.
Revenue increased 45.7% year-on-year as the group had five ongoing projects compared with two a year earlier, although gross profit margin narrowed to 29% from 36.1%. Quarterly sales reached RM195.5 million, up 91.5% year-on-year, while unbilled sales climbed 6% quarter-on-quarter to a record RM1.13 billion, providing 2.69 times cover against FY26 property development revenue.
HLIB expects earnings to recover as construction progresses and billings accelerate, with further support from more than RM2 billion of planned launches this year. The upcoming PPVC plant, expected to be completed by end-3QFY27, could further accelerate billings from 4QFY27.
The research house lowered its FY27 and FY28 earnings forecasts by 17.9% and 4.9% respectively but retained its RM0.90 target price.
The stock price is flat at RM0.40 as of 11.47 am.
