Results

• Acceptable Quarter Overall – SkyWorld performed in 1Q24 with revenue of RM210.8m (QoQ: -6.7%) while net earnings of RM41.9m (QoQ: -29.2%). Revenue is lower than the previous quarter due to lower progressive revenue from two of its ongoing projects (SkyAwani 4 and EdgeWood Residences). Currently, 1Q24 revenue achieved 24.6% of our latest FY24 forecast while net earnings have achieved 37.4% of it.

• Margins Retreated – The Group’s margins are seen to be declining overall in the quarter where GP has slipped to 37.3% (QoQ: -5.9 ppts) due to the better savings in construction and finance costs for its projects that happened in the previous quarter.

• Positive Outlook – As of 30th June, the Group has an unbilled sales amount of RM951.9m (4Q23: RM944.6m) and remain optimistic to launch a total GDV of RM1b worth of projects in FY24. So far, the Group has 6 ongoing projects worth a total GDV of RM2.8b.

Earnings Outlook/Revision

• Forecast adjusted – We adjusted our FY24F forecasts to a more conservative revenue performance (lower by 16.7%), while raising the Group’s GP margin up to 32.0% (previously 30.0%) which will overall affect its EPS slightly lower to 11.2 sen (previously 11.4 sen) in FY24F.

Valuation & Recommendation

• Maintain BUY with a lower target price of RM0.94 (previously RM0.96). Our revised target price is pegged at its peers forward 8.4x PE multiple to the Group’s 2024F diluted EPS which is in line with our overall optimistic outlook of the sector as interest rate hikes are deemed to reach its peak while remain overall conservative.

Source: JF Apex Securities Research - 29 Aug 2023