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NHF

NIB Plummets 13% After Downgrading Profit Guidance

Tumul Sinha

Tumul is an experienced Equity Analyst with ASR Wealth Advisers. She holds a Master’s Degree in Finance from the University of Sydney. Her key industry verticals include Real Estate, Health Care and Technology.

Australian health care fund nib Holdings Ltd (ASX: NHF) has come off nearly 15% to an eight month low at market open after downgrading its profit guidance by $30 million, making it the worst performer in the ASX 200 today. NIB announced that their group underlying operating profit (UOP) was likely to be $170 million, down from the original forecast of $200 million, blaming higher than expected claim costs across a number of the Group’s underlying business lines.

NIB Grouip
nib Health Funds Group (ASX: NHF) has plummeted nearly 15% at market open, down to $5.66 per share, after a downgrading its profit guidance by $30 million, making it the worst performer in the ASX 200 today. (Credit: iTnews)

NIB managing director Mark Fitzgibbon said that the $30 million downgrade was spread evenly across the core business Australian resident’s health insurance, adjacent businesses, and one-off costs including data mining joint ventures and underwriting environments. Fitzgibbons says that NIB’s margins “appear to be something of the past”, and that it is likely that the Company’s dividend payout ratio could get as high as 70 to 80%.

The stock currently has a market capitalization of $3 billion and is trading on a trailing P/E of 20x and a forward consensus P/E multiple of 17x, meaning the market is pricing in earnings growth. The company is expected to pay a fully franked dividend of 3.52% in 2020.

The news comes after Medibank Private Ltd (ASX: MPL) announced in November that it had been caught $21 million short after claims had increased at a greater rate than anticipated. Thus, nib’s latest downgrade will do little for the health insurance industry, which is under great pressure given squeezed margins from an ageing population and declining memberships among young consumers.

 


 

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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