In a note Wednesday, DBS cut its view on the stock to Hold from Buy, and slashed its target price to S$0.28 from S$0.40, citing heightened uncertainty and risk over the company’s financials.
DBS noted Crosstec shares plunged 84 percent on Tuesday, implying ECON Healthcare may post an investment loss of more than S$3.2 million, which would be around 118 percent of its fiscal 2022 net earnings.
On Monday, ECON Healthcare said it acquired 6.8 million Crosstec shares for around S$1.99 million on 30 December, and on 6 January, the company acquired another 5 million shares for around S$2.0 million, for a total investment of around S$3.99 million. The nursing home operator said it was seeking a higher yield on its idle cash.
DBS said ECON Healthcare needed to reconsider its investment mandate.
“The investment of the majority of its idle cash into a single, loss-making, small-cap company is a riskier decision than one would expect,” DBS said.
“We believe that the growth prospects for Econ’s core nursing home business remain intact but we prefer to wait for more clarity on the company’s plans for its investment strategy before turning positive,” the bank added.
Shares of ECON Healthcare were flat at S$0.29 at 2:11 p.m. SGT Wednesday. Crosstec shares were down 26.32 percent at HK$0.28 at 1:55 p.m. SGT Wednesday.
ECON Healthcare operates 11 medicare centers and nursing homes in Singapore, Malaysia and China.
In January 2020, the company was appointed an operator for two new nursing homes, the ECON Medicare Centre and Nursing Home – Henderson, expected to be operational in the second half of this year, and the ECON Medicare Centre and Nursing Home – Jurong East, which is expected to be operational in 2025, according to the company’s website.
Crosstech Group Holdings provides interior design services, mainly to luxury goods and high-end fashion brand clients.