NIB Holdings Limited (ASX: NHF) shares have seen a modest increase of 1.15% on Monday (at 3:24 PM AEST), coinciding with a 0.71% rise in the S&P/ASX 200 Index (ASX: XJO). Despite this, NIB shares have underperformed the index in recent times, experiencing a 7% decline over the past month. This significant drop has prompted one expert to consider NIB shares as a potential value investment.
Broker Recommendation: Buy Rating from Morgans
Morgans Financial has recently updated its rating on NIB shares to 'add'. According to reporting by The Australian, Morgans has set a price target of AU$7.92 for NIB shares, suggesting a potential upside of 13%. When combined with expected dividends over the next year, this could translate into a mid-to-high-teen return for investors.
Recent Developments for NIB
In March 2024, NIB announced an average health insurance premium increase of 4.1%. This follows two of the lowest premium increases in the past 20 years, occurring in 2023 and 2024. The company acknowledged the financial strain on many households but noted that healthcare spending continues to grow, driven by factors such as an aging population, rising chronic conditions, and the cost of new technologies.
During its presentation at the Macquarie conference in May, NIB highlighted its consistent revenue growth since FY05, despite challenges during the COVID-19 pandemic. The company's underlying operating profit has also shown long-term growth, further showcasing its resilience and strong performance.
Strategic Expansion and Market Growth
NIB has successfully expanded into adjacent markets, including New Zealand, international workers and students, travel insurance, and disability navigation. This diversification has contributed to the company's growth in market share within the core Australian private health insurance sector.
One of NIB's strategic goals is to become the leading navigator in the disability sector, supporting NDIS participants and others with identified disabilities. The company aims to reach approximately 50,000 participants by the end of FY25, underscoring its commitment to expanding its services and impact.
Outlook for NIB Shares
For FY24, NIB expects to achieve net policyholder growth of between 3% and 4%, while maintaining stable underlying margins. The company aims to gradually return to its target growth rate of between 6% and 7% in the coming years. Morgans Financial's positive outlook on NIB reflects confidence in the company's strategic direction and potential for continued growth.