nib holdings limited
NHF Details
A Quick Look at 1HFY22: nib holdings limited (ASX: NHF) operates as a private health insurer in Australia and New Zealand.
- In 1HFY22, NHF recorded a rise of ~8.3% in group underlying revenue, which came in at $1.4 billion, owing to an uplift in policyholders as well as COVID-19 related disruption to elective surgery and allied healthcare like dentistry.
- It recorded a growth of 28.5% in underlying operating profit, whereas NPAT for the period reflected an increase of 24.7% over pcp. During the half-year period, the company declared a fully franked interim dividend of 11.0 cents per share as compared to 10 cents per share on 1HFY21.
- At the end of 1HFY22, NHF witnessed robust capital generation from the business, evident by the increased closing capital of $89.5 million as compared to $65.7 million as of 30 June 2021.
Trend of Net Tangibles Assets (Source: Analysis by Kalkine Group)
Key Risks: The company’s business is exposed to risk arising from rapidly inflated claims costs derived from health service providers. NHF’s operational and financial performance could be impacted by the rising market share of peers in the industry in which it operates.
Outlook: The company is optimistic about the outlook of Kiwi business on the back of favourable market conditions. In addition, the company expects the nib travel and International Inbound Health Insurance (IIHI business to become profitable by FY23.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the last three months, the stock has been corrected by ~8.48% and has a 52-week high and low levels of $8.05 - $5.21. The stock has been valued using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at a slight discount to its peers, considering risks related to the global capital market, regular changes of law and policies, forex headwinds, etc. For valuation purposes, peers like Medibank Private Ltd (ASX: MPL), Steadfast Group Ltd (ASX: SDF), Generation Development Group Ltd (ASX: GDG), and others have been considered. Given the decent long-term outlook, current trading levels, upside indicated in valuation, rising revenue and NPAT, new market expansion, and key risks associated with the business, we give a ‘Buy' rating on the stock at the closing market price of $6.34, up by ~0.955% as of 4 April 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
NHF Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined:
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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