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Analysts say Medibank shares could reach $2.70 early in 2015. Source: News Corp Australia
THE army of mum and dad investors in Medibank are cheering as the shares stage a recovery from a jittery start on the stock market last month.
Retail shareholders, who bought the shares for $2 each in Australia’s second-biggest initial public offering, are now seeing the stock edge higher. They closed up 2¢ to $2.30 yesterday after trading around $2.10 in late November amid a nervous debut on the bourse.
Analysts say they could reach $2.70 early next year, a boon for retail shareholders who invested on average $5850, equal to about 2925 shares, in Australia’s biggest private health insurer. Based on yesterday’s close that is equal to a paper profit of more than $800.
Michael McCarthy, chief market strategist at CMC Markets, said there were a number of factors that would help the shares over the next few months.
Firstly, Medibank would soon be included in major Australian stock market benchmarks such as the ASX100. This would support its share price as “inclusion in these indexes effectively means fund managers are forced to buy†the stock.
Secondly, investors who had missed out on buying all the stock they wanted in the float may come back for another bite of the cherry if the stock looked attractive.
Mr McCarthy said there was a chance that the shares could touch the $2.60 range over the next three months but the magical $3 level would not be achieved unless there was dramatic news from the company.
On the downside, the shares were more expensive in terms of valuation compared to rival NIB.
Ben le Brun, a market analyst with optionsXpress, said Medibank was considered a “people’s float†with smaller investors attracted to the brand name of the company.
Mr le Brun said that depending on how earnings went next year, the shares could trade around $2.70. It also was not impossible that they could go as high as $3.
Philip Lee, executive director corporate advisory at Brisbane-based brokerage Morgans, said small investors were attracted to Medibank because of its brand name and the growth potential of the health care sector in Australia.
“There are 440,000 shareholders of Medibank which is a significant registry,†Mr Lee said. Morgans was a co-lead manager of the Medibank float.
How big data will improve Medibanks bottom line.