Shares of private health insurance provider NIB Holdings Limited (ASX: NHF) are in a trading halt after announcing a capital raising and acquisition.
NIB’s capital raising and acquisition
NIB announced that it’s launching a fully underwritten $135 million institutional capital raising and an underwritten $15 million share purchase plan.
The institutional part of the capital raising will be determined by an institutional bookbuild – it depends how much demand there is for the shares. But, the floor price is $6.90, being an approximate 8% discount to the last closing price.
The idea is that NIB will enter the NDIS as a plan manager. NIB sees “close alignment between plan management and its traditional role of helping people choose health cover and connect with healthcare services.”
Acquisitions
The first acquisition announced by NIB is called Maple Plan. It’s the seventh largest plan manager with around 7,000 participants. Maple Plan is one of around 1,200 known NDIS plan managers. It generated approximately $10.4 million in FY22.
Other possible acquisitions are under “active consideration”, with a target of 50,000 participants by 2025.
Trading update
To give investors some information about how it is performing so far in FY23, NIB told investors how it performed in the first quarter of FY23.
It said that group underlying operating profit (UOP) was $64.3 million in FY23 Q1, up from $63.8 million in the first quarter of FY22. After adjusting for the COVID-19 givebacks, revenue growth was 6.5% compared to a year ago.
Net policyholder growth in the Australian resident health insurance segment was 9,415. Claims experience remains “relatively benign”. NIB continues to assess possible further member “recompense”.
The NIB Managing Director Mark Fitzgibbon said:
Our flagship Australian residents health insurance business continues to benefit from heightened demand, which appears to be driven by lingering COVID-19 concerns, and difficulties in public system waiting times.
We don’t celebrate these difficulties. But they are a reality and point to a need for an even greater private sector role in healthcare.
Our adjacent international students and workers, New Zealand and travel businesses are also doing well, with the student and travel businesses recovering from the pandemic blow.
Final thoughts on the NIB share price
Diversification of earnings seems like a smart move by the business. How profitable will NDIS be for NIB? It’s hard to say, but management seems to think it’s worth pursuing. The company has effectively used acquisitions to grow in the past.
I think this ASX share could be a smart way to make a diversified play across the whole healthcare sector. With the NIB share price up 17.5% in six months, I’m not sure if it’s a good buy today, but this update is promising.
