KUALA LUMPUR (Nov 9): Sunway Bhd may see its healthcare unit’s valuation increase following the Ramsay Sime Darby Healthcare-TPG Columbia deal, said analysts from Hong Leong Investment Bank (HLIB) Research and CGS-CIMB Research.
According to both research houses, the value's resurgence followed a recent report by The Edge citing the joint venture (JV) between Sime Darby and Australia’s Ramsay Health Care — a private equity consortium.
The consortium, led by TPG Capital and Columbia Asia, has reportedly emerged as the frontrunner for the JV called Ramsay Sime Darby Health Care (RSDH) for about US$1.5 billion (RM7 billion).
HLIB said this recent deal could set the new benchmark for the valuation of healthcare operators in Malaysia, including Sunway, a conglomerate with businesses in property, construction, healthcare and others.
Meanwhile, the research house said that Sunway's healthcare segment could be worth at least RM9 billion, or RM1.52 per share, making up 79.6% of the stock’s current market capitalisation.
Echoing the sentiment, CGS-CIMB reported that the potential sale of RSDH at RM7 billion, which implies an enterprise value to earnings before interest, tax, depreciation and amortisation (EV/Ebitda) multiple of 24 times for forecasted financial year 2023 (FY2023F), could lift the valuation of Sunway Health Group (SHG) by 51% to RM10.9 billion, based on a similar multiple.
CGS-CIMB has reiterated its ‘add’ rating and target price of RM2.57 for Sunway, based on a 10% discount to sum-of-parts valuation.
Meanwhile, HLIB has maintained its ‘buy’ call on the group with a target price of RM2.76, based on the same derived valuation.
As a stock, CGS-CIMB liked Sunway as a diversified investment proxy for a robust domestic economy, and its growing exposure to healthcare.
In addition, HLIB also pointed out that Sunway has a strong expansion pipeline ahead, which should allow it to capitalise on the bright healthcare prospects in Malaysia.
The group has reported that it currently has promising operations in the hospitality industry, supported by its plans for expansion which are slated for completion in the fourth quarter of 2023 (4Q2023).
HLIB expects Sunway to register a core net profit of RM595.3 million in the financial year 2023 (FY2023), and RM638.1 million in FY2024.
Concurrently, the research house has projected robust earnings growth for Sunway which will be driven by its property development and investment, construction, building materials and quarry segments.
CGS-CIMB projected an Ebitda of between RM500 and RM600 million for SHG in FY2026F, compared to the group’s guidance of RM800 million to RM900 million.
Sunway remains HLIB's top pick in the property sector as the group's prospects remain bright with its efforts to scale up businesses in healthcare, pharmacy, property development and investment, construction, building materials and quarrying.
At the time of writing, Sunway shares traded up one sen or 0.53% at RM1.89, valuing the group at RM9.41 billion.