Author Topic: (Australia) - Medibank Private IPO?  (Read 11452 times)

bigchrisb

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(Australia) - Medibank Private IPO?
« on: October 19, 2014, 07:15:49 PM »
With the Aust government about to float Medibank Private, who's thinking about participating in the stock?

From the proposed size (about $5B market cap) it will be in the ASX200, and anyone holding AU index funds will end up with a little bit of it.  But is anyone thinking about it as an individual stock?

I'm debating, with some pros and cons.
+ Generally govt IPOs are priced with some premium for buyers in there (political reasons)
+ Healthcare is an area which is growing, and diversifies away from banks/resources
+ Community based risk sharing makes health insurance in Australia fairly stable
= It seems to be priced on a ~4% fully franked yield, and a PE that seems neither cheap nor expensive to me?
- No discount for retail offer (unless it prices over $2/share)
- If its no longer having 30% of the insurance market in government hands, will govt policy towards the insurance groups get tougher?

I think I'll put in for a small parcel of these shares directly (maybe $10k?).  Anyone else thinking about it, or just going to sit back and take a passive index weight?  From the back of the envelope, when listed it will be about 0.3% of the ASX200, give or take.
 

Primm

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Re: (Australia) - Medibank Private IPO?
« Reply #1 on: October 19, 2014, 07:31:45 PM »
Nope. I work in private health care (on the delivery side). I've worked for MBP. No freaking way I'd buy shares in them with their current management structure. It's not the cost side for me, more an ethical basis around how they treat their staff.

I will have a passive index component, like you said, but I'll have to wear that. My personal ethics only extend so far. :)

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #2 on: October 20, 2014, 01:56:08 AM »
I don't think it stacks up all that well. Government is being a bit greedy IMHO trying to get 20x earnings.

Pro-forma profit is slightly down in FY14 compared to FY13 due to the loss of a particularly large government contract from the immigration department which was put out to tender. Market is saturated as well, where is the growth going to come from if you already have the largest share and competitors are trying to take your best customers off you?

You would think the recent market gyrations should also knock several hundred million off the final price.

dungoofed

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Re: (Australia) - Medibank Private IPO?
« Reply #3 on: October 20, 2014, 07:32:37 AM »
Could someone please explain like I was five, why do the Australian people, who have been paying tax for decades, suddenly have to pay again to purchase a bit of Medibank Private? Surely it should be given back to the people who have already paid for it, no?

deborah

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Re: (Australia) - Medibank Private IPO?
« Reply #4 on: October 20, 2014, 01:58:54 PM »
Could someone please explain like I was five, why do the Australian people, who have been paying tax for decades, suddenly have to pay again to purchase a bit of Medibank Private? Surely it should be given back to the people who have already paid for it, no?
Same reason we had to pay when Telstra was privatized.

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #5 on: October 20, 2014, 03:47:03 PM »
Could someone please explain like I was five, why do the Australian people, who have been paying tax for decades, suddenly have to pay again to purchase a bit of Medibank Private? Surely it should be given back to the people who have already paid for it, no?

It's John Howards fault. (No truly, it really is!)

Medibank was set up as a not for profit entity in 1976 with no shareholders. Any residual equity in Medibank was attributable to policyholders (according to the chair of the old Health Insurance Commission Fred Millar),

Howard passed legislation appropriating that equity to the Government in 1997, making the Feds the sole shareholder. He paid $100 for the business that had $282 million in equity.

Rudd then changed Medibank to a for-profit entity in 2009.

It's policyholders who are the real losers, paying twice for the same equity. Taxpayers forego dividends, but there's an argument to say that they should not have received those dividends in the first place.

dungoofed

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Re: (Australia) - Medibank Private IPO?
« Reply #6 on: October 20, 2014, 04:58:59 PM »
Thanks. Now I need to know why that's not criminal, but I don't expect an answer : )

And yes Deborah it was Telstra (Telecom) that first got me thinking about this. Telegraph poles covering the country were suddenly something the government could sell back to the people who had been forced to use this monopoly since inception.

Primm

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Re: (Australia) - Medibank Private IPO?
« Reply #7 on: October 20, 2014, 06:24:55 PM »
I don't think it stacks up all that well. Government is being a bit greedy IMHO trying to get 20x earnings.

Pro-forma profit is slightly down in FY14 compared to FY13 due to the loss of a particularly large government contract from the immigration department which was put out to tender. Market is saturated as well, where is the growth going to come from if you already have the largest share and competitors are trying to take your best customers off you?

You would think the recent market gyrations should also knock several hundred million off the final price.

