KUALA LUMPUR (April 2): IHH Healthcare Bhd's share price fell as much as 34 sen or 6.1% to RM5.23 today after the company said yesterday its external auditors KPMG PLT issued a qualified opinion on IHH's financial statements for the year ended December 31, 2018 (FY18).

Today, IHH shares closed down 15 sen at RM5.42 to become Bursa Malaysia's top decliner. IHH saw some 14 million shares traded.

Yesterday, IHH said in a statement to Bursa Malaysia that KPMG PLT indicated its qualified opinion took into account IHH's acquisition of Fortis Healthcare Ltd and its subsidiaries on November 13, 2018.

Yesterday, KPMG PLT was quoted as saying in IHH's statement: "Due to the ongoing process of the various inquiries/investigations (including the need for any additional investigations by Fortis), the external auditors of Fortis are unable to determine if there are any regulatory non-compliances and additional adjustments/disclosures which may be necessary as a result of further findings of the ongoing or future regulatory/internal investigations and the consequential impact, if any, on the consolidated financial statements of Fortis.

"Any consequential adjustments may be recorded either as adjustments to the assets acquired and liabilities assumed in the acquisition which will have an impact to the provisional goodwill recognised by the group (IHH) on acquisition of Fortis under the purchase price allocation exercise, or as post-acquisition adjustments to be recognised in the financial statements of the group in the period the adjustments are known."

Today, Hong Leong Investment Bank Bhd analyst Sheikh Abdullah wrote in a note that given the many variables that could affect Fortis as a going concern, IHH's external auditors are clearly concerned on the goodwill on acquisition amounting to RM1.54 billion that IHH booked in FY18.

"A full impairment of this goodwill sum (by IHH) would move FY19 into a loss of RM337 million and shrink proforma FY18 shareholder’s equity by 7% to RM20.5 billion.

"We are putting our HOLD call (on IHH shares) and TP (target price) of RM6.03 under review, pending the release of the audited accounts and further clarity from management on the Fortis goodwill. Nonetheless, we expect short-term selling pressure in view of these uncertainties," Sheikh Abdullah said.