Medibank (ASX:MPL) was privatised on the 25th of November last year with the float price to retail investors set at $2 per share
Medibank (ASX:MPL) was privatised on the 25th of November last year with the float price to retail investors set at $2 per share. Currently trading $2.34, shareholders are sitting on a very tidy 17% increase in just two months. The Australian health sector is a major part of the economy, with total expenditure in excess of $147 billion and a 10 year compound annual growth rate of approximately 8% up to 2013. Medibank derives 90% of their revenue from the Australian Private Health Insurance (PHI)sector and had close to 30% of the policyholder market as at June 2014. To the upside Medibank has very strong fundamentals, stable margins, defensive high single-digit earnings growth, low cost of capital, a greater than 20% ROE, leading brand/market share and a strong balance sheet with no debt. To the downside, the company faces government regulatory risk with regards to capital requirements and competition has intensified as new entrants and low-cost providers aggressively grow market share. We believe Medibank are currently fully priced trading on a price to earnings ratio of 24 times.
Founded in 2003, Leyland Private Asset Management is an independently owned firm specialising in Australian Stock Market and Fixed Interest Investments for individuals, companies, self-managed super funds, institutions and family offices.