iSelect (ISU): Upgrade in price target

ISU announced it has come to an agreement to receive a cash settlement for its outstanding NIA Health loan facility. We believe this is a very good outcome for the following reasons: 1. Higher value than anticipated - We valued the NIA loan facility separately at $39.6m vs $42.1m cash to be received; and 2. Enhanced product suite - This deal has further enhanced ISU’s depth of health insurance product by adding GMHBA as well as retaining Health.com.au on a cash upfront commission basis. Based on this announcement, we have made minor upgrades to FY16 & FY17 earnings due to changes in interest revenue assumptions. We have updated our Price Target for the NIA loan settlement and rolled forward our DCF ahead of next month’s FY15 result. We have also added a 15% premium to our valuation to account for the prospect of capital management initiatives. As a result our Price Target has increased to $2.10 (previously $1.65). We retain our BUY recommendation. Read our report (VIEW LINK)