I didn't realise that! I haven't kept up really with their news since I left. I knew some people in that department.

There's also a substantial part of the business contracted to health departments in every state relating to care coordination and telephone triage. That was my old stomping ground. But it's a significant earner for them, and it would change their profit margin considerably if that part (or parts of it, because they subcontract to each state separately) was to be given to another business to run. And they wouldn't be able to sell the tele business to the successful tenderer either, because the staff all work from home.

The Falcon

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Re: (Australia) - Medibank Private IPO?
« Reply #8 on: October 26, 2014, 11:29:55 PM »
With the Aust government about to float Medibank Private, who's thinking about participating in the stock?

From the proposed size (about $5B market cap) it will be in the ASX200, and anyone holding AU index funds will end up with a little bit of it.  But is anyone thinking about it as an individual stock?

I'm debating, with some pros and cons.
+ Generally govt IPOs are priced with some premium for buyers in there (political reasons)
+ Healthcare is an area which is growing, and diversifies away from banks/resources
+ Community based risk sharing makes health insurance in Australia fairly stable
= It seems to be priced on a ~4% fully franked yield, and a PE that seems neither cheap nor expensive to me?
- No discount for retail offer (unless it prices over $2/share)
- If its no longer having 30% of the insurance market in government hands, will govt policy towards the insurance groups get tougher?

I think I'll put in for a small parcel of these shares directly (maybe $10k?).  Anyone else thinking about it, or just going to sit back and take a passive index weight?  From the back of the envelope, when listed it will be about 0.3% of the ASX200, give or take.

Have placed broker firm bids for $40k between Trust and SMSF.....will be oversubscribed so will see how we go. Research looks solid, don't expect it to shoot the lights out but will overall I think long term tailwinds will prevail on MPL.

bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #9 on: October 27, 2014, 12:08:14 AM »
Yep, I'm intending on applying for about $20k.  Will see what gets allocated.

I have to concede that much of the benefit I see in government floats is in the ability to take a tougher stance on cost-out and in particular labour costs than the govt is willing to do in its own hands.  The more entitled and entrenched the workforce, the greater the opportunity from this in my eyes. 

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #10 on: October 27, 2014, 02:04:31 AM »
http://www.abc.net.au/news/2014-10-27/medibank-private-offer-turns-retail-buyers-into-cannon-fodder-f/5845000?section=business

Quote
Mr Warnes says small investors are being treated like mushrooms.

"Well you know how mushrooms grow, and therefore I'm saying that retail investors are kept in the dark and fed what mushrooms are fed - you know what mushrooms get fed," he said.

More I look at it more I am not convinced. Having said that the market makes up its own mind and doesn't really care what I think.

DYOR

deborah

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Re: (Australia) - Medibank Private IPO?
« Reply #11 on: October 27, 2014, 02:50:35 AM »
Well Marty, that makes two of us.

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« Reply #12 on: October 27, 2014, 07:49:57 PM »
I have no idea what i'm doing.

But I'm young and like risk, so I'm going to jump in and see what happens.   Surely nothing could possibly go wrong ;)

I've never participated in an IPO before.   how does applying and allocation work?  Is an application binding on either party?  Apply through the cheap online broker or individually?  Should I apply for too much and get allocated less?  Where is the point of no return?

thanks

bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #13 on: October 27, 2014, 08:25:11 PM »
I'm learning this one by feel too - its my first attempt at an IPO too. 

From what I gather from reading the prospectus (please correct me if I'm wrong!)
- There is some risk of the issuance being scaled back.  Being pre-registered, an employee or a policy holder will reduce teh quantity of the scale back if it applies.
- The broker firm offers are pretty close to closed - many have closed early - don't know if that means excess demand?
- The structure of this IPO isn't great, as the price we pay isn't known until the institutional bookbuild (after we have already passed our point of no return).  I'm basing it upon the premise of would I lose sleep if I paid the highest $2/share?
- The point of no return is when you send that BPAY payment
- After any scaleback, any excess funds will be returned to you.

Its a pretty opaque process, which is a bit disappointing. However, I'm still prepared to give it a crack with a small amount (probably ~1% of net worth).

Hope that helps?  I need to chew over the prospectus some more to check some of these I think!

The Falcon

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Re: (Australia) - Medibank Private IPO?
« Reply #14 on: October 27, 2014, 08:34:41 PM »
broker firm bid allocations will be known this Friday, my guy is suggesting a lot of scale backs.

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #15 on: October 28, 2014, 12:55:29 AM »
Got the email today from Medibank.

Policyholders and employees will be entitled to 30% more shares than the maximum that the general public will get. Good for me as I do have my insurance with them.

