Medibank IPO Crystal Ball, page-9

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26/10/14

12:49

Post #: 14182737
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Originally posted by Katavi ↑

Hey Nani,
Great idea to do some crystal ball gazing.
I find it very helpful to manage expectations pre listing.

Herewith some preamble before thoughts on points one to six
No one is sure how to value MPL. Some suggest insurer, bank, utility, medical industry or some combination of these diverse sectors.
The academic theory says that when you bid for an asset and no one knows how to value correctly then you are likely to get it cheaply.
I do not know who is going to give price leadership in the price setting process. For Aurizon, the OS instos cleaned up and bought it cheaply because local intos were clueless and did not bid strongly for it. In the case of MPL our local instos will jump at it and so will overseas but PE range for MPL higher than USA listed medical/insurer type businesses so not sure if overseas intos will give strong price leadership. Optimistically, I then think MPL pricing will be moderate to strong but not strong.
If it wasn't for non age discrimination in medical policies in Australia then I do not think the hospital operators would be doing so well because a lot of older people could not afford private hospital treatment. So, in Australia, I reckon the relationship between hospitals and insurers is totally symbiotic. This means that MPL should ultimately trade at similar multiples to hospitals . ( NIB price discovery to me is not totally representative because it is mainly held by old policy holders who were given shares and intos only hold 20 percent. )

After that long winded pre amble my predictions on Nani's six points :

1. Expected broker Firm Scale backs : My prediction is around 70 percent scale back on average and JLM brokers scale back will be less.
2. Expected Retail demand : I expect retail demand to be around $ 3 to $4 billion
3. Expected Institutional Dog fight : Good overseas demand but not on pricing. Hugh local demand but they have always been good on moderating pricing . In short, big demand but pricing will not match demand and pricing will be more moderate
4. Final price : I think it will be around $1.85
5. 25th Nov Closing Price : I think it will be around $2.10
Price by 5th Dec Start of Normal Settlement : Around $2.20

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Superb analysis brother. You are almost thinking the same way as I do in our expectations. Lets see how we go. Thanks mate for such an in-depth and critical analysis of MBL from all aspects. Cheers.
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