SkyWorld Development Berhad is starting to look like a property counter where the market may still be pricing in the old earnings downcycle, while the fundamentals are already showing early signs of recovery. HLIB Research has initiated coverage on SkyWorld with a BUY call and a target price of RM0.90, compared with the current price of RM0.39, implying 130.8% capital upside and 133.6% expected total return after including dividend yield. The target price is based on a 60% discount to RNAV of RM2.25.
At its core, SkyWorld is an urban high-rise property developer, mainly focused on Kuala Lumpur, with newer exposure in Penang and future expansion plans into Vietnam. As at 31 December 2025, the group had six ongoing projects with total ongoing GDV of RM2.66 billion, consisting of five projects in KL and one in Penang. More importantly, SkyWorld’s remaining GDV stood at RM19.81 billion, with 61% from Penang, 34% from KL, and 5% from Vietnam. That is a sizeable long-term pipeline for a company with a market capitalisation of only around RM390 million.
The biggest change in the story is Penang. HLIB views Penang as a potential game-changer for SkyWorld because it accounts for the majority of the group’s remaining GDV. The Penang venture involves affordable housing developments in Seberang Jaya and Batu Kawan, with the overall Penang pipeline carrying an estimated GDV of around RM13 billion. The project covers 195.5 acres and is expected to deliver more than 35,000 affordable housing units over about 15 years. This gives SkyWorld a long runway of launches rather than just one or two short-term projects.
What makes the Penang project even more interesting is the cost structure. Based on HLIB’s analysis, the all-in land cost under the minimum scenario is about RM542.9 million, or only 4.18% of the RM13.0 billion GDV. Even under a stepped-up land cost scenario, the land cost-to-GDV ratio rises to only 5.07%, which HLIB still views as very attractive. This gives SkyWorld a low entry cost into a huge development pipeline and provides a buffer against construction cost inflation.
SkyWorld’s innovation angle also strengthens the fundamental story. The group, through a 70:30 joint venture with Singapore-based TeamBuild, is developing Malaysia’s first large-scale Prefabricated Pre-finished Volumetric Construction (PPVC) plant in Penang. PPVC allows completed building modules to be manufactured and finished off-site before being assembled on-site, which can improve productivity and shorten construction time. HLIB notes that PPVC can potentially reduce total construction time per floor by up to 30%, depending on project complexity. If executed well, this could speed up billings, improve cash recovery, and lift project ROI.
The earnings recovery angle is one of the strongest parts of the report. SkyWorld’s earnings had fallen sharply after listing due to launch gaps and slower project replenishment, with quarterly earnings bottoming at RM5.1 million in 1QFY26. However, HLIB believes FY26 marks the trough. The group has since rebuilt its project pipeline, lifting ongoing projects back to six, and unbilled sales surged 83.8% quarter-on-quarter to RM1.08 billion in 3QFY26. That gives much better earnings visibility compared with the trough period.
HLIB forecasts SkyWorld’s earnings to recover from RM35.6 million in FY26 to RM77.5 million in FY27 and RM149.3 million in FY28, representing a sharp two-year earnings CAGR of 104.7% from FY26 to FY28. This is the key reason why the valuation starts to look interesting. At the current share price, the stock is trading at only 6.0x FY27 fully diluted P/E and 3.1x FY28 fully diluted P/E, which looks undemanding if the earnings recovery materialises.
Another underappreciated strength is SkyWorld’s lean cost structure. HLIB points out that even during 1QFY26, when the group had only two ongoing projects contributing to revenue and one of them faced construction delays, SkyWorld still remained profitable. This suggests the group does not need a very large number of simultaneous launches just to cover overheads. For a property developer, this matters because a lean structure can help protect profitability during slower market conditions.
SkyWorld also has a branding and quality angle that should not be ignored. The group has consistently focused on QLASSIC construction quality scores and has delivered affordable housing projects with better facilities than the minimum requirements. Its SkyAwani series includes lifestyle features such as swimming pools, libraries, shared kitchens, co-office space, mini theatre and gyms. This helps differentiate SkyWorld’s affordable homes from typical mass-market projects, and can support buyer trust, referrals and repeat demand over time.
The company’s property investment segment also provides a small but useful recurring income base. SkyWorld has two interim-use assets in Setapak: Sama Square, a retail space with 47 retail lots and 99% occupancy, and SkyBlox, a container-based co-living space with 320 lettable rooms and 91% occupancy as at 31 December 2025. These are not the main earnings drivers, but they show management’s willingness to monetise idle land while waiting for future development phases.
Of course, investors should still watch the execution risks. PPVC is also a new construction method for the group, so execution needs to be carefully managed. However, HLIB notes that SkyWorld’s experienced PPVC partner should help reduce the learning curve.
Overall, the investment case for SkyWorld is no longer just about being a property developer trading below past levels. The more important point is that the company appears to be entering a new earnings cycle. Its launch pipeline has been rebuilt, unbilled sales have recovered strongly, Penang offers a long-duration growth engine, and PPVC could improve construction speed and cash flow. With HLIB assigning a RM0.90 target price, the report suggests that SkyWorld’s current share price may not yet reflect the recovery potential ahead.
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