Knee jerk market reaction over suit against IHH Healthcare

PETALING JAYA: The suit against IHH Healthcare Bhd by Emqore Envesecure Private Capital Trust on allegations relating to the issuance of shares of its subsidiary Fortis Healthcare Ltd is viewed as having a fleeting negative impact on the counter’s share price by analysts.

“We believe this news will have a negative knee-jerk effect on IHH’s share price,” said CGS-CIMB in a report.

However, the research house said it continues to favour the counter for its resilient earnings due to its diversified geographical exposure.

Thus, CGS-CIMB reiterated an “add” call on the counter with a sum-of-parts based target price of RM8.30 per share. It sees return of foreign tourists as a potential re-rating catalysts.

Meanwhile, lira depreciation and negative impact from the introduction of new tax laws for foreign-sourced income has been identified as downside risks for the group.

AmInvestment Bank opined that the news is slightly negative on IHH Healthcare in the short term due to the uncertainty arising from the outcome of the lawsuit.

Pending further development, it maintains the counter’s earnings estimates and a “hold” call with an unchanged fair value of RM6.27 per share.

“The brighter earnings prospect from higher core hospital operations is offset by the uncertainty on the outcome of the lawsuit,” said the research house.

In the suit, Emqore is seeking among others, damages in excess of US$6.5 billion (RM27 billion) comprising compensatory damages plus treble damages and attorneys’ fees pursuant to the US Racketeer, Influenced and Corrupt Organisation Act, against 28 named defendants and 20 non-party defendants, including IHH Healthcare.

IHH believes it has strong grounds to seek a dismissal of Emqore’s claims and intends to file a motion to dismiss the amended complaint.