The Edge Weekly reported that Government of Singapore Investment Corp (GIC) could be the strategic investor, eyeing a stake of 20 to 25% in Sunway’s healthcare unit. News of divesting a stake in Sunway Healthcare is known among investors but the exact stake and pricing is still not known. We believe pricing paid by strategic investor would take into account the existing profitable Sunway Medical and good progress made by new hospital, Sunway Velocity. We maintain our forecast and reiterated our BUY call with an unchanged TP of RM2.11 based on SOP-derived valuation.

NEWSBREAK

The Edge Weekly reported that Government of Singapore Investment Corp (GIC) could be the strategic investor, eyeing a stake of 20 to 25% in Sunway healthcare unit. The article also said deal could surface by this week.

HLIB’S VIEW

Not a surprise. News of divesting a stake in its Healthcare has been on the cards but the exact stake and pricing is not known. We believe the pricing paid by the strategic investor would take into account the existing profitable Sunway Medical and good progress made by its new hospital, Sunway Velocity (to be EBIT positive by 4Q21 and profitable in 2022) as well as pipeline of hospitals under construction. We reckon the actual announcement of the deal will bring to light the underlying value of the healthcare unit.

Healthcare listing. Apart from that, we understand that the plan after divestment is to list the Healthcare unit in 6 to 7 years’ time. With the progressive development of its healthcare unit over the said targeted period, it may not be surprising if the valuation of listed healthcare unit could be larger than the listed parent company now. Furthermore, aside from healthcare, the group is relentlessly building up its various core business segments such as construction, property development and investment, trading and manufacturing of building materials, quarry, and pharmaceutical network.

Forecast. Unchanged

We maintain our BUY call with an unchanged TP of RM2.11 based on SOP-derived valuation. Sunway remains our top pick given its well-integrated property, construction and building material operations. With its wide ranging business exposure, the group is a good proxy to the eventual economic recovery.

Source: Hong Leong Investment Bank Research - 21 Jun 2021