Likely the price is going to be the full $2 a share.

Sunnymo

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Re: (Australia) - Medibank Private IPO?
« Reply #16 on: October 28, 2014, 05:40:48 AM »
I pre-registered as a policy holder and am looking at applying for $3,500. Hopefully, using the extra 30% entitlement that Marty mentioned I will end up with about $3,000 worth. My husband pre-registered as well but the system would only allow one pre-registration per policy. So, as he pre-registered as a non policy holder his additional entitlement will be 15%. He will apply for about $2,500 worth and end up with (we hope) about $1,800 worth. We are still in the early stages of building his portfolio but mine is more advanced.

Sunnymp

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #17 on: October 30, 2014, 03:50:56 AM »
Broker offer closed 8 times over subscribed. Bids were placed for $12 billion worth of stock, with only $1.5 billion able to be allocated.

Me being a concerned taxpayer, why doesn't the government leave it up to the market and un-cap the maximum price?

bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #18 on: October 30, 2014, 08:29:05 PM »
Looks like this one is going to be seriously over-subscribed, from the retail market anyway!  So, do I bid for several times what I actually want, expecting a hefty scale-back? 

I'm assuming given the restricted supply for institutional holders that there will be a high end price (top of range or over), and that there will be a lot of people hoping for stag profits on opening day?

Interesting times, none the less.


The Falcon

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Re: (Australia) - Medibank Private IPO?
« Reply #19 on: November 03, 2014, 02:37:17 PM »
Just had a call from my broker, I was scaled back from 38k to 20k...happy with that given the huge scale backs of broker firm bids, they have looked after me.

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« Reply #20 on: November 09, 2014, 06:12:13 PM »
I applied for $4.5k via the general public offer today.


I might end up with only $450 lol : (

bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #21 on: November 10, 2014, 11:29:31 PM »
Does anyone know if we need to do anything to get shares allocated in the general offer recognized by our brokers?  I've indicated the broker and the HIN for each account/application, so I'm assuming the shares will automatically become issuer sponsored under the same HIN, and show up by default in my trading account?

Or will they start as issuer sponsored, and I'll need to go through and transfer them to my broker account manually?

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #22 on: November 10, 2014, 11:45:29 PM »
If you indicated your HIN then they will be granted to you under that HIN as broker sponsored.

Issuer sponsored only if you put a name/address on the application form that doesn't exactly match your HIN name and address held by your broker.


nz

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Re: (Australia) - Medibank Private IPO?
« Reply #23 on: November 11, 2014, 12:03:39 AM »
Applied for  $10k  through my local broker here in NZ......ended up with $2k.

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #24 on: November 19, 2014, 12:27:38 AM »
Retail offer closed with bids of $17 billion.

The punters might be lucky to get $2.5 billion all up. Going to be a massive scale back....

Instos had to bid above $2 before 7am in the bookbuild earlier this week to be even considered for their allocation.

Government needs to find a better way to sell these small assets. There's so much cash sitting on the sidelines waiting for it that there is no orderly market when these things come up for sale.


bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #25 on: November 19, 2014, 07:17:17 PM »
Hi Marty,

Is that 17M for both the retail broker, and direct retail offers, or the direct only?

Trying to get a feel for just how scaled back I'm likley to be - and how much cash I might need to park elsewhere :)

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #26 on: November 20, 2014, 03:16:36 AM »
Retail direct that was.

Instos are now being asked to pay $2.30, so whatever you get is pretty much guaranteed to open 15% higher on day 1

This_Is_My_Username

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Re: (Australia) - Medibank Private IPO?
« Reply #27 on: November 22, 2014, 04:40:30 PM »
Government needs to find a better way to sell these small assets. There's so much cash sitting on the sidelines waiting for it that there is no orderly market when these things come up for sale.

according to supply/demand, couldn't the govt have simply priced it at (e.g.) $2.50, and received lower demand and a higher sale price?

(yes i am aware that it is hard to measure demand in advance)

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #28 on: November 23, 2014, 03:12:54 AM »
Yes they could have sold it at $2.50. But then what happens when the price falls after it starts trading?

You get lots of angry voters. Remember T2 (Telstra)? People who bought in at $7.40 at the height of the dot com bubble are STILL underwater.


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Re: (Australia) - Medibank Private IPO?
« Reply #29 on: November 23, 2014, 03:22:45 PM »
Final retail price of $2. I think institutions are at $2.15.

