NIB Holdings (NHF) - Upside on offer

NIB Holdings engages in the underwriting and distribution of private health, life, and living insurance to residents, international students, and visitors in Australia and New Zealand. The company operates in five segments: Australian Residents Health Insurance, International(Inbound) Health Insurance, New Zealand Insurance, nib Travel, and nib Thrive segments. It is also involved in the sale and distribution of travel and disability insurance products; and provision of health management programs. The company was founded in 1952 and is based in Newcastle, Australia.

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Ord Minnett has reviewed its investment thesis on NIB and concluded the health insurer still offers attractive value, with industry data due in November and upcoming details on next year’s premium rate increases likely to reinforce our positive view on the medium-term earnings outlook.

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NIB shares are pricing in more risk to the earnings outlook than we perceive, leaving the stock trading at a steep circa 30% valuation discount to the benchmark S&P/ASX 200 Index. In our view, this provides plenty of valuation support and investment appeal.

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We thus reiterate our Buy recommendation, with our target price of $7.25 and FY25 DPS estimate of $0.28 implying a total return of more than 25%.

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