MARC Ratings has affirmed its rating of AAIS(cg) on Sunway Healthcare Treasury Sdn Bhd’s (SH Treasury) Islamic Medium-Term Notes (Sukuk Wakalah) Programme of up to RM5.0 billion. The rating outlook is stable. The rating reflects the credit strength of parent Sunway Healthcare Holdings Sdn Bhd (SHH), based on SHH’s unconditional and irrevocable guarantee on the programme.
The affirmed rating reflects SHH’s strengthening business profile with a growing market share in the Malaysian healthcare sector and strong debt service ability given its robust internal cash flow generation. SHH’s healthy liquidity position and strong financial flexibility supported by a strong ownership profile are also key rating factors. These factors are tempered by execution risk associated with the group’s rapid expansion plans, its exposure to regulatory and contingent liabilities, and concerns over the industry-wide shortage of nurses.
The group has strengthened its position as a key player in the domestic private healthcare industry. As of September 2024, SHH operates three hospitals with 1,240 licensed beds (end-2023: 1,148 beds), capturing an estimated 7% of the market based on bed count. With two new hospitals opening from 4Q2024 and ongoing expansions, total bed capacity is expected to increase to around 1,900. This, along with strong industry growth drivers, will provide further upside to the group’s operational and financial profiles. As of July 2024, SHH’s patient throughput reached 741,000 and is on track to surpass the 1.2 million visits recorded in 2023.
Revenue for 2024 is likely to chart higher than the RM1.5 billion posted in 2023 based on strong 9M2024 results. The solid top-line performance has supported EBITDA growth and strong cash generation. The group projects to generate RM480 million to RM1.2 billion of annual cash flow from operations between 2025 and 2030, supported by portfolio growth.
As at end-September 2024, SHH’s borrowings stood at RM1.3 billion, with a debt-to-equity ratio of 0.45x. This is expected to decline slightly by year end to about RM1.0 billion following a scheduled debt repayment of approximately RM282 million. SHH forecasts borrowings in the range of between RM1.1 billion and RM1.7 billion from FY2025 to FY2030, with proceeds primarily funding the group’s ongoing expansion plans. MARC Ratings believes the group’s cash-generative operations will support the higher debt levels. Under the rating agency’s sensitised case, which includes profitability stress, cash flow coverage on interest and debt is expected to remain strong at 7.9x-12.2x and 0.3x-0.4x over the forecast period.