PETALING JAYA: Sunway Healthcare Holdings Bhd (SHH) is confident the market will see value in the company’s maximum initial public offering (IPO) price of RM1.45 per share, despite there being talk that the price is relatively elevated compared to industry peers.
SHH, scheduled to list on the Main Market of Bursa Malaysia on March 18, launched its prospectus last Friday, aiming to raise up to RM2.86bil through its IPO, which would give the healthcare arm of parent Sunway Bhd
an approximate market capitalisation of RM16.68bil on 11.5 billion shares.
At the maximum IPO price, this would be the largest IPO in the country in nine years, beating out other well-known names such as 99 Speed Mart Retail Holdings Bhd and Farm Fresh Bhd.
According to SHH’s listing prospectus, the company generated a net profit of RM257.5mil for the financial year ended Dec 31, 2024 (FY24), which means its price-to-earnings (PE) ratio based on the IPO valuation would be roughly 64.8 times.
In comparison, the other two listed healthcare companies, IHH Healthcare Bhd and KPJ Healthcare Bhd, have estimated PE ratios of approximately 35 times.
SHH president and executive director Datuk Lau Beng Long pointed out that the PE figure based on earnings results for FY24 would have been affected by the cost structure in setting up the two latest hospitals, namely Sunway Medical Centre Damansara (SMCD) and Sunway Medical Centre Ipoh (SMCI).
“Our experience in ensuring our medical centres turn around to profitability puts us in good stead.
“For example, SMCD has achieved a positive earnings before interest, tax, depreciation and amortisation (Ebitda) within eight months and a positive pre-tax profit in 13 months.
“Likewise, SMCI is now Ebitda positive in nine months, so we look forward to even better numbers for FY25 and beyond,” he said.
As such, he said investors with a mid-term to long-term mindset would be attracted to the prospects of SHH despite its currently higher valuation.
Lau was speaking at a media briefing to launch the prospectus last Friday, which was also attended by Sunway founder and chairman Tan Sri Sir Dr Jeffrey Cheah.
The company appointed Maybank Investment Bank Bhd (Maybank IB) and AmInvestment Bank Bhd as joint principal advisers.
Explaining further on the reasons for SHH’s IPO valuation, Maybank IB’s managing director and regional head for equity capital markets Raymond Chooi said investors can take comfort in SHH’s domestically focused clear earnings visibility.
“Expansion-wise, whether it is brownfield or greenfield, the group has also demonstrated a comprehensible pathway.
“While investors often need to decide between risk and rewards, in SHH’s case, we would find defensive exposure with a coherent growth path, a profile that does not appear often in Malaysia,” he said.
Notably, the IPO has secured 20 cornerstone investors subscribing for 855 million shares collectively, or 97.5% of the institutional offering.
These include AHAM Asset Management Bhd, AIA Bhd, Employees Provident Fund (EPF) Board, International Finance Corporation, JPMorgan Asset Management (Singapore) Limited, and Kenanga Investors Bhd.
Targeting to raise roughly RM833.8mil via public issue, the company intends to utilise approximately RM554.1mil or 66.5% of the gross proceeds, to part finance the expansion of existing hospitals, in line with the strategy to strengthen market leadership and increase bed capacity.
Approximately RM249.7mil or 29.9% would be allocated towards the partial redemption of tranche 2 and full redemption of tranche 3 of the sukuk wakalah issued by SHH in 2023 and 2024, respectively.
The proceeds from tranche 2 were used to finance the acquisition of Towers A and B of Sunway Medical Centre Sunway City Kuala Lumpur in 2023, while the proceeds from Tranche 3 were utilised to fund the construction of brownfield projects, mainly SMCD, SMCI, Sunway Medical Centre Sunway City Kuala Lumpur (Towers D, E and F) and Sunway Medical Centre Penang.
The remaining RM30mil or 3.6% would be utilised to defray fees and expenses in relation to the IPO and the listing.
Meanwhile, Sunway chairman Cheah, also executive director and chairman for SHH, said the company would be focusing on expanding its footprint throughout the country, including East Malaysia.He did not discount the possibility of overseas expansion but added that the company would be “cautious” and would not be pressured into timelines given its strong local foothold.
Lau added that ideally, the company would look to expand into locations in the country in which its brand has become well known, with an emphasis on building up the medical tourism portfolio.Commenting on competition from its Singaporean and Thai counterparts in the region, Lau emphasised that SHH has highly competitive fees in relation to private hospitals in these countries, with a standard of professional training matching that of Singapore.
Meanwhile, SHH chief financial officer Chelsea Cheng said the company remains committed to working closely with the government on efforts to manage insurance premiums through the use of the diagnosis-related group (DRG) initiative.
“However at this juncture, DRG regulations are still evolving, and we are also waiting for further directives from the Health Ministry.
“We believe it is in the midst of collecting data from all private hospitals before it makes any further decisions,” she said.
On a separate matter, Cheah reiterated that Sunway’s RM11bil takeover offer for IJM Corp Bhd is a “commercial transaction”, adding that there is no compulsion for shareholders to accept the offer.
“There is a lot of noise out there, but I stress that there is no compulsory acquisition. Sunway does not bully or hurt people.
“We see IJM as an attractive asset, so we made an offer,” he said.
“There’s no obligation for shareholders to sell.
“If they accept, fine. If they do not, we walk away. It is up to them.
“They just need to decide which boat they want to be on. If they accept, they will receive Sunway shares and participate in our growth.
“It is a ‘willing buyer, willing seller’ situation,” said Cheah.
