Medibank Private Ltd (ASX: MPL) is Australia’s largest private health insurer, with a market share of around 30 per cent. Its market capitalisation is A$9.3 billion.
What is the FY19 result?
Today (Thursday 22 August 2019), Medibank Private released its FY19 results. The main points are as follows:
- Total revenue from external customers of A$6655.8 million, up 2.9 per cent.
- Underlying NPAT of A$447.9 million, up 2.6 per cent.
- Underlying EPS of 16.3 cents, up 2.6 per cent.
- Final dividend of 7.4 cents per share plus a special dividend of 2.5 cents per share, making a total final dividend of 9.9 cents per share (fully franked).
The key features of the results are as follows:
- Medibank Private’s market share increased by 5 basis points. This represents a recovery in the Medibank brand following a number of years of Medibank Private losing market share slowly over time.
- Gross profit (premium revenue less claims expense) increased by 0.9 per cent. Slow growth in management expenses (up 0.5 per cent) and growth in investment income (up 7.5 per cent) were key factors driving the small increase in earnings (up 2.6 per cent).
What is the outlook?
Medibank Private did not provide any specific earnings guidance. However, Medibank Private expects private health insurance market volumes to be flat in FY20 (after falling in FY19) and modest growth in insurance claims. On the positive side, Medibank Private expects management expenses in FY20 to be below FY19 as Medibank Private achieves productivity gains.
Medibank Private noted that APRA’s capital requirements for private health insurers are falling (from 14 per cent of premium income to 11 to 13 per cent of premium income). Consequently, Medibank Private expects the dividend payout ratio in FY20 to be at the top end of the revised target range of 75 per cent to 85 per cent of underlying NPAT. This is a positive for investors seeking yield.
What is the market’s reaction?
Today (Thursday 22 August) Medibank Private is trading at around A$3.44, up around 1.8 per cent. Medibank Private trades at a P/E ratio of around 20 times earnings and an annual dividend yield of around 4 per cent (fully franked).
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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