KUALA LUMPUR: SkyWorld Development Bhd, whose shares have been trading below its initial offering price (IPO) of 80 sen since it debuted on the Main Market of Bursa Malaysia on July 10 (Monday), is committed to achieving a return on equity (ROE) of over 20% for its shareholders going forward.

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

And this will be supported by the 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,” Ng said. As at March 31, 2023, the group had unbilled sales of RM944.6 million.

SkyWorld’s business model is focused on first-home buyers and those wanting to upgrade their homes.

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

For the non-affordable 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 as we would not get [a] good ROE,” Ng noted, adding that the current challenging property environment does not allow the group to launch high-end products.

Since the launch of the first project in 2014, SkyWorld has scored a take-up rate of 98%, for which Ng attributed to the group’s strategy of delivering the right product with right pricing and at the right location, coupled with good quality and workmanship.

He said that the group has studied the market well, and has plans put in place before buying any land for property developments.

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

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

The group has set its sight on expanding its footprint abroad to further fuel its growth, with Vietnam being its first overseas venture. It is planning to kickstart a project there by the second half of 2024.

Ng shared that the group has identified a few parcels of land in Ho Chi Minh, Vietnam and is targeting to buy one or two parcels of land by 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 premised on its big population of close to 100 million people, with a relatively young demographic as the majority of its citizens are aged between 25 and 45, according to Ng.

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

Also, he sees Vietnam being one of the highest recipients in terms of foreign direct investments among the Asean countries, hence driving huge demand for properties.

SkyWorld made its debut 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 apiece. About RM166.4 million has been earmarked for land acquisition, working capital and repayment of bank borrowings.

The IPO price valued 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 was listed on the Main Market on May 31 this year at an IPO price of 50 sen, had a higher PER of 17.06 times based on its earnings per share of 2.9 sen for the financial year ended Dec 31, 2021 (FY2021).

However, it is now trading at a lower PER of 12 times after its share price was down by nearly 30% since its IPO, partly due to a lawsuit filed by 241 purchasers 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. Having closed down 7.5% or six sen to 74 sen on its maiden trading, the counter continued its fall to settle at 72.5 sen on Tuesday, giving it a market capitalisation of RM725 million. The stock has fallen 9.4% or 7.5 sen from its IPO price.

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

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

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

“Listing is part of our journey because from day one we know we will go for listing. As a property developer, when we reach a certain size, we need a bigger platform to raise more funds and expand. That is our focus.

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

He believes SkyWorld will be able to attract investor attention given its track record and growth prospects. Ng has set a target for the group to achieve US$1 billion market capitalisation over the next 10 years.

“I have been operating in a tough and challenging environment since 2014. People kept speculating that the property market will continue to go down. But SkyWorld has been going up and we announced the highest performance for the financial year ended March 31, 2023 (FY2023). I believe one day, investors will know we are a good company that is highly efficient and lean with 200 employees,” Ng said.

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