Will Sunway Medical's early spin-off and listing drive stock prices?
Its two hospitals will open within the next two years, and it is expected that they will soon be profitable. Sunway $SUNWAY(5211.MY$Its Sunway Medical Group may be spun off and listed as early as 2026!
According to Galaxy International Securities's latest report, 2026 is the best time for Sunway Healthcare to go public.
“Because the group's two new hospitals, Sunway Damansara Hospital (Sunway Damansara) and Sunway Ipoh Hospital, will open in the last quarter of 2024 and the first quarter of 2025, respectively, and contribute to the profit for the 2026 fiscal year (December end).”
Can incentivize Sunway's stock price
Analysts further believe that the spin-off and listing of its medical group will be a big benefit for the parent company Sunway. It is expected to repeat the history of stronger stock prices after announcing the spin-off and listing of SUNCON Construction (SUNCON, 5263, Main Board Construction) in 2014.
“From September 2014 to April 2015, Sunway's stock price increased 22%.”
Analysts added that the two new hospitals mentioned above have 334 and 258 beds, respectively, and are likely to achieve profit (EBITDA) before interest tax amortization and depreciation (EBITDA) in the 2026 fiscal year.
After the operation of the two new hospitals mentioned above, Sunway Medical Group's total number of hospital beds will increase from 1,158 as of the end of March this year to about 1,700.
Valuation reached 13.5 billion
“Today, we have raised the overall valuation of Sunway Healthcare Group to RM13.5 billion, which is 22 times the corporate value to EBITDA ratio (EV/EBITDA), which is 20 times higher than the previous Ramsay Morinami Medical divestment case and 10% higher.”
He added that based on 84% of the shares held by Sunway, it is worth RM11.5 billion.
The analyst also said that Sunway Healthcare Group's valuation premium is reasonable because the group's future expansion plans will further expand its current domestic private hospital market share of 6%.
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“What's more, Sunway Medical Group's average revenue per hospital bed is RM1.3 million, which is higher than Ramsay's RM85 million.”
Additionally, analysts quoted foreign media sources as saying that Sunway Medical Group is bidding for the 600-bed Island Hospital (Island Hospital).
“If the acquisition is successful, I believe the development plan for Sunway Medical Center in Penang will be delayed.”
Overall, the analyst maintained Sunway's “buy” rating, and the target price was significantly raised to RM4.40 from the previous RM3.45.
Source: Nanyang Siang Pao
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