KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) says investing in Sunway Bhd offers investors a chance to be part of Malaysia's expanding economy, which is anticipated to pick up momentum in 2024 and beyond.
HLIB highlighted that Sunway's diverse portfolio, covering property, construction, healthcare, hospitality, and other sectors, is deeply embedded in the nation's economic advancement.
"The group's prospects remain bright, anchored by three main growth pillars, namely healthcare, property development, and construction segments.
"With the group's widening exposure to the Malaysian economy, having exposure to the stock is tantamount to owning a piece of the domestic economy, which is on the cusp of entering a new phase of growth," it said.
On its healthcare segment, HLIB said Sunway recently disclosed significant milestones for Sunway Healthcare Group (SHG).
In FY23, SHG achieved earnings before interest, tax, depreciation, and amortisation (EBITDA) of RM380.8 million with an EBITDA margin of 26.1 per cent and an impressive four year compounded annual growth rate (CAGR) of 34.9 per cent from the financial year 2019 (FY19) to FY23.
"Moving forward, we anticipate SHG to sustain its growth momentum, anchored by its strong expansion pipeline and robust healthcare demand supported by the ageing population, income growth, overcrowded public hospitals, medical tourism, and higher insurance penetration," it said.
To note, the listing of SHG as agreed under the shareholder agreement with Sunway's JV partner GIC is to be completed by October 2027.
While many investors are hoping for an earlier listing, HLIB thinks it would be worthwhile to wait given the strong anticipated EBITDA growth momentum, where the valuation for Sunway's stake could swell to RM18.8 billion–RM24.2 billion based on its estimates above if it were to list at a date closer to its deadline.
"Based on our sensitivity analysis, a listing valuation for SHG, anticipated by end-FY27, could potentially range from RM22.4 billion to RM28.9 billion, reflecting its superior EBITDA margin and other competitive advantages.
"Overall, we maintain Buy on Sunway with a higher target price of RM3.76 (from RM3.10) based on SOP-derived valuation," it added.