KUALA LUMPUR (Nov 14): The disposal of Ramsay Sime Darby Health Care Sdn Bhd (RSDH) to Columbia Asia Healthcare Sdn Bhd for RM5.7 billion is considered fair, said Public Investment Bank (PIB) research.

The research house said the disposal price of about 20.1 times EV/Ebitda aligns with the research house’s values estimation on the company’s healthcare division.

“We view this disposal positively as it is in line with plans to monetize its non-core assets with estimated net gain on disposal of RM2 billion (29.7 sen per share)” said PIB in its statement on Tuesday.

“We are positive on the deal as it will unlock value of a non-core asset and further strengthen its core businesses of industrial and motors, while also paring down borrowings for the acquisition of UMW Holdings Bhd (UMW)” it added.

Meanwhile, HLIB Research has pointed out that the valuation for the disposal was derived from enterprise value of RM6.1 billion, and based on a ‘willing buyer, willing seller’ basis.

RSDH operates four hospitals in Malaysia and three hospitals in Indonesia. Columbia Asia is a Malaysia-based international private healthcare company which has 22 medical facilities across Asia, with 14 of them in Malaysia.

“The group is expected to recognise a net gain of RM2 billion from the disposal exercise. The disposal is also timely to address concerns on the ballooning gearing level of the group for its acquisition exercises,” it added.

In a separate statement, Sime Darby has confirmed on Nov 10 (Friday) that the group and its Australian partner are selling Ramsay Sime Darby Health Care Sdn Bhd (RSDH) to Columbia Asia Healthcare Sdn Bhd for the disposal of 100% equity interest for RM5.7 billion cash, marking the groups’ exit from the healthcare business.

Commenting on the Sime Darby financial earnings, both research houses acknowledged that the disposal of RSDH will only have minimal impact on the group given that the contribution of the healthcare division is relatively small at RM81 million for financial year 2024 (FY2024) to RM85 million for FY2025 to the group’s profit after tax and minority interest (PATMI).

Following that, the research houses made no changes on the earning forecast for Sime Darby, pending the upcoming financial results by the group for the first quarter of 2024 (1Q2024), and the outcome of the EGM voting on UMW acquisition exercise.

HLIB has maintained its ‘buy’ call on Sime Darby with higher target price (TP) of RM2.60 (previously RM2.40) based on unchanged 10% discount to sum of parts valuation of RM2.89.

PIB otherwise has kept their ‘neutral’ stance for the group with an unchanged TP of RM2.37 on similar derived valuation.

At the time of writing, the shares for Sime Darby were traded up three sen or 1.28% at RM2.37, valuing the company at RM15.95 billion.

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Sime Darby confirms sale of healthcare business to Columbia Asia Healthcare for RM5.7 bil cash