PETALING JAYA: The possible listing of Sime Darby Bhd’s 50:50 joint-venture healthcare unit, Ramsay Sime Darby Healthcare (RSDHC), could raise at least RM500mil in 2021.
CGS-CIMB Equities Research said it is positive on this potential corporate development.
“We gathered from management that the process is in the preliminary stage and that the group is assessing the timing, given the ongoing Covid-19 pandemic and market conditions, ” it said in a report yesterday.
RSDHC operates six hospitals in Malaysia and Indonesia, with about 1,600 beds, and a day surgery facility in Hong Kong.
The group plans to focus on building up its brand in Hong Kong and China to increase patient volume and expand its scope of services at its day surgery facility in Hong Kong.
“We see the potential listing of RSDHC as a positive move for Sime Darby to unlock its asset value, given the premium valuation commanded by hospital asset operators regionally, underpinned by structural megatrends such as ageing demographics and demand for quality healthcare with rising affluence, ” the research firm said.
CGS-CIMB Research currently pegs its valuation for Sime’s 50% stake in RSDHC at RM1.3bil, based on 25 times the calendar year 2021 forecast price to earnings (PE). This, it pointed out, is still at a 39% discount to Malaysian-listed hospital operators and a 33% discount to regional hospital operators. These operators are trading at 37 to 41 times PE.
“We think the potential listing exercise would also allow RSDHC to raise cash proceeds. This would enable RSDHC to explore more greenfield and brownfield opportunities to expand its asset portfolio without affecting the group’s balance sheet, ” it said.
In the financial year ended June 30,2020 (FY20), RSDHC registered a 29% on-year drop in profit before tax due to the general reduction in patient volumes in March to June following the implementation of the movement control order and one-off impairments.
RSDHC contributed 2% to Sime’s core profit before tax in FY19 and 3% in FY20.
The research firm has reiterated its “add” rating on the stock with a sum-of-parts based target price of RM2.65. It sees the potential for a special dividend of three sen per share (based on a 70% payout ratio), pending the disposal of its 30% stake in Tesco Malaysia for RM300mil in the second half of this year, faster demand recovery in China, and resilient mining demand in Australia as potential re-rating catalysts.Decline in coking coal prices and a delay in demand recovery in China are key downside risks, said CGS-CIMB Research.
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