Sunway poised to be included in FBM KLCI

UOBKH Research said the potential inclusion in the FBM KLCI should further enhance Sunway’s investibility and attractiveness.

PETALING JAYA: Sunway Bhd is poised to be included in the as a component stock in the FBM KLCI in the second half of the year following the increase in the conglomerate’s market capitalisation to the 28th largest on Bursa Malaysia.

According to UOB Kay Hian (UOBKH) Research, the potential inclusion in the FBM KLCI should further enhance Sunway’s investibility and attractiveness.

“We believe Sunway’s share price momentum is expected to continue its upward trajectory, supported by the broader theme of potential index inclusion, as well as other themes such as being one of the beneficiaries of Iskandar Malaysia and the unlocking of its crown jewel healthcare assets,” the brokerage wrote in its report yesterday.

Reiterating “buy” on Sunway, UOBKH Research raised its target price for the counter to RM3.01 from RM2.38 previously.This followed the brokerage’s move to roll over its valuation for Sunway to 2024, include a higher stake of its Iskandar Malaysia project in Pendas from 60% to 100%.

There is also a higher take-up rate assumption and healthcare valuation based on 20 times enterprise value (EV) per earnings before interest, tax, depreciation and amortisation (ebitda) with 2024 estimated ebitda at RM450mil.

This is in line with management’s guidance of RM450mil to RM470mil for 2024 against 13 times EV/ebitda with previous 2024 estimated ebitda of RM400mil.

“The recent property rally and its recent placement have pushed Sunway’s share price towards the RM2.72 level, translating to a market cap of RM15bil (based on Feb 9 closing), and surpassing those of a few FBM KLCI constituents,” UOBKH Research noted.

“We estimate Sunway has passed the liquidity test for the past months.

“If Sunway’s share price maintains at this level or higher, and if the company can maintain its median daily volume of at least one million shares per day for the next two out of four months, we believe Sunway is likely to be included in the FBM KLCI,” it added.

UOBKH Research said Sunway’s healthcare unit was set to deliver strong earnings, underpinned by an increase in its bed capacity from 1,121 as at September 2023 to about 1,300 by end-2024.

“Historical five-year revenue and pre-tax profit have shown impressive compounded annual growth rate (CAGR) of 20% and 37% respectively,” it explained.

“We conservatively expect another revenue and pre-tax profit CAGR growth of 12% to 2028, underpinned by its expansion plan for medical centres,” it added.

It noted that the healthcare segment’s earnings contributed 24% to Sunway’s profit for the nine months to September 2023.

It expected this proportion to increase to around 30% as the company’s healthcare earnings strengthened.

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