MARC Ratings has assigned preliminary ratings of AIS(cg)/MARC-1IS(cg) to SkyWorld Capital Berhad’s proposed RM300.0 million Islamic Medium-Term Notes/Commercial Papers programmes with a stable outlook. SkyWorld Capital is the funding vehicle of parent SkyWorld Development Bhd (SkyWorld) to undertake the sukuk issuance. SkyWorld has extended an irrevocable and unconditional guarantee on the programme.
The assigned ratings incorporate SkyWorld’s strong take-up rates and healthy operating margins due to a focused strategy of embarking on projects within populous urban areas that mitigates demand risk. Moderating the ratings are the weakening outlook on the domestic property market and SkyWorld’s highly leveraged balance sheet with its debt-to-equity (DE) ratio of 0.95x as at June 2022 (1QFY2023). In assigning the rating, MARC Ratings has factored in a potential decline in the DE ratio to 0.6x on an expected increase in total equity by end-1H2023.
Relatively a new player in the domestic property industry, SkyWorld’s maiden project, SkyArena, a RM2.3 billion master development project on about 30 acres of land in Setapak, Kuala Lumpur, was launched in 2014. The project comprises high-rise residential projects and a commercial-cum-retail centre; of these, two residential blocks (Phase 1 and 2) have been completed. Phase 3 comprising another high-rise residential development is upcoming and slated for completion in 2027 while Phase 4 consisting of a commercial-retail centre is targeted to be launched in 2026.
SkyWorld’s other category of development is the SkyAwani projects comprising affordable units under the government’s affordable housing programme known as the “Residensi Wilayah Keluarga Malaysia” (RUMAWIP). As of date, SkyWorld has completed three of its five SkyAwani projects with a total gross development value (GDV) of RM1.31 billion comprising 3,839 residential units and 162 commercial units. SkyAwani IV and SkyAwani V are currently ongoing and carry a combined GDV of RM723.2 million, slated for completion in 2023 and 2024.
As at end-June 2022, SkyWorld’s ongoing projects with combined GDV of RM2.3 billion recorded an average take-up rate of 89.9%. The rating agency notes that with sizeable unbilled sales of RM1.0 billion, SkyWorld has earnings visibility over the medium term. Its landbank of 60.1 acres in urban and suburban areas in Kuala Lumpur would provide development opportunities for high-rise projects.
For FY2022, revenue rose sharply y-o-y to RM790.4 million (FY2021: RM488.8 million) following the accelerated completion of projects; this was on resumption of economic activities following the easing of pandemic-induced restrictions. Operating profit margin of around 20% is commendable given its present focus on the affordable and medium-priced segments. Its unsold inventory stood at a manageable level of RM96.3 million. Total borrowings stood at RM399.5 million as at end-2QFY2023.