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Medibank Private Ltd – FY19 Profits Result Sound With no Surprises

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

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.

MediBank - FY19 Results

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).

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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