RHB Research keeps ‘buy’ call on Sunway with RM1.88 target price

Sunway Bhd will see a recovery in all its business divisions due to the gradual reopening of business activities, and long-term growth prospects will be strengthened after its recent fund-raising exercise, RHB Research said.

In a note yesterday, the firm said the healthcare division might see a potential value-unlocking opportunity, while the proceeds from its minority stake sale would be used to fund the construction of new hospitals.

“Based on our recent discussion with the management, we understand that Sunway may rope in a reputable foreign strategic investor by selling a minority stake in the healthcare division over the near term.

“If this transaction materialises, Sunway Healthcare Group (SHG) may be valued at a premium given its track record, brand equity and growth prospects.

“This should set a benchmark for the future listing of the division, which could take place in six to seven years,” it said.

RHB Research said it believed the proceeds would be used mainly to fund SHG’s expansion. The new hospitals in the pipeline include Sunway Medical Centre Phase Four and Sunway Medical Centre Seberang Jaya.

It said the hospitals were estimated to cost RM1 billion for the construction and fit-out works.

RHB Research said Sunway aimed to book RM1.6 billion in sales this year (financial year 2020: RM1.3 billion).

“Its exposure to the Singapore property market is opportunistic, in our view, as the country’s post-pandemic recovery is ahead of many neighbouring countries.

“As such, Sunway’s first quarter 2021 sales should be strong given the encouraging take-up rate of 60 per cent for Parc Central in Tampines, while Ki Residence is 36 per cent sold — these projects were launched in January 2021 and December 2020, respectively,” it said.

RHB Research has maintained its “buy” call on Sunway with a new target price of RM1.88 from RM1.86 previously.

If this transaction materialises, Sunway Healthcare Group may be valued at a premium given its track record, brand equity and growth prospects. RHB RESEARCH