Our Analyst Tan Kai Sheun Shared a Good Analysis on Sunway, See Below: - Sunway (RM1.88) - Sunway’s Ramsay Healthcare Bid Update.
It was reported that the Ramsay-Sime Darby healthcare sale could go to Columbia Asia or Affinity’s consortium of bidders.
This suggests that Sunway was not able to secure the bid. We understand that this information was verbally conveyed to bidders. Actual outcome of the bid will be officially made known by next week.
Could be a sigh of relief for investors
Following this news report, Sunway’s share price inched up for the day to close at RM1.88 (up 5 sen from previous day close).
We believe that investors may in fact heave a sigh of relief following this development as there were previously concerns on the bid which include:
(i) over payment on the deal;
(ii) gearing impact given the size of the deal; as well as
(iii) possible margin erosion.
As such, this development could be a blessing in disguise and spell a sigh of relief for investors.
Uncovering the valuation of healthcare
Once the results of the bid are officially made known likely next week, the transaction should uncover the latest market valuation of a healthcare (i.e. hospital) business.
A premium valuation of the deal should help to shed light on the value of the healthcare segment and may in turn lift the valuation of Sunway.
Strong expansion pipeline ahead
Notwithstanding this deal, investors should be reassured that the healthcare segment’s growth remains intact given the group strong expansion pipeline ahead including:
(i) the progressive opening of Tower D, E & F in SMC SC;
(ii) SMCV Phase 2 expansion by end-2023;
(iii) SMC Damansara in 1Q24;
(iv) SMC Ipoh in 2Q24 and more.
Expanding organically
Additionally, we believe an organic expansion should allow the group better control on its assets and seamlessly integrate its hospital assets into the group’s wider ecosystem and hub-and-spoke model.
For instance, the group’s hospital assets such as SMC SC, SMC Penang, SMCV, SMC Ipoh are all located strategically either within the group’s township or in proximity to its other developments, creating synergies within the group’s ecosystem.
Conversely, an expansion via acquisition may see the group inheriting assets that may or may not fit well with the group’s overall ecosystem.
Forecast Unchanged.
Core net EPS (sen):
FY22a: 11.6
FY23e: 12.0
FY24f: 12.9
FY25f: 14.1
Maintain BUY with an unchanged TP of RM2.76 based on SOP-derived valuation. Sunway remains our sector top pick as the prospects of the group remain bright with its efforts to scale up businesses in healthcare, pharmacy, property development & investment, construction, building materials and quarry.
Source: Hong Leong Investment Bank Research - 3 Nov 2023
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