Sunway’s healthcare business underappreciated, says analysts
KUALA LUMPUR: Following a recent visit to Sunway Bhd’s (Sunway) Sunway Medical Centre (SunMed), the research arm of HongLeong Investment Bank Bhd (HLIB Research) believe the group’s healthcare business which runs SunMed, home nursing services and retail pharmacy, is underappreciated due to its growth potentials.
In a research report, the team saw that SunMed is currently on a multi-year expansion path with its newly opened wing (Tower C) which houses 620 beds and an upcoming new medical centre in Velocity slated to be opened in in the first half of 2019 (1H19).
It guided that Sunway is aiming to achieve a total capacity of 2,000 beds within the next 5 years.
While the new wing has only been running for less than a year, it is understood that the wing has already been generating profit at an operation level – bucking the trend of a long gestation period of private healthcare businesses.
“A seamless execution is made possible thanks to management’s experience and strong branding,” explained the research arm.
Demonstrating strong operation strengths and an eagerness to increase service quality with continuing medical education via various collaborations, SunMed is aspired to become a leading medical centre in the Asean region – providing much upside to its parent company Sunway.
And beyond that, Sunway is also set to benefit from a booming medical tourism industry as efforts by the Malaysia Healthcare Travel Council and Visit Malaysia Year 2020 to promote Malaysia as a top destination for medical tourism are expected to benefit SunMed.
“Additionally, we believe that SunMed is a front runner for the Flagship Hospital Programme given its expertise and unmatched location,” added the research arm.
Overall, HLIB Research is reiterating their ‘Buy’ call on Sunway’s stock as they believe that it should be rerated and traded much closer to its peers such as IJM Corporation Bhd and Gamuda Bhd given its diversified incomes stream and declassification from the property sector.
Besides that, the research arm reckoned that the stock is a cheap entry into the healthcare business as Sunway Bhd is currently trading at a forward price earnings ratio (PER) of 13 fold, much lower compared to the 46 fold of IHH Healthcare Bhd and 23 fold of KPJ Healthcare Bhd.
“We opined that it is a deep value stock with mature investment properties and the underappreciated trading and healthcare businesses.
“Besides, a spin-off of healthcare business is also on the cards along the shareholder value creation journey,” said the research arm.