SkyWorld Development aims to maintain over 20% ROE with RM4.08 bil new launches over the next three years

KUALA LUMPUR: SkyWorld Development Bhd, whose shares have traded below its initial offering price (IPO) of 80 sen since it debuted on Bursa Malaysia’s Main Market on July 10 (Monday), is committed in achieving return on equity (ROE). ) of more than 20% for its future shareholders.

In an interview with The endits executive chairman Datuk Seri Ng Thien Ping said the group recorded a three-year average ROE of 20%, one of the highest among its peers, despite the challenging property market environment.

And this will be supported by 10 upcoming new launches between now and 2026, with a total gross development value (GDV) of RM4.08 billion.

“Every year we try to maintain at least RM1 billion of unbilled sales,” said Ng. As at March 31, 2023, the group had unbilled sales of RM944.6 million.

SkyWorld’s business model is geared toward first home buyers and those looking to upgrade their homes.

“My target income groups are M40 and T20, and the age group is between 25 and 45-year-olds,” said Ng, noting that the group’s property sale prices is between RM300,000 and RM800,000.

For the unaffordable segment, the selling price is around RM500 to RM650 per square foot (psf) while the affordable segment is priced at RM375 psf.

“We do not sell any property project priced below RM300,000 that we cannot acquire [a] good ROE,” said Ng, adding that the current challenging property environment does not allow the group to launch high-end products.

Since launching the first project in 2014, SkyWorld has achieved a take-up rate of 98%, which Ng attributes to the group’s strategy of delivering the right product at the right price and in the right location, along with good quality and workmanship. . .

He said the group studied the market carefully, and had plans in place before purchasing any land for property development.

“We reached the right consumers; this is proven by our take-up rate of 98%. SkyWorld goes for a thorough discussion and study of market needs before launching products,” said Ng.

The strategy also allows SkyWorld to have a quick turnaround time for its property projects, which are typically sold out within 12 to 18 months after launch.

Girl project abroad in Vietnam

The group has set its sights on expanding its footprint overseas to further fuel its growth, with Vietnam being its first overseas venture. It plans to start a project there in the second half of 2024.

Ng shared that the group has identified several parcels of land in Ho Chi Minh, Vietnam and is targeting to purchase one or two parcels of land this year.

“We will have a conservative start for our first project with a GDV of US$80 million (RM363.1 million) in Vietnam, a very small project, because we are learning their culture and how to deal with their authority,” he said, noting that the group has been studying the Vietnam market for more than four years.

The huge opportunity seen there is based on its large population of close to 100 million people, with a relatively young demographic as most of its citizens are between the ages of 25 and 45, according to Ng.

Another advantage is that Vietnam’s urbanization rate is less than 40%, which offers a lot of room to grow, compared to Malaysia’s 78%.

Also, he sees Vietnam as one of the highest receivers in terms of foreign direct investment among Asean countries, thus driving huge demand for properties.

Attracting long-term investors

SkyWorld debuted on the Main Market on July 10, raising RM320 million from its new issue and offer-for-sale shares based on its IPO price of 80 sen each. About RM166.4 million has been earmarked for land acquisition, working capital and repayment of bank loans.

The IPO price values ​​the group at a price-earnings ratio (PER) of 7.55 times based on its earnings per share of 10.6 sen for the financial year ended March 31, 2022 (FY2022).

Meanwhile, its peer, Radium Development Bhd, which listed on the Main Market on May 31 this year at an IPO price of 50 sen, has a higher PER of 17.06 times based on its earnings per share of 2.9 sen for the ended financial year. December 31, 2021 (FY2021).

However, it now trades at a lower PER of 12 times after its share price fell nearly 30% since its IPO, partly due to a lawsuit filed by 241 buyers of Residensi Platinum OUG in Kuala Lumpur over safety-related defects.

Back to SkyWorld, its share price performance has not been impressive so far, trading below its IPO price. Closing up 7.5% or six sen at 74 sen in its early trade, the counter continued its decline to settle at 72.5 sen on Tuesday, giving it a market capitalization of RM725 million. The stock fell 9.4% or 7.5 sen from its IPO price.

Prior to the listing, the group received a lukewarm response from retail investors with an oversubscription rate of just 0.19 times.

Ng said SkyWorld’s share price reflected the challenging environment for the local property market.

“[Until today]the result is still negative for shares. [But] I never blame people. For me, we didn’t hit the right investors,” said Ng.

“Listing is part of our journey because from day one we knew we were going for listing. As a property developer, when we reach a certain size, we need a bigger platform to raise more funds and expandable. That’s our focus.

“I am looking for long-term investors who can cooperate with SkyWorld. We are not here to cash out, we have a long way to go,” explained Ng.

He believes SkyWorld will attract investor attention because of its track record and growth prospects. Ng set a target for the group to achieve US$1 billion market capitalization in the next 10 years.

“I have been operating in a difficult and challenging environment since 2014. People have continued to think that the property market will continue to decline. But SkyWorld is on the rise and we have announced top performance for the financial year ended March 31, 2023 (FY2023). I believe that one day, investors will realize that we are a good company with high efficiency and lean on 200 employees,” said Ng.

For FY2023, SkyWorld posted a net profit of RM144 million on the back of revenue of RM841.41 million. In FY2022, it earned a net profit of RM104.29 million on the back of a revenue of RM790.44 million.

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