From what I have seen the more a retail investor was after the more they were scaled back; for example someone who was seeking about $3k was only scaled back a couple of hundred but someone who applied for $100k is likely to receive about $12k of shares. There will be variation based on policy holder or not and pre-registration or not.

bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #30 on: November 23, 2014, 11:08:00 PM »
Details of the allocation, including formula are available here http://www.financeminister.gov.au/media/2014/1123-medibank-private-share-offer.html

Looks like I got approx $8k in each of my own name and the trust name.

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Re: (Australia) - Medibank Private IPO?
« Reply #31 on: November 24, 2014, 02:49:16 AM »
Thanks bigchrisb, followed your link and did the calculations. We didn't apply for over much so our scale back wasn't too bad. We ended up with more than expected after all the doom and gloom about the level of oversubscription.

The Falcon

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Re: (Australia) - Medibank Private IPO?
« Reply #32 on: November 24, 2014, 12:47:35 PM »
Ended up with 23k, broker firm bid with 16k (20k scaled back) came through for me.

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« Reply #33 on: November 24, 2014, 05:49:04 PM »
why is the sell price so low, and the buy price so high?

who the hell wants to buy at $3.75 or sell at $1.80 ?

(see attachment)

bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #34 on: November 24, 2014, 06:20:04 PM »
You often see that kind of bid/ask in a stock that isn't open for trade.  Those who are bidding high/low are trying to make sure their trade goes through at the opening price, which is the market clearing price.  You can see this on your screen shot as the "indicative price".

Seems to have stabilized at around $2.20 on heavy volume ($400M or so in 20 mins!).  I reckon the next telling moment will be what happens on 1 Dec when we retail investors have our shares on the registry and are able to sell them - will possibly see some volatility then I'm guessing.

On the cuff however, looks like a quick 10% for anyone who got an allocation.

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #35 on: November 25, 2014, 03:04:05 AM »
why is the sell price so low, and the buy price so high?

who the hell wants to buy at $3.75 or sell at $1.80 ?

(see attachment)

As bigchrisb has explained this is the pre-open auction market. Those who bid at $3.75 and offer at $1.80 are seeking to get their trades completed at the days opening price. The ASX nets off all these (crazy price) bids and offers until the highest bid price is lower than the lowest offer price. Everyone participating in the pre open auction gets the same opening price.

There is a fair bit of manipulation and outright market rigging that goes on in the pre-open market. HFT's and algo traders, along with the big investment banks will try and "fix" the opening price on a given day.

This can be done for any reason depending on the motivation, whether for speculation, aligning with futures/options contracts, fiddling/messing with technical/charting indicators etc the list is endless

Occasionally traders will accidentally fuck it up, as what happened with ANZ shares 2 years ago.

Unfortunately cannot find the link for the news story which detailed who was responsible.
« Last Edit: November 25, 2014, 03:06:02 AM by marty998 »

marty998

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Re: (Australia) - Medibank Private IPO?
« Reply #36 on: November 25, 2014, 04:11:20 AM »
Total value of trades appears to be just shy of $1billion according to commsec (not sure if it includes Chi-X trades).

This means that 1/6 of the register was turned over today, but if you exclude the retail holders who can't trade yet, we're looking at about 1/3 of all shares held by instos were traded!

Closing price is $2.14, which was also the low for the day. The high was $2.23.

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« Reply #37 on: November 25, 2014, 05:42:08 PM »
so, I am a strong proponent of indexing.

But now I have 2150 (~$4300) MPL shares.

And I have no idea what to do with them : /

I am still in the early accumulation phase of FIRE, 9-10 years to go.

First world problems....

Any ideas?

bigchrisb

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Re: (Australia) - Medibank Private IPO?
« Reply #38 on: November 25, 2014, 06:27:13 PM »
What to do?  Up to you.  You could always sell them for the quick profit and buy index ETFs if you feel that's vastly superior.  After costs and tax, you will probably have 5% more index fund that you would have had without participating in the float.

My personal take?  I'm intending to sell half my stake, and retain the other half.  I see it as a high yielding, large cap, non bank, non resources stock, of which there aren't many available on the ASX.  Hence I'm happy to hold a bit to diversify my holdings.

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« Reply #39 on: November 26, 2014, 07:20:53 PM »
thanks for the advice.

i guess I'll just make it up as I go along. 

Nothing could possibly go wrong with this plan. 

: )

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Re: (Australia) - Medibank Private IPO?
« Reply #40 on: November 27, 2014, 10:45:56 PM »
Warren Buffet would point out that there is no 'moat' around Medibank Private, ie, there is competition. Furthermore all medical insurance companies are subject to political interference from time to time. Against that, there will always be a need for medical insurance. I am retired and cannot afford to invest, but if I were working I might make Medibank Private a small part of my portfolio.