Sunway Healthcare jumps 27.6% on Bursa debut in Malaysia’s biggest IPO in nine years

[KUALA LUMPUR] Sunway Healthcare got off to a strong start on Bursa Malaysia on Wednesday (Mar 18), with its share price rising 27.6 per cent to RM1.85 from its initial public offering (IPO) of RM1.45 per share.

Shares in Sunway Healthcare opened at RM1.70, up 17.2 per cent. The shares then climbed as high as RM2.07, up 42.8 per cent, valuing the company at about RM22 billion (S$7.2 billion). A total of 594.7 million shares changed hands by Wednesday’s closing.

The healthcare arm of tycoon Jeffrey Cheah’s Sunway Group debuted on the main market after pricing its IPO at RM1.45 per share and raising RM3.3 billion from its base offering and overallotment option, making it Malaysia’s largest IPO in nine years.

About 51 million shares changed hands in the first few minutes of trading, pointing to strong investor demand for the counter.

Demand came from both retail and institutional investors. The retail tranche was 5.57 times oversubscribed, while the institutional portion was fully taken up. The offering was also backed by 20 cornerstone investors, including the Employees Provident Fund, Lembaga Tabung Haji and JP Morgan Asset Management (Singapore).

Eye on growth prospects

Trident Analytics chief research officer Peter Lim said that the stock was not cheap at current valuation levels relative to listed healthcare peers, but added that institutional support and Sunway Healthcare’s growth prospects were underpinning demand for the shares.

Kieran Lim, equity research analyst at Malacca Securities, noted that Sunway Healthcare was still trading at a premium to IHH Healthcare and KPJ Healthcare, but that the premium could be justified by its potential inclusion in the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI), as well as its solid fundamentals and clear expansion plans.

He added that the group’s relatively quick turnaround in earnings before interest, taxes, depreciation and amortisation for new hospitals, at around a year or less versus an industry norm of three to five years, also supported the valuation.

CIMB Securities said that Sunway Healthcare could qualify for inclusion in the FBM KLCI on a T+2 basis (where deals are settled two business days after the trade execution) if its closing market capitalisation on Wednesday exceeds that of QL Resources.

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The agribusiness group is currently the index’s smallest constituent with a market value of about RM13.4 billion.

Of the RM833.8 million in fresh proceeds raised for the company, 66.5 per cent will go towards expanding existing hospitals, 29.9 per cent towards redeeming sukuk wakalah – a type of Islamic debt instrument  – with the rest earmarked for listing fees and expenses.

On Monday, Sunway Healthcare reported a 43.3 per cent rise in its fourth-quarter net profit to RM112.4 million, driven by higher patient volumes and favourable tax treatment, and a 21.3 per cent increase in revenue to RM614.6 million.