price target $3

Medibank Private shares could surge as high as $3.00 over the next year, according to Bank of America Merrill Lynch’s Toby Langley, who is the first analyst not linked to the $5.7 billion privatisation to reveal a bullish view on the stock.
Langley said while insurance analysts had fretted over Medibank’s high price in comparison to general insurers, the market was yet to value the stock as highly as private hospital operators. The analyst said hospital operators like Ramsay Health Care and Healthscope exist in “relative symbiosis” with the health insurance sector.
“Both sectors are set to gain from the long-term growth in private health care spending we foresee and yet, despite a good start from Medibank and two-year rally in [its listed peer] nib, private health insurance valuations still lag the hospitals by 20 per cent,” he wrote in a note to clients.
Langley initiated his coverage on Medibank with a “buy” rating and a price target of $3.00. For the smaller nib, he gave a “neutral” rating.
His price target suggests growth of 22 per cent on today’s closing price of $2.35, which was down 1.7 per cent in a weak market.
It would also suggest a potential market value of $8.2 billion, far higher than the $5.7 billion raised by the government in the sale of the insurer by pricing shares at $2.00 for retail investors and $2.15 for institutions.


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