PETALING JAYA: Sunway Healthcare Holdings Bhd’s planned acquisition of nearly 10 acres of freehold land in Johor is a positive strategic move that will strengthen its long-term expansion plans.
However, the stock’s recent share price rally prompted Hong Leong Investment Bank (HLIB) Research to downgrade its call to “hold” from “buy” before.
The research house said the proposed land acquisition supports Sunway Healthcare’s strategy of expanding its network of tertiary hospitals while deepening its presence in Johor.
Despite the rating downgrade, it maintained its target price of RM2.05 per share, saying the recent appreciation in the share price had narrowed the stock’s upside potential.
Sunway Healthcare had announced it had entered into a sale and purchase agreement with Sunway Marketplace Sdn Bhd, Sunway Parkview Sdn Bhd and Sunway Iskandar Sdn Bhd to acquire four parcels of freehold land measuring about 9.918 acres in Sunway City Iskandar Puteri, Johor Baru, for RM45.37mil.
HLIB Research described the acquisition as being in line with the group’s long-term growth strategy.
“The acquisition aligns with Sunway Healthcare’s long-term strategy of widening its network of tertiary hospitals, while expanding its footprint in Johor.”
The proposed development will see Sunway Healthcare build a 410-bed tertiary hospital, which is expected to become the key healthcare anchor within Sunway City Iskandar Puteri, an integrated township located in the Johor-Singapore Special Economic Zone.
HLIB Research noted that the larger land parcel also provides flexibility for future expansion. It said the additional land gives the group the optionality to further scale up its hospital over the longer term, as well as to develop senior living facilities.
Construction of the hospital is targeted for completion between 2030 and 2032.
The research house also noted that the vendors must first obtain freehold ownership of the land from Iskandar Investment Bhd before the parcels are amalgamated into a single title and transferred to Sunway Healthcare.
The transaction is expected to be completed by the second quarter of financial year 2027.
HLIB Research said the purchase price was within fair market value based on an independent valuation by Knight Frank Malaysia.
The acquisition is also not expected to materially strain the group’s balance sheet.
The research house estimates Sunway Healthcare’s net gearing will edge up only slightly to 28.8% in the financial year ending 2027 from 27.6% currently.
