With a risk-weighted three-year profit after tax (PAT) compound annual growth rate of 60.4% over the awards review period, Sunway Bhd outperformed its peers in the industrial products and services sector, clinching The Edge Billion Ringgit Club Award for Highest Growth in Profit After Tax over Three Years.

The conglomerate’s net earnings jumped more than sevenfold to RM2.66 billion for the financial year ended Dec 31, 2021(FY2021), from RM357.3 million in FY2020 on the back of a RM2.29 billion net gain arising from the partial divestment of Sunway Healthcare Group.

For FY2019 and FY2018, its PAT came in at RM709.2 million and RM645.6 million respectively.

Recall that Singapore’s sovereign wealth fund GIC Pte Ltd had in June 2021 acquired a 16% stake in Sunway Healthcare Holdings Sdn Bhd (SHH) for RM750 million. SHH is set to become a leading integrated private healthcare group with close to 3,000 beds in the next few years.

Excluding the one-off net gain, the healthcare business would have reported a net profit of RM104 million in FY2021, driven by sustained recovery in hospital activities with a higher number of admissions and outpatient treatments at Sunway Medical Centre and Sunway Medical Centre Velocity.

Although the healthcare segment is expected to register a record-high profit in FY2022, Kenanga Research warned that it could see slight negative earnings growth in FY2023 and FY2024 before registering growth again in FY2025, given the gestational losses expected from the three new incoming hospitals.

“That said, the new hospitals are expected to break even faster than the industry norm as established doctors with existing patients are coming onboard,” said the research house in an Oct 5 note while maintaining an “outperform” call on Sunway, with a target price of RM2.05.

HLIB Research also sees Sunway’s healthcare division gaining traction in the group’s development.

“We believe the stock will be re-rated in due time as the healthcare segment will increasingly draw investor focus as the earnings from this segment filter through and as the group progresses closer to the value unlocking exercise of its healthcare through an IPO to be completed by Jan 31, 2028, or earlier,” it said in an Oct 14 research note.

Maintaining a “buy” call on Sunway with an unchanged target price of RM2.65, HLIB Research said Sunway remains its top pick, given the group’s synergistic business model and well-integrated property, construction and building material operations.

Property development contributed a profit before tax of RM154.1 million to the group in FY2021, followed by construction (RM148.8 million), trading and manufacturing (RM38 million), building materials (RM10.6 million) and quarry (RM9.4 million).

However, property investment incurred a loss before tax of RM10 million, as its leisure and hospitality divisions were adversely affected by the various phases of Movement Control Orders and lockdowns.

For the six months ended June 30, 2022 (6MFY2022), Sunway’s net profit was RM309 million, more than double the RM128.97 million in 6MFY2021, thanks to improved performance across all business segments.

Sunway believes its leisure and hospitality segments will be able to perform well, owing to improving domestic tourism demand and higher tourist arrivals.

“The healthcare segment will also benefit from the recovering medical tourism sector as international travel starts to normalise. Barring unforeseen circumstances, the board is optimistic that the group’s financial performance for FY2022 will be satisfactory,” it commented on the prospects after the release of its latest quarterly results.

Founder and chairman Tan Sri Dr Jeffrey Cheah holds a 64.65% interest in the group. Sunway has two listed subsidiaries on Bursa Malaysia: Sunway Construction Group Bhd and Sunway Real Estate Investment Trust (Sunway REIT), with stakes of 54.56% and 40.89% respectively.

Sunway’s shares hit a high of RM1.85 in April this year before paring gains to close at RM1.53 on Oct 21, giving it a market capitalisation of RM7.55 billion.

At the time of writing, Bloomberg data shows that of the 12 analysts covering the stock, nine had “buy” calls and three “hold”, with a consensus target price of RM2.02.

Sunway declared a total cash dividend of 2.5 sen per share for FY2021, with the dividend payout equivalent to 33% of core profit after tax and minority interest, which was well above the 20% dividend payout guidance.