KUALA LUMPUR (March 16): Kenanga Research has raised its target price for Sunway Bhd (KL:SUNWAY) to RM5.32 from RM4.98, reflecting the market appeal of its healthcare arm, Sunway Healthcare Holdings Bhd (KL:SUNMED), which is set to list on Bursa Malaysia on March 18 at an IPO market capitalisation of RM16.68 billion.

The research house noted that Sunway Healthcare’s IPO was 5.6 times oversubscribed due to the scarcity of listed private hospital operators in the market and strong capacity expansion visibility.

It noted that Sunway Healthcare's bed capacity is expected to grow about 11% over seven years to 3,400 beds from 1,600 beds, and the superior earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins to be in the mid-to-high 20% range, compared with peers that typically operate in the low 20% range.

“On the group’s other core businesses, momentum remains intact. The property division is expanding its footprint in the southern region and Singapore, which we view as a strategic move to diversify away from the more competitive Klang Valley property market.”

“Meanwhile, earnings support should also come from SUNCON’s (Sunway Construction Group Bhd)(KL:SUNCON) continued traction in securing data centre-related projects, with management targeting RM6 billion in order book replenishment from FY2025’s record RM5.2 billion,” it further said in a note on Monday.

Meanwhile, Kenanga noted that assuming the take over of IJM Corp Bhd (KL:IJM) is successful (acceptance threshold of 50% + 1 share), its sensitivity analysis suggests an upside to its target price for Sunway of 32 sen to 57 sen per share.

"This is premised on potential synergies that could warrant a tighter RNAV (revalued net asset value) discount for IJM’s property division from 50% to 40%," it added.

There are now two “buy” and 11 “hold” calls on the stock. The consensus target price is RM5.75, based on the average of the 13 research houses tracked by Bloomberg.

Therefore, Kenanga upgraded Sunway to a “market perform” call, citing improved sentiment from Sunway Healthcare’s spin-off, Sunway Construction’s order book momentum, and the strengthening presence in Singapore’s property market.

Sunway ended Friday's (March 13) trading on Bursa Malaysia at RM5.14, giving the company a market value of RM34.75 billion.