KUALA LUMPUR: Sunway Healthcare Group's (SHG) planned initial public offering (IPO) is unlikely to significantly dilute earnings, with proceeds expected to drive the group’s high capital expenditure (capex) growth, particularly in its property segment, according to Hong Leong Investment Bank Bhd (HLIB).
The investment bank said in a note today that SHG targeted its IPO by the end of financial year 2025 (FY2025) or the first half of FY2026, but healthcare would remain a core earnings pillar and it is expected that Sunway Bhd
(Sunway) would retain a significant stake and consolidate SHG's results.
"With strong growth ahead from hospital expansions and rising foreign patient volumes, the listing is unlikely to cause a material earnings dip.
"Sunway’s property and construction segments are entering an earnings upcycle, hence, it should help to mitigate any potential earnings impact from the partial healthcare dilution,” it said.
The opening of Sunway Medical Centre (SMC) Damansara in December last year and SMC Ipoh in April this year shows that SHG continues to increase its hospital portfolio from three to five.
HLIB said foreign patients offer substantial earnings potential, generating over four times the revenue per bed and significantly higher earnings before interest, taxes, depreciation and amortisation (EBITDA) margins compared to domestic patients.
"Recognising this potential, SHG targets to scale up its foreign patient mix to 15 per cent in 2025 (from around 10 per cent in 2024).
"This should position SMC Sunway City (SMCKL) as an emerging regional medical tourism hub,” it said.
Meanwhile, the investment bank said that in FY2024, Sunway recorded its highest-ever property sales at RM3 billion and is setting a higher goal of RM3.6 billion for FY2025 supported by a RM4.1 billion launch pipeline and the group is entering its busiest year in Johor with RM1.26 billion in planned launches.
"In Sunway City Iskandar Puteri (SCIP), while residential launches are modest, the group is accelerating industrial, commercial and tourism components to lay the groundwork for recurring income and residential growth.
"Meanwhile, Sunway is also marking a new milestone in Singapore with four active projects, the most in its history," it said.
HLIB has maintained its forecast for the company with a 'buy' rating with an unchanged target price (TP) of RM5.70
As at 11.37 am, Sunway's share price increased one sen to RM4.90, with 1.56 million shares traded. - Bernama
