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04-01-2015, 10:04 PM
Investor windfall as Medibank share price stays in good health
THE AUSTRALIAN JANUARY 05, 2015 12:00AM
Andrew Main
Senior Business Reporter
Sydney
Medibank share price.Medibank share price. Source: TheAustralian < PrevNext >
••
REMEMBER how Medibank Private was going to struggle to get past $2, in the days before it floated in November?
The stock closed when last traded on Friday at $2.43, confounding the sceptics.
That price is about 21.5 per cent above the $2 a share retail investors, who make up the bulk of the register, paid in the public float of Australia’s biggest private health insurer.
And at current prices the gains represent a windfall of almost $1.2 billion for investors, raising questions over whether Canberra may have sold the nation’s biggest health insurer too cheaply.
Institutions paid $2.15 a share so their bonanza has been more modest, but there appears to be more buyers than sellers at present despite the fact the stock price is trading now at a multiple of just over 25 times Medibank’s forecast 2015 earnings.
In other words, demand for the stock exceeds supply even though everyone knows Medibank is overpriced in the short term.
“Investors are looking for a place to hide in this market,’’ said Shaw Stockbroking analyst David Spotswood, making it clear that Medibank shares might be “very fully priced’’.
Mr Spotswood has a 12-month price target on the stock of $2.25, meaning that it is already almost 20c ahead of where he expects it to be on November 24, the first anniversary of its float.
And he is one of the optimists among the five broking analysts prepared to stick their necks out on the shares and pick a price target. The average target price the five have on the stock is $2.09 and there is not one single analyst calling it a “buy”.
The analysts all have anodyne recommendations such as “hold’’, “reduce” and “neutral’’, which is as close as most brokers like to get to saying “sell”.
Mr Spotswood said there would inevitably be institutions upweighting to match the 50 Leaders Index, given that only one institution so far, Commonwealth Bank, had a holding above 5 per cent. “And basically, retail investors don’t sell,’’ said Mr Spotswood, whose broking house has a big list of retail clients.
He said there had been a lot of people buying in anticipation of costs being taken out of the business, as was common with most government selldowns. “That’s despite the fact that CEO George Savvides has been extracting costs for the past 10 years,’’ he noted.
Mr Savvides himself is the biggest single shareholder in Medibank Private with 49,700 shares declared in his own name, including 14,000 he bought on December 8 at about $2.19.
Chris Gottlieb, a Sydney retail investor who bid for $450,000 worth of shares but ended up with $22,000 worth due to the huge scalebacks most investors suffered, agrees with him. “It’s quite possible that a lot of investors don’t actually know how to sell their shares even if they want to,” he said.
“They bought the shares by filling in an application form but many of them don’t have a broker via whom they can sell.’’
He noted that “there’s a lot of capital that has been sitting around looking for a place to go and with all the uncertainty and volatility around, Medibank just looked safer and investors have just piled all over it’’.
And his own view? “I’m delighted with the outcome so far but we’re in it for the long haul,’’ he said, joining the legion of rusted-on retail holders.
THE AUSTRALIAN JANUARY 05, 2015 12:00AM
Andrew Main
Senior Business Reporter
Sydney
Medibank share price.Medibank share price. Source: TheAustralian < PrevNext >
••
REMEMBER how Medibank Private was going to struggle to get past $2, in the days before it floated in November?
The stock closed when last traded on Friday at $2.43, confounding the sceptics.
That price is about 21.5 per cent above the $2 a share retail investors, who make up the bulk of the register, paid in the public float of Australia’s biggest private health insurer.
And at current prices the gains represent a windfall of almost $1.2 billion for investors, raising questions over whether Canberra may have sold the nation’s biggest health insurer too cheaply.
Institutions paid $2.15 a share so their bonanza has been more modest, but there appears to be more buyers than sellers at present despite the fact the stock price is trading now at a multiple of just over 25 times Medibank’s forecast 2015 earnings.
In other words, demand for the stock exceeds supply even though everyone knows Medibank is overpriced in the short term.
“Investors are looking for a place to hide in this market,’’ said Shaw Stockbroking analyst David Spotswood, making it clear that Medibank shares might be “very fully priced’’.
Mr Spotswood has a 12-month price target on the stock of $2.25, meaning that it is already almost 20c ahead of where he expects it to be on November 24, the first anniversary of its float.
And he is one of the optimists among the five broking analysts prepared to stick their necks out on the shares and pick a price target. The average target price the five have on the stock is $2.09 and there is not one single analyst calling it a “buy”.
The analysts all have anodyne recommendations such as “hold’’, “reduce” and “neutral’’, which is as close as most brokers like to get to saying “sell”.
Mr Spotswood said there would inevitably be institutions upweighting to match the 50 Leaders Index, given that only one institution so far, Commonwealth Bank, had a holding above 5 per cent. “And basically, retail investors don’t sell,’’ said Mr Spotswood, whose broking house has a big list of retail clients.
He said there had been a lot of people buying in anticipation of costs being taken out of the business, as was common with most government selldowns. “That’s despite the fact that CEO George Savvides has been extracting costs for the past 10 years,’’ he noted.
Mr Savvides himself is the biggest single shareholder in Medibank Private with 49,700 shares declared in his own name, including 14,000 he bought on December 8 at about $2.19.
Chris Gottlieb, a Sydney retail investor who bid for $450,000 worth of shares but ended up with $22,000 worth due to the huge scalebacks most investors suffered, agrees with him. “It’s quite possible that a lot of investors don’t actually know how to sell their shares even if they want to,” he said.
“They bought the shares by filling in an application form but many of them don’t have a broker via whom they can sell.’’
He noted that “there’s a lot of capital that has been sitting around looking for a place to go and with all the uncertainty and volatility around, Medibank just looked safer and investors have just piled all over it’’.
And his own view? “I’m delighted with the outcome so far but we’re in it for the long haul,’’ he said, joining the legion of rusted-on retail holders.