PETALING JAYA: Sunway Healthcare Holdings Bhd is projected to see near-term earnings growth on the back of its brownfield expansion projects, as well as its deep integration with the Sunway ecosystem, says CIMB Securities.
The research house, which initiated coverage on the stock with a “hold” call, forecast a core net profit compound annual growth rate (CAGR) of 23.6% for the hospital operator for the financial year 2025 (FY25) to FY28.
“This will mainly be anchored by brownfield expansion projects that could add 477 beds (three-year CAGR of 10.9%), raising total bed capacity to 2,422 beds by end-2028, and margin expansion from higher patient intensity,” the research house said.
It added the additional beds are anticipated to generate RM300mil to RM400mil in revenue per annum, which is equivalent to 17% to 19% of the company’s 2025 revenue.
CIMB Securities noted Sunway Healthcare’s flagship hospital, Sunway Medical Centre KL, will continue to be its key earnings engine, contributing 44% of total bed capacity following the expansion.
“Sunway Healthcare’s superior earnings quality, reflected by its above-industry-average net margin, is underpinned by its strong synergies with its parent company Sunway Bhd
, the strategic location of its assets, and the robust earnings generation capability of its established quaternary hospital Sunway Medical Centre KL.”
The research house highlighted the company’s position within the wider Sunway Group ecosystem, with extensive township, hospitality, and education networks, offered a key advantage.
For instance, Sunway Healthcare benefits from access to a large captive population within Sunway townships, in addition to preferential access to prime sites for hospital expansion.
Furthermore, collaborations with Sunway’s hospitality and leisure arms can lead to enhanced medical tourism opportunities.
“We believe this unique ecosystem and location-driven benefits foster strong patient catchment opportunities and create long-term stickiness,” it said.
CIMB Securities has set a target price of RM1.88 a share for Sunway Healthcare, after applying a 27 times 2027 enterprise value/earnings before interest, tax, depreciation and amortisation (EV/Ebitda) on 2027 earnings estimates.
The multiple constitutes a 100% premium over the market cap-weighed average for local private hospital players under its coverage.
“We believe Sunway Healthcare’s premium over its peers is supported by its robust earnings growth outlook, stronger margin profile, aggressive brownfield expansion strategy and superior return on equity,” the research house added.
However, it is of the view that the company’s prevailing valuation looks demanding, adding its share price, which surged 29% on its initial public offering debut in March, has already largely priced in future earnings upside.
