Malaysia’s diversified group Sunway Bhd is said to be planning to raise around $200-300 million to support the expansion of its healthcare business, according to sources familiar with the matter.
Sunway will issue around 20-25 per cent fresh shares in its healthcare business to investors as part of the fundraising process, the sources added. Potential investors include private equity firms as the holding company is open to only minority investments.
The fundraising process is said to be in an early stage and Maybank Kim Eng has been appointed as the sell-side advisor, three sources told DealStreetAsia.
“Sunway plans to use the funds to expand its hospital chain in Malaysia to increase its capacity to 2,500 beds by 2025,” sources said. Sunway, with business interests spanning property to construction and healthcare, has a total of 741 licensed beds, according to its 2019 annual report.
The fundraising can be seen as a pre-IPO funding round, as the healthcare division is expected to be listed on Bursa Malaysia in about three years, a source said.
When contacted, Sunway said the group “has always been active in exploring and evaluating various options for its businesses with a view to enhancing shareholders’ value.”
“To this end, we continue to have discussions with various parties on potential opportunities involving the businesses and affairs of the group and its subsidiaries. However, as of now, no decision has been made by the group to pursue any particular opportunity. We will make the necessary announcements as and when required,” the group said in a statement to DealStreetAsia.
In 2017, it was reported that Sunway founder and chairman Tan Sri Jeffrey Cheah said the group plans to list its healthcare unit in five years. Sunway was said to have conducted a fundraising plan for its healthcare business to raise around $100 million in 2016, according to two sources.
The plan was not successful as its healthcare business was deemed to be not substantial at that time. Sources said Sunway’s healthcare business is now considered more attractive for potential investors as it has grown bigger. Sunway’s hospital chain could emerge as the third-largest private hospital player in Malaysia, after sovereign wealth fund Khazanah-backed IHH Healthcare and KPJ Healthcare.
Sunway established its flagship hospital Sunway Medical Centre (SMC) in 1999 in Selangor. The group opened a second hospital, Sunway Medical Centre Velocity, in September 2019 in Cheras.
Sunway’s other medical centres include Sunway Specialist Centre Damansara, Sunway Traditional Complementary Medicine Centre in Sunway City Kuala Lumpur and Sunway Medical Centre (Singapore). In total, the division provides 741 licensed hospital beds, 226 consultation suites and 17 operating theatres, its annual report showed.
Sunway is expanding its network of tertiary hospitals. In its latest annual report, Sunway said its healthcare division is currently undertaking capacity expansion at SMC and has embarked on an expansion plan to build six more hospitals over the next five years within its integrated developments in Malaysia.
In July this year, Sunway said, in a regulatory filing, it is acquiring a 3.811-hectare-land in Kelantan, a state in East Coast of Peninsular Malaysia, for RM28.7 million. The group plans to build a 200-bed hospital with an estimated development cost of RM200 million ($47.93 million).
The healthcare division reported revenue of RM584.8 million and profit before tax of RM61.8 million in 2019 compared to revenue of RM459.7 million and profit before tax of RM54.4 million in 2018, its annual report showed. The financial performance in 2019 was better mainly due to the strong performance of Sunway Medical Centre. The overall healthcare performance was partly offset by the operating loss of RM17.8 million from Sunway Medical Centre Velocity.