PETALING JAYA: The listing of Sunway Bhd
's healthcare arm Sunway Healthcare Group (SHG) could take place by end of financial year 2025 (FY25) or early FY26.
According to Hong Leong Investment Bank (HLIB) Research, Sunway has initiated work on the listing of SHG and it is likely to be one of the largest in terms of market capitalisation in Malaysia.
"We gathered that Sunway had recently appointed the relevant investment banks to initiate work on the listing of SHG. With this development, we believe SHG is on track for a potential listing by endFY25 or early-FY26," the research firm said in a note to clients yesterday.
It said recent private healthcare deals transacted at 20-25 times the enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) sets a valuation floor for SHG's IPO, with potential to exceed this range.
"It would be strategically prudent for Sunway and GIC Pte Ltd to only consider a listing that matches or exceeds this valuation."
Singapore's sovereign wealth fund GIC acquired a 16% stake in the healthcare division in 2021.
"Both Sunway and GIC could realise higher value through private sales if the IPO valuation does not meet this threshold, suggesting a floor valuation of at least 20 times EV/EBITDA and the potential to reach above 25 times. In our sum-of-the-parts (SOP) valuation, we value Sunway’s 84% stake in SHG at RM17.2bil, based on 25 times FY26 EV/EBITDA."
HLIB said the potential listing could unlock value for Sunway shareholders.
"Drawing parallels to the 2015 initial public offering (IPO) of Sunway Construction Group Bhd (SunCon) where Sunway shareholders received SunCon shares along with a special dividend funded by IPO proceeds, we believe Sunway shareholders should also similarly be able to enjoy benefits from this listing exercise. However, the specifics of this structure remain subject to Sunway’s final decision."
On operational updates, it said Sunway recently expanded its healthcare footprint with the opening of its fourth hospital, Sunway Medical Centre Damansara (SMCD) in Dec 2024.
According to the research firm, in under three weeks, SMCD has demonstrated strong community acceptance, serving over 2,400 patients, performing 50+ surgeries across various specialties, and registering over 500 health screening sign-ups.
"Looking ahead, the group plans to launch its fifth hospital, Sunway Medical Centre Ipoh in 2Q25. This facility is expected to replicate the success of SMC Penang by addressing the needs of the underserved community in Ipoh, further solidifying SHG’s growth trajectory and reinforcing the long-term prospects of Sunway’s healthcare division.
"Maintain Buy with an unchanged target price of RM5.75 based on SOP-derived valuation."
The research firm said with the group’s widening exposure in the Malaysian economy, the stock provides a good proxy to the domestic economy which is currently entering a new phase of growth.
Moreover, in an environment of heightened geopolitical uncertainty and potential policy risks, particularly with the upcoming changes under the Donald Trump administration, Sunway’s predominantly domestic-focused business model stands out in its investment appeal given that it is less exposed to this risk.
