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Medibank Private sale to fetch $5.5b

Oct 20, 2014

The Federal Government hopes to raise up to $5.5 billion from the sale of Medibank Private.

Finance Minister Mathias Cormann said retail investors will be able to buy shares in the private health insurer for between $1.55 and $2 a share.

Medibank Private is expected to start trading on the Australian share market on December 5.

“The Medibank Private share offer is an exciting opportunity for Australians to participate in the future of Medibank Private,” Cormann said on Monday.

The government intends to sell down its entire holding in Australia’s biggest private health insurer.

It stands to reap between $4.269 billion and $5.508 billion from the sale and stock market listing, depending on the final share price that is set.

Cormann said the price range meant retail investors would not pay more than $2 per share, though the price for institutional investors may be higher.

More than 750,000 Australians have pre-registered to receive the Medibank Private share offer prospectus, which allows them to receive a higher share allocation than those who haven’t registered.

The share offer opens on October 28 and closes on November 14.

Medibank Private expects to pay a fully-franked dividend of 4.9 cents a share for the seven months to June 30, 2015.

That amounts to a dividend yield of between 4.2 per cent and 5.2 per cent, and puts the potential share price at between 16.5 and 21.5 times the company’s expected earnings.

The insurer plans to pay out between 70 and 80 per cent of its earnings as dividends in the future.

Medibank Private expects to make an operating profit of $282.1 million for the 2014/15 financial year, up from $255.3 million in 2013/14.

Net profit is expected to remain flat at $258.2 million.

Revenue is expected to grow 4.2 per cent to $6.64 billion.

Medibank Private managing director George Savvides said the company had 29.1 per cent of the private health insurance market and provided cover for 3.8 million people.

The health insurer is expected to be among the top 100 listed companies once it starts trading on the ASX.

He said the privatisation would provide an opportunity to invest in the growing healthcare sector.

“The healthcare economy in Australia is strong and stable and has shown good growth over the past decade,” he said.

“It’s a sector where limited investment opportunities for Australians exist and hence our entry into the top 100, we believe, will be very much welcomed.”

Savvides also said the private health insurance sector had produced stable and consistent premium revenue growth over the past decade, while there had been relatively little volatility in the amount it paid out in claims.

Medibank currently pays out around 87 cents of every dollar it receives in claims.

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