KUALA LUMPUR (Jan 22): Sunway Bhd (KL:SUNWAY) has started the ball rolling for the initial public offer (IPO) of its healthcare unit, sources told The Edge.

Maybank Investment Bank Bhd and AmInvestment Bank Bhd are said to be the front-runners as principal advisers for the IPO of Sunway Healthcare Group, the sources said.

Affin Hwang Investment Bank Bhd and CIMB Investment Bank Bhd, meanwhile, have been shortlisted as joint book runners, according to sources.

The conglomerate has also shortlisted three foreign firms as joint global coordinators, namely HSBC, UBS, and Jefferies, said the sources, who declined to be named as they are not authorised to speak to the media.

The arrangement hints towards a pursuit for more foreign investors for the IPO, and a higher end of the valuations range ascribed to recent healthcare business transactions in the country.

Shares of Sunway, which last traded at historical price-to-earnings ratio of 25.6 times, was up 23 sen or 5.44% on Monday (Jan 20) to close at RM4.46, compared with the 0.52% rise in the benchmark KLCI. 

The deal also comes at a time when the domestic healthcare industry is in the spotlight amid medical inflation, which put upward pressure on insurance premiums and prompted intervention from Bank Negara Malaysia to phase out the upward revisions.

Sunway could be looking at an enterprise value (EV)-to-ebitda forecast of 21 to 23 times for the financial year ending Dec 31, 2026 (FY2026), the sources said.

Recent healthcare transactions include IHH Healthcare Bhd’s (KL:IHH) acquisition of Island Hospital Sdn Bhd from Comprehensive Care Sdn Bhd. The deal valued the Penang-based 600-bed hospital at RM3.92 billion based on 19.2 times 2024 EV/ebitda. The deal, first announced in September, was completed two months later in November.

Earlier in 2023, Sime Darby Bhd (KL:SIME) and Australia-based Ramsey Health Care Ltd sold their 50:50 joint venture unit Ramsay Sime Darby Health Care Sdn Bhd (RSDH) to Columbia Asia Healthcare Sdn Bhd for RM5.7 billion cash.

This was based on EV/Ebitda multiple of 20.1 times, which Sime Darby at the time compared with “median traded EV/Ebitda of selected Southeast Asia hospital peers is around 16 times”.

Sunway’s annual report separately showed that the healthcare group booked an Ebitda of RM380.8 million in FY2023, up 33% from RM285.8 million a year ago.

Company search data registered Jan 7 shows that the group’s unit Sunway Healthcare Holdings Sdn Bhd (SHH) is 90.26%-owned by Sunway City Sdn Bhd, which is in turn wholly owned by Sunway.

Another 9.73% in SHH is owned by Greenwood Capital Pte Ltd, an indirect unit of Singapore’s sovereign wealth fund GIC Pte Ltd. GIC had first bought a 16% stake in SHH back in 2021 for RM750 million, which valued the entire entity at RM4.69 billion then.

In FY2023, SHH’s net profit slipped 13.5% to RM181.62 million, from RM209.9 million in FY2022, SSM data showed. This as revenue rose 36.8% to RM1.46 billion, from RM1.06 billion.

Based on Sunway’s 9MFY2024 results and its equity portion in the healthcare group, the business contributed RM63.03 million or 13.6% of Sunway’s pre-tax profit of RM462.66 million in the nine-month period.

The listing of SHH has to occur by October 2027 based on a shareholders’ agreement with GIC, said Sunway Healthcare Group president Datuk Lau Beng Long to The Edge in an interview in 2023.

From 1,157 combined licensed beds across Kuala Lumpur and Pulau Pinang in 2023, Sunway Healthcare Group has established its footprint in Selangor, and plans to expand further into Perak, Johor, and Kelantan, targeting 3,000 beds across its network of hospitals by 2030, according to Sunway’s annual report.

In addition to its primary healthcare operations, SHH also operates ancillary healthcare businesses, which include Sunway Specialist Centre in Damansara and Singapore, as well as a traditional medicine centre, a fertility centre, and a senior living facility.

Sunway’s major shareholders include its founder Tan Sri Jeffrey Cheah with 0.56% direct and 58.84% indirect stake, and the Employees Provident Fund Board (EPF) with 8.06% direct stake.

At its last close of RM4.46, Sunway had a market capitalisation of RM27.75 billion. The counter is down roughly 7% since the start of the year.