Is NIB a healthy opportunity right now?

Key Highlights:

• nib Holdings shares delivered a 17% return in the last 5 years. However, in the last 1 year, we see that the Company’s stocks have surpassed its benchmark index.
• The Company delivered robust 1H FY2023 results with strong revenue and net income growth.
• In the coming period, the Company will continue to invest in health management programs to aid its members living with chronic conditions.

Private health insurer nib Holdings Limited (ASX: NHF) is a key player in the ASX 200 index that delivered a return of ~17% in the last 5 years, which is quite below its benchmark index. However, in the last 1-year, the stock surpassed ASX 200 index. Besides, Nib Holdings is also a consistent dividend payer since September 2013. Thus, making the stock popular amongst investors.

Established in 1952, NHF is one of the fastest-growing health funds in Australia. In the last 5 years, the Company diversified its sources of income. It managed to grow its Australian resident policyholders at a faster rate compared to the broader industry over the long term.

Based on the company’s past track record, one might wonder whether the coming period will be better for this stock or not?

In this article, we will try to explore whether this stock has growth potential or not?

1H FY2023 Group Performance:

On 23 March 2023, the Company announced its 1H FY2023 results. During the period, the Company reported a surge in underlying operating profit to AU$125.1 million, up 13.3% from AU$110.4 million in the previous corresponding period. Group underlying revenue increased by 9.3% to AU$1.5 billion. All the businesses of the Company performed well, with robust results from the Australian Residents Health Insurance as well as New Zealand businesses. The retrieval in the International Inbound Health Insurance (iihi) business and nib Travel supported the Company’s performance. Statutory earnings per share increased 12.4% to AU 20 cents. It announced an interim dividend of AU 13 cents compared to AU 11 cents per share in the previous corresponding period. There was also a significant growth of 47% in net investment income to AU$22.2 million from AU$15.1 million in 1H FY2022.

Outlook & Strategy:

The Company is positive about its outlook for its businesses across the Group. In 2H FY2023, the Company will continue to invest in health management programs to support its members living with chronic conditions.

nib Group continues to make good development in its Payer to Partner (P2P) strategy. During 1H FY2023, the Company raised AU$158.1 million to fund its entry into the National Disability Insurance Scheme (NDIS). It acquired its first plan manager, Maple Plan, in November 2022 as well as launched nib Thrive as the brand for the NDIS business. Also, NHF signed agreements to buy two more plan managers, Peak Plan Management and Connect Plan Management, and completed the acquisition on 28 February 2023 and 28 March 2023, respectively. These two are in the list of top ten ranked plan managers in Australia. With the completion of these acquisitions, NHF has nearly 22K NDIS participants and is on track to reach at least 50K by FY2025.

Is there a growth potential?

Based on the company’s performance and progress so far, we can expect growth in its topline and bottomline numbers. But, at the same time, the health insurance industry as a whole can be affected by several factors, including changes in government regulations, healthcare costs and trends, as well as demographic shifts.

The outlook of the Company also depends on the future performance and market position. It may be helpful to review the Company’s financial statements, market performance, and industry trends to better understand its current and potential future performance.

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Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

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