Limited competition makes Putrajaya attractive for SunMed: HLIB

KUALA LUMPUR: Sunway Healthcare Holdings Bhd's (SunMed) proposed expansion into Putrajaya presents a growth opportunity, supported by limited private hospital competition, according to Hong Leong Investment Bank Bhd (HLIB) Research.

Under the agreement, Sunway Healthcare Ventures Sdn Bhd, wholly owned by SunMed, and Tapak Senja Sdn Bhd, wholly owned by Putrajaya Holdings Sdn Bhd (PJH), will establish a 60:40 joint-venture company to construct and lease a multi-speciality tertiary private hospital.

"We view the development positively, as it aligns with SunMed's long-term strategy of expanding its network of tertiary hospitals while expanding its footprint in Putrajaya," it said in a research note.

The proposed Sunway Medical Centre Putrajaya will be developed on about 1.01 hectares of freehold land in Precinct 7, adjacent to Putrajaya Sentral, which is served by the Express Rail Link and Mass Rapid Transit stations.

The hospital will have 325 beds and include a dedicated burns unit.

HLIB Research said its channel checks indicated that Putrajaya currently had no private hospitals, while the existing public hospital was relatively crowded, presenting a potential market opportunity for SunMed.

Construction is targeted to begin in the fourth quarter of 2027 with completion expected by 2031.

Under the joint-venture agreement, SunMed will contribute capital according to its shareholding, arrange for a subsidiary to lease the hospital from the joint-venture company and obtain the necessary licences and approvals.

PJH, meanwhile, will contribute capital, facilitate the acquisition of the land for RM40 million and provide support and expertise in real estate development and construction.

Following the finalisation of the joint venture with PJH, HLIB Research maintained its "Hold" recommendation on SunMed with an unchanged target price of RM2.05.

It said SunMed's earnings forecasts remained unchanged, as contributions from the proposed greenfield hospital were expected to materialise beyond its financial year 2026 to 2028 forecast period.

The research house reiterated its RM2.05 target price, based on an unchanged valuation multiple of 30 times its financial year 2027 enterprise value-to-earnings before interest, tax, depreciation and amortisation.