AmBank Research maintains hold on IHH Healthcare
KUALA LUMPUR: AmBank Research has maintained a “hold” call on IHH Healthcare Bhd with an unchanged fair value of RM5.30 per share.
In a research report yesterday, it said IHH Healthcare’s long-term growth prospects are strongly underpinned by growing demand for private healthcare, backed by rising affluence and an aging population.
It added that IIHH also appeals to investors for its presence in key regional markets, such as Singapore, India and China.
However, AmBank Research said it was negative on the issuance of a qualified opinion on the group’s financial year 2018 in relation to Fortis Healthcare Ltd, as it would impact the groups’ financial statements.
“The rationale behind the opinion is that there are ongoing investigations by various parties on Fortis. As such, the auditors are unable to ascertain the extent of diversion of funds, if any, in excess of the amount that had been provisioned for prior to the acquisition, circa RM261.2 million,” it said.
It said Fortis’ board had taken steps to review and tighten its internal governance control and also in initiating civil actions against former controlling shareholders of Fortis and various other entities demanding recovery of the outstanding amounts.
IHH’s internal investigations, ongoing since November 2018, has not uncovered any additional sources of diversions.
The group has also initiated an independent forensic audit on Fort is’ operations, which is expected to be completed by December 2019 to ensure sources of diversions or funds are identified.
“Moreover, on the company level, there was a RM2.3 billion charge on the company’s profit or loss based on the impairment assessment of its Turkey investment, as it faces the risk of a depreciation of the Lira.
“However, this amount has no bearing on the group level as the amount will be reversed during consolidation of accounts,” AmBank Research added.
It also remained cautious on IHH Healthcare due to the high currency risk associated with its operations in Turkey, coupled with start-up losses at its green field hospital projects. — Bernama