KUALA LUMPUR (Nov 22): Sunway Bhd (KL:SUNWAY) became the best performing constituent member of the FBM KLCI index year to date after its share price breached the RM5 mark on Friday, ahead of its third-quarter (3Q) earnings announcement expected next week.  

The counter reached an intraday high of RM5.05 in the early-morning trade, after more than 110 million shares changed hands. The stock settled 0.4% or two sen higher at RM4.99, giving the diversified property developer and healthcare operator a market capitalisation of RM28.61 billion.

The record high in its shares makes Sunway the best-performing FBM KLCI constituent so far this year, less than five months of its entrance to the benchmark 30-stock index, with a return of 132% since Jan 2, 2024. The counter has appreciated by more than 150% over the last one year.

At RM5 per share, Sunway’s share price had surpassed the consensus 12-month target price of RM4.49, ascribed by 12 institutional analysts covering the stock. Out of the 12, eight analysts endorsed a "buy" call on Sunway, while three called for a "hold", with only one house, Kenanga Investment Bank, having a "sell" call on the counter.

When contacted by The Edge, analysts covering Sunway mostly said that they are still awaiting the release of Sunway's 3Q results. Analysts’ consensus forecast collated by Bloomberg shows that Sunway's net profit is expected to reach RM863 million in FY2024 and projected to increase to RM965.67 million in FY2025.

For the first half of 2024, Sunway's net profit surged by 51.8% to RM442.7 million from RM291.57 million in the previous year, while revenue rose by 9.8% to RM3 billion from RM2.73 billion, driven by higher contributions across all business segments.

Sunway has also reported to begin preparation for the listing of Sunway Healthcare Group on the country’s stock exchange.

“We see a catalyst from the upcoming listing of the healthcare unit which is likely to happen in 2026 and that will unlock the value of its healthcare division,” MIDF Amanah Investment Bank Bhd senior analyst Jessica Low Jze Tieng told The Edge.

Sunway Healthcare, which owns two hospitals in Kuala Lumpur and one in Penang including Sunway Medical Centre Sunway City (SMCKL), the largest private hospital in Southeast Asia, currently operates a combined 1,730 beds and is set to expand to 2,300 beds by 2025.

SMCKL is expected to expand to 1,086 beds, surpassing major regional hospitals such as Island Hospital in Penang with 600 beds and Bumrungrad International Hospital in Thailand, which operates 580 beds, Hong Leong Investment Bank (HLIB) said in its latest report on the conglomerate.

In the report, HLIB explains that SMCKL’s has the potential to significantly grow its international patient base, bringing its revenue per bed closer to Bumrungrad’s levels.

Bumrungrad’s strong appeal to international patients, who form 67% of its clientele, drives a revenue per bed of RM5.7 million, which is more than four time higher than Sunway Healthcare’s average of RM1.3 million per bed, said HLIB.

“Over the next few years, SMCKL has the potential to significantly grow its international patient base, bringing its revenue per bed closer to Bumrungrad’s levels. This underscores the considerable upside for SMCKL, driven not only by capacity expansion but more importantly by enhanced pricing power similar to Bumrungrad,” said HLIB.

HLIB opined that it would be strategically prudent for Sunway and Singapore’s GIC Pte Ltd — which owns a 16% stake in Sunway Healthcare on a fully converted basis — to only consider a listing that matches or exceeds the enterprise valuation of between 20 and 25 times earnings before interest, taxes, depreciation and amortisation (Ebitda).  

The 20 to 25 times Ebitda valuation for Sunway Healthcare is based on the acquisition of Ramsay Sime Darby Health Care by Columbia Asia Healthcare Sdn Bhd in November 2023, at RM5.7 billion. According to HLIB, the Ebitda of Ramsay Sime Darby in FY2023 stood at RM301 million.

“With top-tier doctors, advanced equipment, and a strategic location in Sunway City offering access to accommodation, leisure, and shopping, SMCKL is well-positioned to become a leading medical tourism hub,” HLIB said.

Besides its hospital business, Sunway is also the key beneficiary of the recovery of the Johor property market given its landbank in Iskandar Malaysia, noted MIDF.