Medibank value could hit $6.3bn, as float demand pushes up price range BUSINESS SPECTATOR NOVEMBER 19, 2014 2:21PM
AUSTRALIAN institutional investors hoping to secure shares in Medibank Private are betting a price of $2.15 will be set for the health insurer, as demand continues to escalate. “The whole thing is out of control,” said an unnamed fund manager, who has bid into the book at $2.15 per share. He added that $2.15 looked like “a fair price”. Grey market trading was underway even before the three-day institutional book build began. IG Markets was selling contracts for difference at $2.15, as first flagged by The Australian yesterday. The overwhelming institutional investor demand today prompted the federal government to announce an increase in the indicative price range for the Medibank float. The indicative price range was initially set at $1.55 to $2.00 per share, but now has been increased to $2.00 to $2.30 each, Finance Minister Mathias Cormann said. The increase values Medibank up to as much as $6.33 billion, based on $2.30 per share. “Very strong demand from domestic and offshore institutional investors has led the government to increase the indicative price range for the Medibank Private share offer,” Senator Cormann said. It is understood that at least 300 institutional investors are vying for shares in Medibank. But a number of fund managers stressed the government will be keen to ensure a supportive market post the private insurer’s debut on disallowed on November 25. Analysts are also starting to grow nervous about the burgeoning valuation. A research note from Shaw Stockbroking today emphasised that at $2.20, Medibank’s shares will trade on a price earnings multiple of 22.7 times 2015 earnings. “We forecast 9 per cent per annum growth over the next three years — this is looking very racy.” said David Spotswood, the firm’s senior analyst. The final price will be determined by the book build, which closes tomorrow. Retail investors have been guaranteed that they will not pay more than $2.00 per share. The government expects to announce the final price and the allocation of shares by next Tuesday. With Business Spectator
