KUALA LUMPUR: Sunway Bhd is looking to list its healthcare arm, Sunway Healthcare Holdings Sdn Bhd, on Bursa Malaysia in six to eight years.

       The group plans to build six new hospitals over the next four years and according to Sunway Group president Tan Sri Chew Chee Kin, (pic, below) this is crucial to enable the group’s hospitals to start delivering healthy earnings prior to a listing on the stock exchange.

       “Most of the hospitals will be ready within the next three to four years.

       “They should be recording positive earnings when we go for a listing, ” he said during a media briefing here yesterday.

       Sunway Group founder and chairman Tan Sri Jeffrey Cheah is confident that a total of eight hospitals would be in full swing within the next eight years.

       Currently, the group has two hospitals with a capacity of over 800 beds namely, Sunway Medical Centre Sunway City in Selangor and Sunway Medical Centre Velocity (pic below) in Kuala Lumpur.

       It is targeting to increase its capacity to 3, 000 beds through the new hospitals in Penang, Selangor, Perak, Johor and Kelantan.

       Meanwhile, Cheah said the construction of the hospitals would be funded via the sale of a 16% stake in Sunway Healthcare Holdings Sdn Bhd (SHH) to Singapore sovereign wealth fund GIC (Ventures) Pte Ltd for RM750mil, implying an equity value of RM4.68bil.

       “The definitive agreement signed between the parties stipulate that the group will only be withdrawing from GIC’s investment as and when it needs to, up to the maximum of RM750mil which will be spread over four different tranches over three years, ” he added.

       On the rationale of choosing GIC as its partner, Cheah said the sovereign wealth fund has given the group the “best valuation” among other potential buyers.

       “GIC has been our partner before and we are familiar with how we work and deliver things.

       “And with its worldwide connections and involvement in the healthcare segment, I am confident it will help the group deliver better services and products to our patients.

       “Besides being a very well-known sovereign fund, it always looks at the long-term compared with other private equity funds, ” he noted.

       In a statement yesterday, Sunway Bhd said Greenwood Capital Pte Ltd – an indirect unit of GIC (Ventures) – entered into a share subscription agreement to acquire the stake in SHH.

       The group added the subscription amount would be used for capital expenditure to expand its two existing hospitals.

       It also noted that the funds would be used for working capital purposes which include, but not limited to, the day-to-day operating and administrative expenses of the proposed Sunway healthcare group.

       Cheah said the new medical facilities would be delivered on time.

       They will contribute significantly to the group’s earnings which will unlock equity value once the listing exercise is executed, according to Sunway Group chief financial officer Chong Chang Choong.

       Moreover, he added that GIC’s investment horizon could be extended should there be capital appreciation going forward.

       In total, the group would be spending about RM2bil in capital expenditure over the next four to five years to build four to six hospitals, with the investment from GIC to cover about 40% of the amount.

       “The group will then be able to capitalise and borrow against the equity commitment. The group would also top up the funding requirement with the cheaper banking borrowing cost.

       “It would put the group in a very comfortable position to manage our capital and hospital expansion plan at an optimum funding cost, ” he noted.

       Meanwhile, GIC head of direct investments group for South-East Asia of private equity Amit Kunal said private healthcare in Malaysia would benefit from trends such as an ageing population, the expanding and rising affluence of its middle class as well as a robust healthcare insurance penetration.

       “In addition, medical tourism is expected to resume after Covid-19-related travel restrictions ease. Malaysia will remain an attractive medical tourist destination due to its good air connectivity and quality medical facilities in this region, ” he said in a statement.

       Prime Minister Tan Sri Muhyiddin Yassin, whose pre-recorded speech was aired at the signing ceremony, said the sizeable foreign direct investment in a Malaysian company is proof of its confidence in both Sunway and the Malaysian economy, and a testament to the excellent track record of Sunway in the healthcare sector in the country.

       Given Malaysia’s ageing population, Muhyiddin said serving the needs and demand of older citizens can open a new “silver economy” as aged care could become a new economic driver.

       Moving forward, he added that the healthcare sector, driven by structural demographics changes, would be able to present new opportunities to patient investors.

       Malaysia’s healthcare market is expected to grow by 127% to RM127.9bil in 2027 from RM56.3bil in 2017, according to Fitch Solutions Macro Research.