DBS Group Research analyst Rachel Tan has kept her ‘buy’ rating on IHH with an increased target price of $2.32 from $2.00 previously.
IHH is currently trading at a very attractive FY2022 EV/EBITDA of 14 times, close to -2 standard deviation of its historical range and is positioned to ride on the strong pent-up demand from foreign patients when borders reopen, says Tan.
Earlier on Jan 5, IHH announced that it has been in legal tussles with US fund Emqore Envesecure Private Capital Trust since June 2020.
According to IHH’s statement, Emqore’s claim against IHH arises from allegations relating to the issuance of the shares of Fortis Healthcare to IHH’s subsidiary in and around 2018.
Under the amended complaint, IHH revealed that Emqore was seeking damages in excess of US$6.5 billion. The sum comprises “compensatory damages plus treble damages and attorneys’ fees pursuant to the US Racketeer, Influenced and Corrupt Organizations Act, against 28 named defendants and 20 non-party defendants.”
See: US fund sues IHH Healthcare for US$6.5 bil; IHH to 'vigorously' defend against claims
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IHH however believes it has strong grounds to seek dismissal and intends to file a Motion of Dismiss on 3 principal grounds–lack of personal jurisdiction, forum non conveniens and failure to state a claim for relief, according to the analyst.
As such, Tan believes that the overhang on the share price will likely be temporary if IHH is successful in obtaining the dismissal.
Moreover, the analyst sees that IHH is tapping into Asia’s strongest growth markets – China and India moving forward in the coming year. “With strong platforms in India and China, IHH now has exposure to Asia’s two largest economies with the strongest growth potential in the healthcare sector,” says Tan.
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Additionally, in light of Gleneagles HK achieving an EBITDA breakeven in May 2021, en route for its next leg of growth, this should start to contribute positively for IHH's next leg of growth, according to the analyst.
Some key risks that analyst notes are weaker-than-expected performance, especially in new markets or hospitals and slower recovery post-Covid-19, in addition to government policy changes by the court to overrule IHH’s acquisition of Fortis Healthcare.
At 3:27pm, shares in IHH are trading at 0.15% down or 1 cent lower at $2.13.
Photo: The Edge Singapore
